Business Maverick


After the Bell: The Guptas and Vanuatu, a marriage made in hell

After the Bell: The Guptas and Vanuatu, a marriage made in hell
Atul Gupta. (Photo: Gallo Images / Sunday Times / Kevin Sutherland) | Vanuatu. (Photo: Flickr / Eugene Kaspersky)

It was with a huge sense of - I don’t know what … frustration? anger? schadenfreude? - that South Africans learnt that the Gupta brothers had managed to get citizenship in the Pacific island nation of Vanuatu through its citizenship by investment scheme.

Clearly, Atul and Rajesh Gupta got this citizenship to frustrate the anticipated South African application for extradition. If you, (the person for whom extradition is being sought) are not a citizen of the applicant country (SA in this case), then presumably that country’s application for extradition is legally debatable.

Reading between the lines, it seems this was the reason the Dubai courts rejected SA’s extradition request – the Dubai court papers revealed that the Guptas were citizens of the tiny South Pacific island grouping. But it’s all a bit suspicious, natch, because SA officials only discovered they had acquired citizenship of Vanuatu after receiving the note verbale (a kind of diplomatic communication) from the UAE embassy on 6 April.

So, the Guptas have once again managed to escape the legal consequences of capturing the SA state and they have outfoxed, once again, the Damascus blade. How they must be laughing at South Africa’s dysfunctional innocence and ham-fisted government.

But there is a tiny bit of solace here for those South Africans who would like to see some justice in this case – the reputations of the Guptas are in the gutter and now they have to live, or at least tell people they hail from, a string of struggling islands in the middle of nowhere that risks being submerged in rising sea levels.

There is also irony – there always is – because Vanuatu has to live with them. The situations are different, but Vanuatu strikes me as a slightly more successful version of another Pacific island nation, Nauru. They are over 1,000km apart, as it happens, but they are similar in being small islands with dubious economics in the middle of a vast ocean.

Nauru has an extraordinarily interesting economic history because once it was the richest country on earth. It seems incredible, but it was (if you aggregate the incomes of the very small population of around 7,000). The island’s economic history is a good example of how the resource curse works. 

What happened is very simple and yet very remarkable. In the early 1900s, geologists discovered high-grade phosphate ore covering about 80% of the island. The phosphate was caused by fossilised bird poop which had accumulated over the centuries. The country dug up and sold the poop – sorry, phosphate – and in the 1960s and 1970s, it earned around $2.5-billion, or around $350-million per person.

You would think it would be impossible to squander that kind of wealth, but somehow the island managed to do so. After being the richest country on earth, Nauru contrived to end up returning to being one of the poorest countries on the planet, even poorer than when its “development” started.

When the phosphate was mined out in the early 2000s, the country went into decline and started grasping at straws. One decision was to go in for “banking”, so the country passed very lax banking laws. Then the Russian mob, natch again, used the island as a money laundering centre and the island fell out of favour with banks around the world.

But the worst was still to come: Since it became impossible to grow crops on the mined areas of the island, all food now had to be imported. In desperation, the government agreed that Australia could use the island as a place to dump illegal immigrants – for a fee. 

The Nauruan people now face extremely high rates of obesity, alcoholism, prostitution, mental health problems and myriad other issues that stem from these maladies, according to Wikipedia.

Nauru, a single island, is very different from Vanuatu, a large group of islands. But if you are offering one of the world’s cheapest economic citizenship programmes and welcoming crooks from all over the world with fast name changes, trust me, something is going to go wrong. The downward desperation cycle is clearly gearing up.

It’s a sad day, or week for SA’s justice system, but Vanuatu and the Guptas probably deserve each other. And, as they say, karma can be a bitch. Ask Nauru. BM/DM


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