My television and radio interviews are sometimes preceded with an e-mail pre-interview. Below is a pre-interview with
the Voice of America. I was out of the country at the scheduled date
and never appeared as a guest for this segment. I am posting my
pre-interview notes so that you will understand the inspiration and
"the story behind the story" of the things I say on radio and television. The answers were
e-mailed to the television producer in March 2000.
Are you still interested in appearing as a guest on our segment on "The Flight of Money and
Intellectual Capital from Africa?"
EMEAGWALI: I noticed that the title was expanded from "Capital Flight" to "Capital and Intellectual Flight." I believe that your new title can be broken down into the flight of (1) money capital; (2) intellectual capital; and (3) intellectuals. The distinction is that the "flight of intellectuals" is brain-drain but the "flight of intellectual capital" is not equivalent to brain drain.
Intellectual flight is the migration of writers, scientists and experts from Africa to the wealthier nations. Intellectual capital flight is about the migration of intellectual materials that can be used to develop Africa, such as information, knowledge, experience and intellectual property. For example, western music companies own the copyrights of most African music. The most productive African musicians now live and work in the New York, London and Paris. The music of King Sunny Ade, Kanda Bongo Man, Yossou N'dour is created for the taste and consumption of westerners and is losing their African authenticity. The westernization of African music is a flight of intellectual capital. I can give similar examples for writers, artists and scientists (such as myself).
African audiences will find it easier to understand "money capital" because it directly yields tangible products that they can touch, smell or hear. For the latter reason, they intuitively believe that "money capital" is more important than "intellectual capital." .
Without "intellectual capital," it will be impossible to convert "money capital" into products and services. African leaders court foreign investors (financial capital) but do not try to court the expertise (human capital) that will develop and manage the investments and resources with the continent. Therefore, intellectual capital is more important than money capital.
Also, the lack of intellectual capital contributes to the flight of money capital. For example, Nigeria borrowed money from the World Bank to complete its multi-billion dollar steel complex. Some money disappeared. Some was squandered and mismanaged, causing the national debt to increase. When Nigeria repays the World Bank for a nonoperational steel mill that payment will become money capital flight. In other words, it is the flight of money capital caused by the lack of intellectual capital.
You cannot touch, smell or hear knowledge and information and this makes it difficult to discuss the subject of intellectual capital. Since an African can touch a car but cannot touch the technological knowledge that created it, you find that most of them tie up their money in unproductive things like cars, lands and houses. In the new global economy, an African can invest on high yield Internet stock markets.
The economies of the 21st, 20th and 19th centuries are based on information, industry and agriculture, respectively. The beat has changed but Africa is still dancing to the old tune. African leaders are taking lessons on how to walk on land (Industrial Age) while the rest of the world is learning how to swim in water (Information Age). While the wealth of the 20th century is physical, the wealth of the 21st century will be based upon knowledge and information. We are creating a global economy in which English language will be the common language and Internet and telecommunications will be the infrastructure.
Nike is not a shoe manufacturing company, as most people believe. Nike subcontracts its shoe manufacturing to overseas plants that employ 35,000 Vietnamese whose total salary is less than that of Michael Jordan. Nike is a knowledge-based company that designs, markets and distributes shoes. In other words, Nike and Michael Jordan control the intellectual capital while the Vietnamese people control the less lucrative physical capital. Whoever controls the intellectual capital controls the money capital.
Again, natural resources and money are not as important as brain power. It is not the soccer balls, shoes and fields that are important. It is the players' knowledge, training and experience that matter. Similarly, it is the human resources that create wealth. You cannot create constant electrical power without first acquiring the necessary brain power. Africa needs people (intellectual capital) with the brains to build and operate the electrical machinery that supplies constant electricity.
With a population of 800 million, Africa does not need muscle power. It needs brain power!
I just wanted to make the distinction between the "flight of intellectuals" and the "flight of intellectual capital" and their relationships to the "flight of money capital."
PRODUCER: How does capital flight affect the average African?
First, money outside Africa cannot be used to develop Africa.
Second, money outside Africa cannot be taxed. Third, it is the poor people in Africa that indirectly pay for the external debts.
Capital flight increases the level of corruption. The flight of capital means that police officers cannot be adequately paid and are forced to extract bribes. Medical doctors, teachers and government clerks extort bribes from citizens.
Capital flight is related to lack of technological development. Because it lacks the technological knowledge, Nigeria exports crude petroleum only to re-import refined petroleum. It exports steel only to re-import cars. It exports one-third of its university-trained graduates only to re-import technological products created by human brains.
Africa is a consumer of technology (and not a producer). Major construction projects are given to foreign companies like Julius Berger (a German construction company). Ten percent of Nigeria's petroleum revenue is paid to the foreign oil companies as royalties and the companies reinvest their profit in Europe. Profits made by foreign companies repatriated abroad and is capital flight which, in turn, increases the level of poverty in Africa. It can only be stemmed when Africa invest in technological development. Nigeria, the world sixth largest producer of crude oil, does not fully possess the technology to refine petroleum. Nigeria imports refined petroleum from countries it exports oil to and this results in capital flight. Because of the low level of technological development, the African economy is, by default, based largely on the export of raw materials, the import of refined (technological) materials, and the payment of profits to overseas shareholders. Attempting to solve this problem without understanding the relationship between technology and capital flight will be like a wild goose chase for a mirage in the desert.
Africa becomes poorer when it exports raw materials and brains and re-imports finished products.
An increase in capital flight leads to an increase in the level of
poverty which leads to an increase in religious and ethnic violence.
In Nigeria, for example, we have the religious fundamentalist
fighting for Sharia Islamic Laws and the minorities living in the
Delta region fighting for a greater share of the diminishing national wealth. A vicious circle is created when the unemployment, social
unrest and political instability creates a market for the importation
of arms which are often bought on credit and/or by exporting the
remaining capital to arms-exporting nations.
PRODUCER: What happens to the money
in overseas account?
The Swiss banks retains the money when African leaders dies. When Samuel Doe, the
late Liberian President, was asked by his captors to reveal his overseas bank
account. He said to them: “I won’t tell you. You are going to kill me anyway.”
Doe died without revealing his Swiss bank account and Liberian money became Swiss money.
Sani Abacha and former Nigerian military dictators ran the Central Bank
of Nigeria as if it was their own private bank accounts. It is now reported that
Sani Abacha has 2.2 billion dollars ($2,200,000,000) in his Swiss bank account.
Abacha’s widow is
one of the richest women in the world. It is her moral duty to return or
re-invest her husband’s money in Nigeria. If Mrs. Abacha re-invests her money
in Nigerian bank accounts, it could be loaned and used to develop the nation.
The unfortunate part is that the small percentage of capital flight that
comes back is classified as foreign direct investment, instead of as
repatriated money, which means that the owners can now legitimately take
the interest and dividends out of Africa again.
During his five-year rule, $12 to $16 billion was transferred from Nigeria to the private accounts of his family and ministers.
It will be impossible to reduce capital flight without first reducing corruption.
PRODUCER: How is capital diverted overseas?
Sani Abacha sent his money abroad by over-invoicing imports and under-invoicing exports.
On the average, imports to Nigeria are over-invoiced by more than 30 per cent. In other words, for every dollar Nigeria spends on importation of goods and services, more than 30 cents leaves the country as capital flight. Four times more capital leaves the continent from falsification of prices than from the ten percent kick-backs extorted from government contractors.
After Sani Abacha died, it was discovered that he collaborated with two of his ministers
(Finance --- Anthony Ani, and of Power and Steel --- Bashir Dalhatu) to
embezzle $2.5 billion under the pretext that it will be used to
refinance a giant steel complex. Instead of financing the steel mill, the $2.5 billion
was transferred from the Central Bank of Nigeria to their
private bank accounts in London.
For the latter reasons, African nations should establish an
independent Central Bank which, in turn, will make it more difficult for corrupt officials to repatriate money to their Swiss bank accounts. It was the extraordinary access to government funds that made it possible for Mobutu and Abacha to become billionaires.
PRODUCER: How can capital flight be stemmed and reversed?
One third of the capital flight cake is enjoyed by Switzerland. For
more than sixty years, the Swiss banks have been profiting in
capital flight from Africa.
The United Nations should sanction
Switzerland for allowing African leaders to maintain secret bank
accounts and contributing to the underdevelopment of Africa.
Without the cooperation of the Swiss government, it will be i
mpossible to recover the money deposited in the Swiss bank accounts
of Mobutu, Sani Abacha and Haile Selassie.
The solution will be for
the United Nations to put pressure on the Swiss government reveal
and return the billions of dollars stashed in private accounts of
corrupt leaders. Also, the Swiss banks should periodical publish,
in their newspapers, the names of their largest account holders,
including the amount of money they deposited.
PRODUCER: When did capital and intellectual flight begin?
They began when about forty years ago when most African countries gain independence. And dramatically increases with military dictatorships and civil wars.
There are many factors that contribute to capital flight. Most African political leaders has bank accounts in Europe but no European leader maintains a bank account in Africa. Millions of African Moslems go travel annually to Mecca for holy pilgrimage. The government encourages and subsidizes these pilgrims which, in turn, reduces the nation's foreign exchange reserve. Affluent Africans fly to London to their medical treatments. Many white South African families travel overseas because they can earn and deposit their $6,000 per family allowance in overseas bank accounts.
Capital flight also results in tax evasion since the principal, interests and dividends from these accounts cannot even be taxed by African nations.
Capital flight will be reduced when we make it illegal for leaders to maintain bank accounts in Europe, fly abroad for medical treatments and stop subsidizing holy pilgrimages for government officials.
PRODUCER: How does foreign aid reduce capital and intellectual flight?
A widely held misconception is that the west is giving generous foreign aid to Africa.
For each dollar received as foreign aid, Africa turns around and gives back three dollars, in capital flight. This applies to most developing nations. For example, each year, Europe receives at least $50 billion dollars as capital flight from developing nations and the United States receives about the same amount. In effect, the developing nations receive foreign aid from the west and then return the foreign aid as capital flight.
Similarly, Africa receives foreign technical assistance from other nations while one third of its university trained professionals have left Africa.