When you think of aid to the starving poor in Africa, you think of Oxfam or Christian Aid. You don’t think of wealthy bankers, private equity companies or tax havens.
Yet a report out examining in detail the aid programme given by the European Investment Bank on behalf of the European Union reveals more and more aid cash is being given to African banks, private equity companies and passed through tax havens.
The report from a group of non governmental organisations Counter Balance reveals that much of the €1.01 billion given to relieve poverty is now going to projects that are run by banks and private equity companies. And worse than that commercial confidentiality by both the banks and the EIB is preventing the public and the taxpayer knowing whether it has gone to good use.
The EIB argues that all is well as the banks know better than them what to do with the money and their own audit checks, often farmed out to local firms in these countries, prove it is value for money.
But the report reveals that all is not as well as they claim. In one case in Gabon the EIB had a lucky escape when they were about to give money ton the Banque Gabonaise de Devloppment only to discover that there was alleged corruption at the bank involving the siphoning of funds by the cronies of the now dead president, Christian Bongo. They pulled out just in time.
In Nigeria, they also offered a €50 million credit line to the Intercontinental Bank of Nigeria at a time when its managing director was being investigated for alleged fraud by Nigeria’s equivalent of the Serious Fraud Office. The bank had to bailed out last year by Nigeria’s state bank. Luckily for the EIB none of the money had been drawn down.
The report also highlights a lot of money going to Mauritius – where many private equity companies are based, but not much of the cash is being spent there, most of it is spent in the rest of Africa.
The fear must be – in the wake of the Irish bank crisis and the collapse of Lehman Brothers which started the global crash – that the EIB could be next on the list. What could look on the surface as a sound investment might turn out to be little better than some of those subprime investments given a AAA rating.
The problem is that all the EIB loans are triple AAA rated because they are in Europe. If anything goes wrong, it could be another matter. Don’t say you have not been warned, but this report, even though it is quite dense and detailed, is a must read. It is rather like a canary warning of danger in the mines.
You can get the report at Counter Balance. The direct link to download it is http://bit.ly/f6zalC.
I have also written an article in The Guardian. The direct link is bit.ly/fdkO5K.