Category Archives: economic sanctions

Ghosn Press Conference

Former Nissan and Renault CEO, Carlos Ghosn staged an escape from home-arrest in Japan and flew to Lebanon on December 31, where he re-emerged this week and gave a press conference to justify his decision to flee. 

In the session, broadcast live from Lebanon, he spoke of the decline in Nissan’s performance that started after he left as CEO to focus on bringing Mitsubishi into the Alliance. He had been CEO for 17 years and left Nissan in 2016 with $20 billion cash, profitable, growing, respected, having taken it from nowhere in 1999 to a top (no 60) brand in the world. But performance dived after he left, in 2017 and 2018. 

He traced his troubles to a shareholder vote in France to give Nissan which owned 15% of Renault voting powers there, similar to what Renault had at Nissan in Japan with its 15%. But the vote did not attain the threshold required and the Japan government was upset and blamed him for that – and saw removing him as the only way that Nissan would get autonomy.  

He was surprised (like Pearl Harbor) when he was arrested at an airport terminal in Japan in November 2018 and told he was being charged with understating his compensation – an amount which was not fixed, approved or paid. He wanted to call Nissan to get a lawyer and (at the time) he did not know it was stage-managed. They were trumped-up charges which, while Nissan pled guilty to in Japan and paid a fine to its government, in Tennessee (USA) they had denied the same charges.

The job of the CEO is to create value, and that of the board is to protect shareholders – but, he said, today there is no alliance – I worry as a shareholder we lost 35% of value while the entire auto industry is up 12%. Today the Nissan-Renault alliance, which was the number one auto group in the world in 2017, does not work – They wanted to turn the Ghosn page and they have – growth has disappeared, profits are down, there is no strategic direction and innovation. 

What they have today is a masquerade of an alliance that is going nowhere – and they missed out on bringing Fiat Chrysler into the Alliance which he had been negotiating – and who instead chose to join the PSA (the Peugeot, Citroën) group.

The presumption of guilt prevailed and he was pressured to confess in a country where the conviction rate is 99%. He spent 130 days in isolation, underwent endless interrogations, spoke to his wife twice in nine months (in the presence of a lawyer) – and when I left Japan, I did not have a court date for the first charge – and my lawyers said it would be five years before I got a judgment – which he led him to conclude that he would die in Japan if he did not get out.  

 Another theme of his defence was that he was not greedy. He had served the company for a long time and in 2009, amid the US auto crisis, he was asked to become the CEO of General Motors and engineer a similar turnaround there. He now says, he made a mistake and should have accepted that offer. 

He was determined to fight back against a smear campaign that was part of a €200 million investigation. I was a hostage in a country I had served for 17 years, I revived a company – I was a case study and role model in Japan with 20 books written about me, then instantly I became a cold greedy dictator.

The reason for the collapse of the Zimbabwe Economy

Anonymous guest post. 

Land redistribution (or seizures) didn’t sink the Zimbabwe economy. In fact a 2011 independent study, quoted at the time in the New York Times (it’s unlikely to get more sceptical than that) declared that the redistribution programme had actually worked – that Zimbabwe was not just more productive; its food security had also rebounded to pre-redistribution levels.

But many (especially Western) analysts politicize the economic crisis without properly comprehending it. They link the collapse of the currency with the collapse of settler production, which in turn is caused by misrule. Misrule is then metaphorised as a trust problem, which is then looped back into the economic crisis, this time as its very basis.

The land redistribution-economic collapse analysis was deliberately trotted out in the early 2000’s by both the British and the white settlers. It’s a myth, as carefully and boldly planned and executed as anything Goebbels ever put out. It’s the Big Lie Theory stunningly executed. The Big Lie worked on a very plausible assumption: given that the white settler control of agro-industry was the heartbeat of the Zim economy, it followed that dismantling it would trigger the disintegration of the economy. This was only true to the extent that the land seizures disrupted productivity so severely as to halt it altogether.

Herein lies the Big Lie: it was easy to assume that a change in land ownership would mean a collapse in agricultural production. This evidently (as the statistics demonstrate) was a manifestly racist assumption. For one, it failed to account for ongoing smallholder production. More to the point, a decade after land redistribution, agricultural production was at the same levels, if not higher than what they were prior to redistribution.

So: what accounts for the collapse of the Zim dollar? The simple answer is sanctions. In 2002, and at the height of the land redistribution programme, (then President) Mugabe refused to sign onto the second phase of the IMF ESAF programme.

In response, Zimbabwe was suspended from the Fund. At the same time, and in solidarity with the white farmers, Bill Clinton (presidency ended in 2001) and the US Congress instituted sanctions against Zimbabwe. The result: Zimbabwe lost ALL its major export markets. And as a follow-on, its hard currency reserves began to tank.

Those sanctions have still not been lifted. This makes Zimbabwe, after perhaps Cuba, Iran and North Korea, the biggest pariah country on earth. Attempts to lift sanctions and the IMF suspension over the past two decades have all been unsuccessful.

One last thing, which I think is at the core of the sanctions question: why haven’t they been lifted? I was at a press briefing in 2010 or thereabouts with (then Prime Minister) Morgan Tsvangirai and his deputy, Arthur Mutambara. These were clearly individuals who had been brought into Uncle Bob’s cabinet (at the instigation of Mbeki and the grand coalition peace deal) precisely on the calculation that they were acceptable faces to the West.

And the question they were asking was: why have the sanctions not been lifted now after the peace deal? Almost a decade later, the whole determination of the Emmerson Mnangagwa government to conduct a credible poll turned on the assumption that, following such a credible poll, sanctions would be lifted.

In fact one could argue that the current design of the post-election Commission of Inquiry is itself an attempt to convince Bretton Woods and Washington that Zimbabwe now has a ‘credible govt’. But still, there are no clear indications that even if the poll had been deemed credible, that sanctions would be lifted.

So one is now driven very close to the conclusion that Zimbabwe is being turned into the new Haiti i.e. that its punishment for daring to stand up to Western capital and threaten the very idea of white supremacy is going to be punished for generations to come.

Also, read the Guide to Harare, the work of the late Professor Sam Moyo.

Financial Sanctions for South Sudan? Part II – The Profiteers

The Profiteers is a documentary by Africa Uncensored that was unveiled in Kenya this week. It was to air on television but was cancelled a few hours before airing on Kenya Television Network (KTN) a local TV channel. The producers confirmed the network’s abrupt decision to pull the broadcast, and then went ahead to release the feature on their own, on Youtube in three parts, and with links and commentary on Twitter.

The Profiteers production by Africa Uncensored follows other work by The Sentry Group and are featured in the latest Sentry report on the situation in South Sudan. Sentry continues to run a watch on events in South Sudan, corruption, the growing refugee population, and complicity of foreign organizations such as banks in Kenya and security forces in Uganda.

The Profiteers investigative team led by John-Allan Namu extensively document, both with straight and under-cover reporting, stories of South Sudan leaders luxuriating in other countries and cutting deals for weapons, logistics, security and valuable wood as they purchase luxury houses and real estate properties in Kenya, Uganda, Ethiopia and Australia, flashy cars and are flush with cash which is the basis of their profligate lives and which does not match their official modest salaries. They are able to freely travel and operate bank accounts and transact vast sums through them, even though some of them face international sanctions.

The Profiteers and The Sentry mention several institutions including banks like KCB, Stanbic and Equity bank, and money transfer services such as Dahabshil, and Amal. Some activities look questionable but are understandable such as the decision by the Bank of South Sudan to hold the bulk of its reserves outside the unstable country while soldier battle.

Sentry Recommendations
  • Kenya and Uganda should strengthen regulatory bodies to track money and enforce sanctions.. compliance departments in Kenyan and Ugandan banks should not wait for financial regulators to request information and should immediately find and flag high-value transactions, all real estate transactions, and the accounts of South Sudanese politically-exposed persons (PEPs)
  • Law Enforcement Should Investigate South Sudanese property without political interference
  • Trade Associations should improve standards for investments
  • Businesspeople should share investment information.
Also mentioned in the Sentry report is a wave of posts by Kenyan bloggers: In mid-2018, a group of Kenyan bloggers garnered significant attention when posting photos on Twitter of luxurious homes owned by South Sudanese elites or images of top officials’ family members living extravagant lifestyles in Kenya and Uganda. Referencing the impunity apparently enjoyed by these well-connected South Sudanese, the bloggers labelled their tweets with the hashtag #SouthSudanUntouchables. The same day that hashtag went viral, a high-level U.S. government official spent the day in Kenya, addressing government agencies, financial institutions, and civil society to deliver a related message: that South Sudanese officials should no longer enjoy impunity and that their ill-gotten gains should not be welcome in Kenya and Uganda.

Kenya’s CBK risk safeguards against bank laundering and terror financing

The Central Bank of Kenya (CBK) has published new guidelines to assist Kenyan banks to assess and mitigate the risk that their institutions and systems may be used for money laundering (ML) or terrorism financing (TF).
They risk rules stipulate, among other proposals that:
  • Senior management of banks are to implement board-approved money laundering/terror financing policies.
  • Bank staff are to prepare periodic reports on money laundering and terrorism finance for their senior management and boards of the bank and also communicate these to the CBK. 
  • Financial institutions will be required to appoint a money laundering reporting officer who will be the point of contact for CBK.
  • Banks should assess and rank TF and ML instances and actions in terms of high, moderate, and low risk. 
  • They should identify countries and regions that are high risk for business; high-risk includes countries subject to sanctions from the UN and other credible organizations, countries that don’t have appropriate banking safeguards and countries known to sponsor terrorism.
  • Banks are to assess their customers for money laundering and terror financing risks; suspicious customer activities include frequent and unexplained movements of money to other accounts, or other institutions, and to far locations. They should also look at politically exposed persons who bank with them including prominent public figures, senior politicians, judicial officers, corporate CEO’s who dealing with them, or their families, may bring a reputational risk to the bank.
  • Banks are to assess their service delivery channels for money laundering risks. They are to pay attention to cash-intensive businesses, including supermarkets, convenience stores, restaurants, retail stores, liquor stores, wholesale distributors, car dealers. 
The guidelines follow an earlier directive on paper bag banking from two years ago. The new ML and TF rules are in draft form and bankers and any interested persons are invited to send comments to the CBK on the proposals before January 31, 2018.

NASA Post-Election Economic Boycott of Brookside, Bidco, Safaricom

Last week, Kenya’s opposition movement, the National Super Alliance (NASA), who boycotted the repeat presidential election held on October 26, announced an “economic liberation programme” and called on their followers to boycott the products of three companies Bidco, Brookside, and Safaricom.

What’s the link?

Brookside Dairies is associated with the family of President Uhuru Kenyatta. The company was started in 1993 and Brookside has grown to control about  44% of the processed milk market in the country, ahead of New KCC and Githunguri Dairies.

Brookside has acquired several dairy companies and still sells milk under their original brands including Tuzo, Molo Milk, Ilara and Delamere.  While the NASA statement mentions that when Jubilee took over milk farmers were getting Kshs 35 per litre while consumers paid Kshs 72 per litre, and that today farmers still get Kshs 35 while consumers pay 120 per litre, the economics of milk prices is a complex one, not attributed to the processor alone. Brookside collects milk from over 160,000 farmers every day.

Safari com: MP’s from the NASA side have  accused Safaricom, arguably Kenya’s most successful company, and some of its employees who they publicly named, of enabling  incorrect election results to be transmitted during the August 8 elections, something which the company has denied and also expressed concern that their employees had been needlessly endangered as they did their jobs and the company merely fulfilled a contract to support the 2017 Kenya general election.

NASA MP’s have gone ahead to public switch from using Safaricom to rival Airtel, even as Safaricom dealers warned of dire effects for their employees and communities.

Safaricom has 6 of its 45 shops in the Western/ Nyanza Region which is the bedrock of NASA support. Whether this is a turning  point for Airtel in Kenya as a company which has branded as Kencel, Celtel, and Zain and which has steadily lost ground and value to Safaricom over the years, remains to be seen.

But members of parliament from ODM (the main party in NASA)  have in the past voiced critical comments about some of their issues with Safaricom from even before the 2017 election –  especially during debate on the gambling and sport betting bills in the last parliament, earlier this year.

Here are some comments by Nicholas Gumbo, the then-Member of Parliament for Rarieda and Chairman of the Public Accounts Committee in the National Assembly.

Then-Member of Parliament for Gem and Deputy Minority Leader, Jakoyo Midiwo threatened on more than one occasion to introduce legislation to break Safaricom.

Bidco: The edible oils company is probably the most vulnerable of the three brands, and was likely targeted because its group chairman Vimal Shah, is the chairman of MKenya Daima an offshoot of the Kenya Private Sector Alliance (KEPSA), of which he’s a past Chairman, and which has throughout the election season been championing for respect of the election outcomes, grievances to be addressed in the constitutional ways (through the courts), for politicians to be careful about their public utterances and for normal business life to resume. KEPSA recently released a statement that read:

This is why we have consistently called Kenyans’ attention to the disastrous economic consequences of the present uncertainty which affects all Kenyans. The Private Sector having reviewed the loss and has estimated it to be about 10 per cent of the GDP equivalent to Kshs 700 Billion

Earlier this year, Bidco announced plans to become a billion dollar turnover (Kshs 103 billion) company by 2021 (their current turnover is Kshs 25 billion) by diversifying into the production of fruit juice, soft drinks, and cereal products.

EDIT May 1 2018