The Horn Of Africa States: Reversing The Export Of Capital – OpEd
The story of foreign direct inflows and remittances pouring into the Horn of Africa States region is often the main stay of reports of inbound capital into the region. Development of ports like the port of Djibouti, Berbera, Bossaso, Kismayo, or Mogadishu and air-links and other investments such as railways (Ethiopia and Djibouti constructed by the Chinese) and remittances by the region’s large global diaspora, are sighted as prime examples of these inflows.
Yet beneath this façade lies a more insidious outflow, much larger than the inflows, often carried in cash or through traditional hawala into offshore accounts in the Gulf, East Africa , mostly Nairobi and Kampala and more recently Dar e Salaam, Tanzania, which has joined the fray. This shifts emphasis from investing in productive sectors domestically in the region to offshore accounts in Dubai or London or real estate in Nairobi, Kampala, and other private investment vehicles elsewhere but the region. The result is that the region re-exports its own capital, leaving local economies starved of the very resources it should have supposedly received through inbound investments.
The real story is, then, one of a financial geography, where money comes into the region in the guise of development assistance, remittances, and value of exported goods, but then leaves again swiftly and silently into offshore accounts or real estate projects, employing others from beyond the region instead of its own youthful population, domestically.
No wonder there is always poverty in the region, unemployment, and migration out of the region for greener pastures elsewhere but the region. Some of the funds, indeed, end up in Swiss and other European accounts and even in exotic places like Azerbaijan, which never had relations with region until very recently. The region’s elites mostly reside now in the Gulf or East African cities like Nairobi, shunning their own countries, which they have deprived of the resources that should have been used to transform the economies of the region.
One must offer the Gulf countries, mostly Dubai, a bravo salute on how well this city has duped or enticed Horn African elites to make it their de facto residence and hence a wealth haven for them. Recently the international Consortium of Investigative Journalists (ICIJ) have reported that the United Arab Emirates is a destination of Africa’s big money – private banks servicing politically connected persons, shell companies managing big enterprises back home or elsewhere, and , indeed, luxury villas that should have been built in their own ruined countries – (ICIJ and Africaexecutive.com). The Horn of Africa States is one such region of Africa whose elites have chosen the UAE to their own countries.
Institutional weaknesses, which the elite have most often participated in creating and involving limited transparency, informal networks, less costly than normal banking processes and of course instabilities in the region and currency constraints weakened through wars and civic strives, all contribute to the mass exodus of capital out of the region as soon as it hits the ground.
It is not only the terror groups or foreign interferences that contribute to the instabilities of the region but the internal rot, which propels desertion of the local economies, which again leads to a massive unemployment in the region – a repetitive cycle, with no end in sight. Money, therefore, comes in and leaves through multiple exits on the other side, which deprives local economies of a resource base of capital, depleted into other markets beyond the region.
The real story of the region should not, therefore, be what comes in as foreign direct investments, development assistance and remittances from the diaspora but what leaves the region – an outward cascade of hard currency into the ether as far as the region is concerned. It does not matter whether it is in offshore accounts or real estate, or in luxury villas or in shell companies.
If the region has to benefit from hard currency inflows, it will require a paradigm shift from attracting capital to retaining it, from being an intermediary managing a flow of funds but a steward of its funds and from hosting projects designed to benefit others to building local capacity and, indeed, holding elites accountable.
It is only then that the region may stem and reverse the trend of outflows and begin to deploy funds internally – in people, in infrastructure, in factories, in agriculture, in tourist projects and in its own future, leaving wars and tribes behind, building the region into a cohesive and cooperative outfit that has a say in the table of international forums.
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