Ethiopia's stolen $8.4 billion and EPRDF

By Eskinder Nega / May 20, 2011

The folks at Global Financial Integrity may not know this, but their report on illicit financial flows is threatening to steal the thunder from an important milestone for the EPRDF, Ethiopia’s repressive ruling party, which will be celebrating its 20th year in power on the 28th of this month. And more than a harmless opportunity to gloat is slipping away. GFI’s report poses real danger of generating mistrust within EPRDF’s senior leadership.

  What is sad is that the TPLF Plc. Is engaged in entrenching itself as the next class of Ethiopian capitalist at the catastrophic expense of the poor Ethiopian people in a manner only a colonial conqueror sabotages its subject’s wellbeing and wealth.
"What is sad is that the TPLF Plc. Is engaged in entrenching itself as the next class of Ethiopian capitalist at the catastrophic expense of the poor Ethiopian people in a manner only a colonial conqueror sabotages its subject’s wellbeing and wealth. ." Azmera Tesfaye

Commissioned grandly by the UNDP, the development arm of the UN, GFI’s report explores the flow of illicit financial flows from Least Developed Countries (LDCs), of which Ethiopia has been an enduring mainstay. (Many countries, some in Africa, have moved up the ladder of development.)

Covering the 18 years between 1990 and 2008, which are all, but one, 1990, within the realm of EPRDF’s reign, the report includes Ethiopia, one of the world’s most impoverished countries, in the top ten countries from which funds have been transferred illegally into banks and offshore financial centers in developed countries. The amount: a whooping 8.4 billion US dollars, which places Ethiopia at a shocking 9th place in the world, just below resource rich and gruesomely autocratic Myanmar with 8.5 billion dollars.

The report attributes the bulk, 65 to 70 percent, of Ethiopia’s illicitly transferred funds to trade mispricings. Somewhere in the remaining 30 to 35 percent -- up to 3 billion US dollars -- are the laundered monies of corrupt government officials, almost all exclusively members of the EPRDF.

Clearly, some EPRDF officials are amply prepared for a comfortable exile. And there are of course others who believe in the fairy tale of the party’s invincibility and see no need for a contingency plan. This will most probably be their wakeup call. The haste not to be left behind is now inevitable. The worst for the nation is yet to come.

Export figures released by the Ministry of Trade in late February 2011 show coffee still dominating the sector. Of the infinitesimal 1.14 billion US dollars the nation earned in six months from goods sold overseas in 2003 (in the Ethiopian calendar), 320 million dollars were attributed to coffee.

Guna Trading House PLC, a holding of the Endowment Fund for the Rehabilitation of Tigray, EFFORT, a business empire managed exclusively by senior members of the EPRDF, is an exporter of coffee. Guna is also a significant exporter of sesame seeds, another key export for the nation. Moreover, it has involvement in the import business.

There is no conclusive proof that EFFORT’s holdings are involved in trade mispricings, but the possibilities that exist for party leaders are cause for particular concern. Perhaps, only the tenure of Seye Abraha, who was EFFORT’s CEO before his fallout with Meles Zenawi and subsequent six years imprisonment, has been thoroughly scrutinized. (He came out clean.) With the EPRDF’s obvious old boy’s network cutting across party, government, and business circles, EFFORT is suspected by many of being a convenient conduit for illicit financial flows. But again, the hard proofs are lacking so far. (Ditto for the much smaller EPRDF affiliated endowment funds for other regions.)

Gold is now Ethiopia’s second biggest earner of foreign currency, bringing in about half as much as coffee. Most of it is exported by MIDROC, owned by Mohammed Al-Amoudi, an Ethio-Saudi billionaire, who owns the largest gold mine in the country. With hundreds of millions of dollars earned from exports, MIDROC is easily the nation’s principal exporter. Though instinctively apolitical, Al-Amoudi’s odd affiliation with the ruling party has long raised eye-brows. But even here, there is nothing more than a lingering suspicion that there is more than meets the eye.

A favorite of corrupt officials everywhere is of course kickbacks. A kickback is the difference between market price and inflated payment to a company that wins a government contract. It’s a favorite of third world dictatorships. And though practiced at all levels of government, the real money is with foreign companies, which is an exclusive preserve of senior officials. Arms procurement is their particular favorite. Interestingly, kickback from arms purchases was an issue during the wrangling for primacy between Meles and his critics in the EPRDF ten years ago. None of the charges were ever proved.

The $8.4 billions stolen from Ethiopia have no doubt mostly disappeared into the black hole that is offshore banking. This is a huge part of international finance; more than 6 trillion US dollars lie there. The IMF estimates the illicit funds laundered annually by offshore banking at 1.5 trillion US dollars (of which half a billion is thought to come from fraud and corruption.) And until recently, Swiss was the favored haven. But since 2008, others, amongst them the Cayman Islands, have risen in popularity. The deposits in Cayman Island, whose population is only 54, 878, is estimated to hover around 1.9 trillion US dollars. In Africa, Ghana aspires to be the new destination for international offshore banking. There are abundant reasons to shun infamous Switzerland.

Beyond the cruelty of stealing billions that could have gone a long way, in the words of UNDP, “to help children go to school, help mothers give birth safely, and expanding access to basic health care, better nutrition, and clean water and sanitation for all,” is the question of how this grand theft was possible.

The answer is simple: feeble rule of law; suffocated civil society; suppressed free media; nominal judicial independence; patronage based civil service---in sum, absence of a democracy with checks and balances. Where there is despotism there is corruption; particularly in the presence of a private sector. The problem is compounded when politics and business mix, which is the case for Ethiopia.

The extent of corruption in Ethiopia, as indicated by the stolen 8.4 billion dollars, is a shocker not only to the naïve supporters of the EPRDF but also to its severest critics. Simply put, no one imagined it to be this big. But it is, and the problem requires an urgent remedy. This is money that has been stolen from Ethiopians, including all but a handful of the alleged 5 million members of the EPRDF.

Rest assured that the time for accountability will come in due time.

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The writer, prominent Ethiopian journalist Eskinder Nega, has been in and out of prison several times while he was editor of one of several newspapers shut down during the 2005 crackdown. After nearly five years of tug-of-war with the 'system,' Eskinder, his award-winning wife Serkalem Fassil, and other colleagues have yet to win government permission to return to their jobs in the publishing industry. Email: