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Comment & Analysis - September 08, 2011

Africa's “King of Kings” Is Out, Long Live His Wealth!

Arthur Boutellis l Non-resident Adviser
boutellis@ipinst.org

This summer, I was invited to speak at the Africa Center's Senior Leaders Seminar on post-conflict transitions in Washington, DC. Participants were mostly senior African military leaders, and the discussion session drifted to Libya. When one officer asked what the regional implications of the conflict in Libya could be, I thought that he, as a security expert, wanted to discuss refugees, mercenaries, and weapons crossing borders. But he quickly corrected me. “The question was about economic security,” he said.

The Libyan crisis has affected many on the African continent through the loss of remittances from the estimated two million African workers in Libya and through the freezing of Libyan assets under UN Security Council Resolution 1970 of February 26, 2011.

The fall of Libyan leader Colonel Muammar Qaddafi raises the question: what do his economic investments represent in Africa? What will happen to these with the establishment of a new regime in Tripoli? Who will fill the potential void?

Qaddafi was long associated mainly with the Middle East. But when he was elected chairman of the 53-nation African Union (AU) for one year in February 2009, he called himself Africa’s “King of Kings” and promoted a vision of a future United States of Africa.

That moment seemed to complete Libya’s foreign policy shift from the Arab world towards the African continent, a move that had started in the 1990s. Of course, the Qaddafi regime, after seizing power in 1969, had intervened both militarily and diplomatically in various African conflicts–notably in Uganda, Chad, and Liberia–without much success. But following the 1988 Lockerbie bombing, Libya’s resulting international isolation and the sanctions imposed on the country, as well as Qaddafi’s disappointment at the lack of Arab support, prompted him to turn to Africa. And the path he chose was the economic and commercial one. Libya took a leadership role in the promotion of regional economic integration through the creation in 1998 of the Community of Saharan and Sahelian States (CEN-SAD). He established the organization’s headquarters in Tripoli, paid most of the organization’s functioning budget, and provided direct access to the Mediterranean through the Misurata free zone and opened up Libya’s borders to many African workers.

Qaddafi’s investments and largesse, particularly in West Africa during the last decade, bought Libya respectability and influence across the continent. It contributed to the sense of solidarity that some African leaders and many ordinary Africans felt for Libya, a feeling that was reinforced by the strong negative reactions many felt towards the Western NATO bombing campaign.

I was working in Burundi in 2008 in the run- up to the AU chairmanship election, and I recall that beyond the folkloric Qaddafi gifts to fellow heads of states, like the five camels he gave to the Burundian president in January of that year, a number of Burundian state-owned companies were reported by local media to have been bought by the Libyan Arab African Investment Company (LAAICO). The purchase was said to include the national telecom company as well as the large state-owned hotel. Although it turned out that the investment company may not have played as big a part in these Burundi privatizations as was initially reported, other large Libyan investments took place during the same period in neighboring Rwanda, Kenya, Uganda, and across the whole continent. They were not primarily meant to yield profits, but rather to obtain prestige for Libya and Qaddafi.

Libya gave up its nuclear ambitions in 2004 and finally emerged from international isolation, and two years later, Qaddafi set up a $70 billion sovereign wealth fund called Libyan Investment Authority (LIA) to manage Libya's oil revenues. The money was invested through subsidiaries like the Libyan Africa Portfolio (LAP), the Libyan Arab Foreign Investment Company (LAFICO), and LAAICO, and these in turn invested in telecom, luxury hotels, real estate, banking, agriculture, and mining. In addition, Libya granted over $2 billion in mostly interest-free loans to Sudan, Mozambique, Ethiopia, and Niger. Finally, Qaddafi’s Libya financed smaller “development” projects such as the building of hospitals, schools, universities, and mosques.

Libyan economic weight on the continent is, however, not limited to these investments, and Libya, together with Algeria, Egypt, Nigeria, and South Africa, pays 75 percent of the African Union’s budget. In addition, it has paid the dues of members in arrears. Libya has also been a major contributor to the African Development Bank, where it holds 4 percent of the voting power.

In the short term, the imperative of rebuilding bombed-out infrastructures will likely lead the Libyan rebels’ Transitional National Council (TNC) to adopt major new priorities in the way the oil and gas revenues are managed—while honoring all the oil contracts granted during the Qaddafi era. The TNC has been pushing for the lifting of the freeze on Libyan government assets, which, while needed for humanitarian relief and for restarting basic public services, may exacerbate divisions among rebels and feed corruption.

In the medium term, the new Tripoli regime is also likely to turn more towards the countries of the Mediterranean basin. While members of the African Union continue to be divided on whether to recognize the TNC, Libyan rebels have moved closer to the more supportive 22-nation Arab League.

The new regime will also likely not follow Qaddafi’s campaign to “help Africa out of the West’s economic dependence” and become a continental hegemonic power. The latest move by the TNC has been to appoint a new director at the head of the Libyan Investment Authority (LIA). The new regime may also try to progressively replace African migrant workers with domestic labor and may be pressed to privatize the hotels and other Libyan investments on the continent, possibly selling them to interested foreign partners.

As Libya will no longer be seen as the “gateway to Africa,” and many of the previous largely non-profitable Qaddafi investments on the continent will be abandoned, the question remains of who will fill the void. The change in regime in Tripoli may present a unique opportunity for emerging powers to further diversify their African investments to productive industries and the service sector. Turkey, which opened 14 new embassies in Africa in the last two years and has been very active throughout the Libyan crisis, could show the way.

 
 

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