How supply chain laundering hurts Africa (1)

COUNTRIES WITH ECONOMIES that are predominantly commodities-based need to take this rather seriously. Africa is well endowed with commodities. Those at the lower rungs of the ladder and are at the weaker points in value chains should be worried about their future in such economic circumstances. African countries are squarely within this bracket and so much needs to be done to take the countries further up on the value chains so they could play more prominent roles and be better rewarded. Extractive industries define African economy, have been the economic mainstay of most African countries and still remain so till now. From minerals to agriculture, African countries generally depend on going back to the soil to generate the needed revenues to run their economies that remain mostly backward and underdeveloped. These do not guarantee real development within the continent in the foreseeable future.

The newly established African Continental Free Trade Area (AfCFTA) will do nothing extraordinary as long as the values of the commodities in the mostly commodities-based trade remain low. Moreover, with great questions on issues of transparency in supply chain, a lot less revenue will continue to be recorded on tradable commodities and the data generated will continue to be at variance with realities. There is yet to be a proof that Africa’s economy is about to make a transition to manufacturing or service  industry-based economy. So, while the status quo lasts, a lot needs to be done to meet with globally accepted criteria in the commodities industries and trade.

The paradox of Africa’s development is encapsulated in the fact that the continent exports low-value primary commodities and import high-value finished products. Africa produces premium quality raw cocoa, coffee, tea, timber, copper, diamond, gold, cobalt, uranium, petroleum and many more primary commodities which are exported to countries that turn them into products of high values and high prices, from which the finished products are imported back into Africa. A very obvious example is that of Nigeria’s petroleum exported raw at low price. The country imports refined high priced petroleum products in return. That Nigeria has been unable to keep its four refineries running since about three decades is an indication of poor handling of value chains in the industry. This points, however, to what is found in many other commodities. Without delving into the details of governance flaws involved, it is enough to point out that the poor management of petroleum value chain is a microcosm of the crisis experienced in other commodities, perhaps with some slight peculiarities in each of them.

Cote d’Ivoire (Ivory Coast), a major cocoa-producing and exporting country in West Africa, has reportedly lost fortunes to low value raw cocoa beans exported to the processors outside Africa. In return, Cote d’Ivoire and other countries within the continent have to import the finished cocoa products at high prices. It is also reported that a lot of infractions occur along the supply chains, some of which have caught the attention of close watchers. The issue of supply chain integrity is such a serious one that cannot afford to be perpetually ignored as it is costing enterprises and countries a lot. From oil bunkering in the riverine southern parts of Nigeria to the gold smuggling in Mali, sharp practices in supply chain and value chain have produced many illicit business platforms and affluent mafias that have become too influential, intractable and their activities difficult to regulate by state authorities.

The overbearing influence of those whose activities and their perpetrators are hard to control. This is a major focus here. They have raised their own militia to counter and sometimes overpower state actors and official security apparatus in order to perpetrate and perpetuate their illicit businesses. Prominent among countries where such activities have become problematic for state authorities are Afghanistan, Mexico, Colombia and Romania, among several others. In Colombia, the drug mafias have seized control of territories, carved out areas of influence for themselves and are becoming influential in deciding those in certain official positions. The Taliban in Afghanistan were able to sustain their agenda with the money from narcotics until they seized the state power apparatus and have now formed government. Mexico now has an established mafia base for narcotic lords and controllers who unleash a lot of terror on the populace. They have become a nightmare for the regional and national governments. The cases of Brazil and Romania under consideration have some similarities in the sense that massive logging exercises have become obvious in the two countries.

The Amazon forests have come under intense onslaught by loggers to the extent that their activities have attracted global attention, especially of climate and environment watchers. In Romania, illicit loggers who make fortune from destruction of pristine forests do not go about the business barehanded, unarmed. In the Democratic Republic of Congo, a lot of the trees in the great forests are now annually lopped and exported. Such activities don’t succeed with exporters without the collusion and connivance of compromised public officers who are saddled with the responsibilities to regulate and ensure best practices. Although the extent to which this is done in Africa can be figured out, the magnitude of losses to the economy cannot be accurately ascertained. This is made difficult by the fact that, like elsewhere in the world, such activities are accompanied with violence and deadly attacks, leading to loss of lives and massive destruction of properties in many cases.

The various activities of underground operators in the various commodities have bred widespread use of deadly weapons, in which case the rate of gun violence increases in tandem with the corrupt practices. These, unfortunately, also boost violence in other areas of socio-economy. This becomes more complicated and difficult to control when they operate with more sophisticated weapons and a lot of money is involved as rewards. In both cases, the state law enforcement agents are often overpowered and are constantly jeopardised. The high rewards serve as incentives and attraction for more recruits and the system gets even more dangerous. The extent to which the governments of African countries take these seriously is worth our attention as serious security challenges are increasingly becoming associated with commodities, their value chains and supply chains. For now, a lot of such activities are outside government’s official radar, which poses great dangers for the continent. Poverty could be given as one of the reasons for such sharp practices and swelling numbers of operators in the illicit businesses, but that does not explain it in entirety.

The avocado mafia in Mexico is an example of illicit business that may not altogether be motivated by poverty, but by quest for raw power, taking advantage of existing security lapses. Avocados are estimated to be a $2.4 billion business in Mexico. The size of cash involved has attracted drug cartels that are stealing land and forcing farmers to hand over their profits. Those stealing such a commodity try to find ways of getting them into the market as “clean” avocados. In particular, it is also reported that up to four trucks carrying avocados are stolen every day in the violent Mexican state of Michoacán, as organised crime groups seek to take advantage of consumers’ seemingly insatiable appetite for the fruit. All of these have forced the locals to resort to arming up themselves and forming vigilante groups to protect their avocados. Now, avocado is being considered as a conflict crop because of the incessant attacks on producers and transporters on their ways to the cleaning and packing plants.

With poor governance, weak institutions, widespread corruption, poverty, low standards and unacceptable general practices in many parts of Africa, commodities entering the global supply chain and value chain seem to continue to meet with suspicion, rejection, low revenues in the mainstream markets. Before the aberrations become the norms, countries in Africa need to begin to look into upholding standards and preventing a preponderance of questionable sources and handling of commodities. It will not be out of place to begin to seriously consider the brand Africa or those based on specific countries in almost all the various commodities to reduce the penchant for sharp practices. If commodities still drive Africa’s economy, it makes sense to be more meticulous about their handling, including the upholding of acceptable standards.