The vultures that circle African economies
- Simon Allison
- 19 Nov 2011 (South Africa)
A special report in The Guardian exposes the “vulture funds” which prey on the world’s poorest economies, almost always African. Their practices aren’t technically illegal, and it’s easy money; as long as you don’t mind profiting from poverty. By SIMON ALLISON.
It works like this. An impoverished country will take a loan for a few million dollars from some other country. The creditor country, maybe facing financial issues itself, subsequently sells that loan to a company. That company then aggressively pursues repayment of the loan, along with all the compound interest it attracts, refusing to participate in any debt relief or reduction programmes.
That’s what happened to Zambia. It took a $15 million loan from Romania. Romania subsequently sold the loan to a vulture fund for $3.2 million. Eventually, Zambia was forced to pay $15.5 million to the fund, which earned itself a tidy profit of $12.3 million for taking advantage of the impoverishment of not one, but two countries.
A more extreme example. The Democratic Republic of Congo took a loan of $3.3 million from what was then Yugoslavia, to build power lines. This was sold to a vulture fund for an undisclosed sum. The fund is now suing the DRC for $100 million, after previous attempts to attach the DRC embassy in Washington DC failed.
It’s not illegal, technically, but something about the practice smacks of profiteering, taking advantage of the world’s poorest countries to turn a quick and disproportionately large profit. Many countries have made it impossible for vulture funds to obtain legal orders enforcing the practice, but loopholes in tax havens such as Jersey and the Isle of Man remain. DM
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