The making of an African narco-state: Drugs, crime and dirty money are new big threats

Kenya is emerging as a money laundering hub; incredibly, trying to stop the illicit flow of money could hurt the economy more than letting it continue

NAIROBI city governor Evans Kidero raised eyebrows in Kenya this week when he said that drug cartels are using proceeds from the illicit trade to “take over” water provision services in the city.

The governor claimed that unnamed individuals connected to the illegal trade are providing services that are the preserve of the city authorities.

Kidero’s main grouse, it seems, is that the drug cartels are using their money muscle out the city government – and so, denying the city tax revenues and ultimately buying their way into positions of power and authority.

Although it’s been seen as a diversionary tactic by the governor – Kidero himself is under fire for corruption allegations dating back to when he was the head of a partly state-owned sugar company – evidence suggests that the broader trend he alludes to deserves more than a cursory glance.

Such “state capture” by organised crime networks has been done to great effect in parts of Latin America, including Colombia and Guatemala.

Africa’s drug cartel problem has not yet reached that level, except in Guinea-Bissau that has been called “Africa’s first narco-state”, in the sense that state institutions have virtually taken over by drug traffickers.

Guinea-Bissau’s emergence as a major hub for cocaine shipments reveals how drug traffickers can use the electoral process to gain a foothold.

In 2005, Colombian drug traffickers reportedly financed the lavish re-election campaign of President João Bernando ‘Nino’ Vieira, “effectively placing him and his country at the service of drug traffickers”, says this report by the West African Commission on Drugs, a joint endeavour of the African Union (AU), Economic Community of West African States (ECOWAS) and the UN’s Office on Drugs and Crime (UNODC).

By April 2012, when the armed forces once again seized power and imprisoned interim President Raimundo Pereira and several other senior officials, drug trafficking had reportedly become “the key economic activity” of the country’s military elite, with the UN reporting at least 20 transatlantic flights involving small aircraft loaded with drugs landing in Bissau in the following six months after the coup.

Foreign exchange reserves in Guinea Bissau reportedly rose from just $33 million in 2003 to $174 million in 2008, a period during which there were very low inflows of foreign direct investment and donor assistance.

Even in the wider West African region, organised crime in the form of drug trafficking has made “deep inroads” into West African states, and sometimes at the highest levels; $1.25 billion worth of cocaine is estimated to be smuggled through the region and on to Europe and North America.

Mystery plane in the desert

In 2009, a burned-out Boeing 727 was found in the desert in northern Mali near the city of Gao. Investigators established that the plane, originating in Venezuela, had been registered in Guinea-Bissau, and that it had been carrying between seven and 11 tons of cocaine.

Though it initially appeared that the plane had crashed, the investigation revealed that it had actually landed, unloaded of its cargo – which was smuggled over land to Morocco and on to Europe – then torched by the drug smugglers.

Investigation of the case was “repeatedly obstructed by the highest levels of authority”, the WACD report says, and subsequent efforts to investigate the case “gradually fell apart in a manner that reveals the extent of criminal collusion with the state, and the illicit connections to political power brokers.”

More recently in Senegal, the country’s chief of police, Abdoulaye Niang, was sacked on suspicion of involvement in drug trafficking; investigations into his case are ongoing.

In Liberia, the deputy director of operations for the country’s Drug Enforcement Agency, Albert Chelley, was sacked for a “breach of ethics” which later emerged to be conspiring with Nigerian drug traffickers to move heroin through the country, and preventing the arrest of traffickers.

The report however downplays the emergence of “narco-jihadism”, an apparent wide-scale drug-terror network that was thought to be emerging following the 2012 coup in Mali, in which terror groups such as Al-Qaeda in the Islamic Magreb (AQIM) and the Movement for Oneness and Jihad in West Africa (MUJAO), and Ansar al-Dine took over territory in northern Mali.

A cocaine seizure at Cotonou airport, Benin. West Africa is a key transit point for drugs from South America on their way to European markets. (Photo: Flickr/ Dulue Mbachu - ISN Security Watch).

But it appears that the terror groups could be more accurately termed “criminal entrepreneurs”, with drug trafficking being just one of the many illicit activities the groups get their money from.

Nevertheless, widespread concern has been voiced that as competition for access to routes, product and profits of trafficking intensifies, West Africa could face an increase in violence similar to that experienced in Mexico, Central America, the Caribbean and Brazil.

And particularly in the Kenyan context, the imminent threat – even if it is has less of the sound-bite punch of narco-jihad – is the slow hollowing out of the state by the entrenchment of illicit money from organised crime.

“While to the onlooker Kenya appears to be in a relatively healthy state, it is in fact weakening due to a process of internal decay,” says this damning report by the International Peace Institute (IPI).

Kenya concerns

“Endemic corruption and powerful transnational criminal networks are ‘white-anting’ state institutions and public confidence in them. Termites are at work, hollowing out state institutions from the inside.”

Although not (yet) a major transit hub like in West Africa, the country’s attractiveness to smugglers is growing. Two drug busts in November netted 712kg of heroin; last year’s total haul off the Kenyan coast was a record 3,500kg.

And Kenya seems to be more deeply entrenched as a hub for money laundering, where the proceeds of drug trade and other organised crime are re-invested into the legal economy, but end up distorting normal market forces.

It’s been whispered that pirate ransoms gathered off the Indian Ocean have been pumped into the Kenyan economy - particularly in real estate, sending prices skyrocketing in the past few years - but this has not been conclusively proved, although Kenyan MPs and commentators in the media once got very worked up over the matter.

Nairobi city skyline. Property prices in the city are now comparable to London, with some areas seeing prices double or triple in the past few years. (Photo: Flickr/ Demosh).

However, a recent report by the US State Department said that Kenya is developing into a major money-laundering country, owing to lax controls and its proximity to Somalia; the report claimed that the country’s financial system may be laundering more than $100 million every year in narcotics proceeds.

In 2010, a staggering $2.1 billion (equivalent to 3.8% of GDP, or nearly half of Kenya’s total exports) found its way into the Kenyan economy without the government being able to explain its source.

Debates about the extent to which this amount might consist of laundered ransom moneys from piracy, remittances, drug money, or other proceeds of crime remain unresolved.

Astonishingly, IPI says that trying to stop the money laundering could have an even worse distortionary effect on the economy than letting it go on unabated.

“It may sound strange, but illegal activities in Kenya are so entrenched and pervasive that having tough legislation that curbs money laundering could impose a heavy cost on the Kenyan economy and hurt its growth,” the report states.

“Corruption in government and private sector supplies, tax evasion, cross border money transfers and funds from undisclosed sources are so significant in the Kenyan economy that curtailing them would have a definite impact.”

Still, the saving grace for the Kenyan state is that it is not yet directly involved in widespread criminal practices as a matter of routine, and therefore is not yet a fully criminalised state, but the country is “clearly on its way to achieving that dubious status”.

The outward veneer of respectability is wearing thin, and unless there are far-reaching, and inevitably painful, reforms, the state will surely slide into the gleeful hands of criminal networks operating parallel to (or hand-in-hand with) the formal state administration.

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