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Africa’s dodgy ‘fixers’

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Roderick Ngoche is a business school graduate from Nairobi, currently working in the renewable energy space in East Africa.

Fixers, powerful middlemen with access to power and corrupt deals have made the somewhat chaotic cities of Africa their home. To ensure sustainable growth it is necessary to rid economies of their tentacles.

By the turn of the millennium, China had undergone more than 20 years of huge economic and social reform. Under the leadership of its erstwhile leader Deng Xiaoping, its policy of Yin Jinlai, or “welcoming in”, facilitated market reforms, domestic capital formations and technological advancement.

Deng’s four modernisations of the economy – agriculture, industry, science and defence – laid the foundations of the China we know today. These reforms were furthered by his successor, Jiang Zemin, who was keen to start putting China’s surplus capital to good use. He began Zhou Chuqu, loosely translated as “going out”, a policy designed to deepen access to foreign markets.

China quickly identified Africa as an untapped goldmine, in both a metaphorical and literal sense. By that time, the continent had firmly cemented its reputation in the West as little more than a philanthropic drain.

The Chinese saw it as an opportunity. Africa is home to 13% of the world’s population, 2% of its cumulative GDP, 15% of crude oil reserves, 40% of its gold, 80% of its platinum and, most importantly, a huge untapped labour force.

But the Chinese government had no experience doing business in this part of the world. They needed a middleman with connections to help lubricate the wheels of commerce. That man was Sam Pa, and for the next 15 years, he was China’s fixer.

The political ecosystems found in East African countries provided the perfect Petri dish in which Sam Pa and his Hong Kong-based business empire, 88 Queensway Group, could further China’s Zhou Chuqu.

The rise and fall of Sam Pa and the Queensway Group has been well documented since his dramatic arrest in 2015. But Pa is just one example of how a foreign country can use a middleman to smooth any barriers to entry.

Some fixers are better known than others, some are more egregious, but they all manipulate political friendships to gain a foothold in the region. This is likely to become even more pervasive as foreign powers, from the West to an increasing number of players from the East (Japan, Turkey and Russia among others) seek to establish a foothold on the continent.

The prevalence of middlemen is often symptomatic of a parallel shadow economy operating without licence and lining the pockets of those in power. The ubiquity of corruption in East Africa leads many to question whether you can operate successfully in the region without a Sam Pa-equivalent on the payroll.

Some companies have tried and continue to focus on running legitimate operations without the need to pander to those in power. But, as long as some companies adopt the tactic of political patronage, economic development will suffer as there will never be a level playing field.

This strategy is certainly not limited to Chinese businesses.

Across the continent, we have seen companies continue to exploit their contacts to expedite business in the region. In December 2016, Samuel Mebiame, a son of the late former Gabonese Prime Minister Leon Mebiame, pleaded guilty in the US to charges relating to a foreign bribery scheme.

Mebiame’s case is that of a classic fixer. He was found to have delivered new cars and cash to officials in Niger, and even a rented an Airbus jet to a high-ranking Guinean.

The court heard he was paid at least $3.5-million by Och-Ziff Capital Management, a New York-based hedge fund, which had entered into a joint venture with Palladino Holdings Ltd, to secure mineral, mining and oil concessions in various African countries. He also received 24 months in a US prison for his services.

In Uganda, political connections are regularly capitalised upon. A quick search of new entrants into the market in Uganda brings up the arrival of Kansai Paint, a Japanese multinational listed on the Tokyo Stock Exchange, and reveals several eyebrow-raising photos of the country’s president with one Kalpana Abe, vice-president of Kansai Plascon East Africa, potentially raising questions about the multinational’s expansion tactics.

In 2017, Teodoro Obiang, the son of Equatorial Guinea’s leader, was handed a three-year suspended sentence and a €30-million suspended fine for embezzlement by a French court. More recently, the Zondo Commission has been investigating allegations of corruption during the Zuma administration.

These extend to the late businessman Gavin Watson, the former head of logistics company Bosasa. Before his untimely death, Watson was accused of paying millions to high ranking officials in exchange for lucrative government contracts, something he always denied.

Unfortunately, this is not a uniquely African problem. It’s clear the developing world has long suffered from this malaise. Fixers extend from Neil Heywood, the British businessman who worked in the ganglands of the south-western Chinese city of Chongqing, to Yevgeny Prigozhin, the Russian oligarch who goes by the moniker “Putin’s chef”.

Where there are corrupt officials, there will always be those willing to exploit it. It is incumbent on new entrants to the market, especially those with vast resources, to refrain from relying on these questionable tactics in vulnerable markets if they are to support the long-term growth of economies, which will eventually better support their bottom line. BM

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