African Success Benin Rocked by Giant Ponzi Scheme

 

13 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com

The tiny West African nation of Benin has been a rare success story in a continent not full of them.

It has long taken pride in its domestication of political life:

·        an absence of military in the streets,

·        a Parliament not in the pocket of the president, and

 

13 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com

The tiny West African nation of Benin has been a rare success story in a continent not full of them.

It has long taken pride in its domestication of political life:

·        an absence of military in the streets,

·        a Parliament not in the pocket of the president, and

·        a relatively free press.

The country has not looked back since a popular uprising effectively overthrew a corrupt military dictatorship 20 years ago,

the first such overthrow in post-colonial Africa.

The newspaper kiosks in this chaotic and ramshackle city explode with disputatious publications,

and in the mornings yellow-vested drivers of motorcycle-taxis crowd them to read and argue politics.

Government, if not always clean, has at least been more or less freely elected.

While certainly still stuck in the throes of poverty,

it has maintained an unusual commitment to freedom and openness in its political life.

But now the tiny country’s stability has been shaken by a massive Ponzi scheme

that seems to have infiltrated almost all aspects of the society.

It started as a tip between friends, an unheard-of chance to pile up riches in a poor land.

How could you go wrong with a good-works company, apparently tight with the government,

promising interest of 50 and 100 percent, maybe even higher?

The “investment”, unfortunately, turned out to be a Ponzi scheme

that has ended in disaster for tens of thousands of families on this sliver of the West African coast,

wiping out savings, shaking the economy and threatening the president

in a nation of nine million that has long been a regional exemplar of stability.

Parliament is demanding his impeachment, high officials have been forced out,

and crowds of small savers up and down this Pennsylvania-size land of rich traditions, but limited means, are demanding restitution.

Benin, birthplace of historic African kingdoms, is on edge.

Recently, dozens of fraud victims massed outside the prefecture in the country’s bustling economic capital of Cotonou.

They pressed up against the fence, anxious, angry and insistent that

because they had seen pictures of President Thomas Yayi Boni, himself a former banker,

alongside officials of the company, called Investment Consultancy and Computering Services,

they assumed that it must be legitimate.

Officials estimate that there are between 50,000 and 70,000 victims,

with losses of perhaps $180 million —

a big sum in a place where most subsist on less than $2 a day,

and breadwinners have extended families counting on them.

“No family has been left untouched by this,”

said Gustave Anani Cassa, a lawyer and former justice minister.

More than 4,000 complaints have been brought to his law office alone, he said.

“I’ve lost everything,” said Christian Benhoungbedi, an auto painter waiting outside the prefecture.

He said he had invested hundreds of dollars.

“I just wanted to help my family.”

Some had waited days outside the yellowing government structure, spending the night under a huge mango tree.

Others in the crowd spoke of suicides and deaths from hypertension because of the losses.

They brandished official-looking “I.C.C.” contracts with the Statue of Liberty

and the stamps and seals that are a staple of West African officialdom.

They said they had been enticed by seeing members of the government on television with I.C.C. officials.

Benin’s pride in its stable and open political life has made the blow even harder.

Under Mr. Boni, the country has taken a populist turn,

with big bonuses for civil servants blamed in part by the International Monetary Fund for a doubling of the deficit.

Now, victims of the scheme associate Mr. Boni’s government with it.

And there is corresponding fear among analysts that

citizens will give up on the country’s young democracy and

take to the streets as they did in 1989

to get rid of the military dictatorship.

“I’m afraid the people will lose confidence,”

said Mathias Hounkpe, a political scientist who works for Parliament, known as the National Assembly.

He estimated that up to a quarter of the working population had been affected.

Others agreed that the scheme was worrisome, both economically and politically,

with one Western diplomat saying it had a huge impact on short-term discretionary spending.

“This business is a crisis of the regime, something that profoundly implicates the state,”

said Roger Gbégnonvi, a former minister in Mr. Boni’s government.

“If, behind every saver, there are only 10 people, then the whole country is shaken.”

A majority of lawmakers in Parliament have signed a letter

demanding that Mr. Boni be tried before Benin’s Supreme Court

for “favoring the activities” of the fraudulent company.

After all, “he’s fired his interior minister” for being involved,

said one lawmaker who signed the letter, Kolawolé A. Idji, a former National Assembly president.

“That’s not just anybody,” he said, adding

“This is an affair of state.”

Officials did not object as I.C.C., while ensnaring its victims, multiplied its good works,

helping to finance health clinics, feeding orphanages, digging wells

and making donations to the evangelical Christian groups that are important here.

Calendars and fabric showing President Boni and one of the company principals circulated.

“We are God’s workers,” the company’s director, Guy Akplogan, said in a television interview this year.

With its do-good reputation set, serious-looking men in dark suits

promised secretaries, mechanics, low-level civil servants and others

an investment that would deliver nearly half their principal back within three months.

In fact, I.C.C. was operating a classic pyramid scheme:

money from one investor was used to pay another.

The money was not invested anywhere,

but buried in the basements of the company’s principals,

said President Boni’s political counselor, Amos Elegbe.

Inside the labyrinthlike presidential compound,

Mr. Elegbe dismissed suggestions that Mr. Boni was associated with the fraud,

but acknowledged “there were fraudulent interventions on the part of structures of the state.”

He blamed the interior minister, Armand Zinzindohoué,

who is accused of furnishing bodyguards to the company’s principals.

And he excoriated the principal state prosecutor, Constant Amoussou,

whom officials accuse of having blocked an investigation of I.C.C. once the alarm was sounded last fall.

He has since been jailed.

“He was in it up to his neck,” Mr. Elegbe said.

About 13 of the company’s officials are also in jail, Mr. Elegbe said.

And while the president did grant an audience to I.C.C. officials in May,

it hardly meant much, Mr. Elegbe insisted,

since he has also met with hundreds of other entities and officials.

Mr. Elegbe, a veteran of several governments here, largely blamed the greed of his compatriots.

“I’m surprised to see how far we’ve gone into moral degeneration,” he said.

“How could people be so greedy?”

But the crowd outside the prefecture last week was not in a mood to blame itself for the devastating losses.

“I saw the head of I.C.C. Services with members of the government on television,”

said Michael Dagah, an electrician who said he invested $2,500.

“The government sanctioned it. It seemed serious,” he lamented.

“People told me it was something good, and you would get lots of interest,”

said Germaine Dagbo, who said she put in $1,200.

“There was a photo of President Yayi in their offices,” she said.

Now, “we’re turning everything over to God,” according to this article in the New York Times.

Unfortunately, it’s by no means clear that God – let alone anyone else – is going to be able to help them,

and that would be a disaster for a country that HAS made remarkable progress in its national life and society.

Where this will all end up remains unclear.

But it DOES serve as a warning sign to people in ALL other countries to be very skeptical

when ANYONE promises to return your principal in an unusually short amount of time,

as the government of China is well aware and, it seems, working hard to prevent.

Still, Bernie Madoff was able to pull off the EXACT SAME SCHEME in the US for DECADES,

fooling people supposedly considered sophisticated in all ways.

So who knows what the outcome is going to be – whether in the US, China,

or even the poor and struggling – yet democratic and proud – small country of Benin.

We can only hope that, somehow, restitution of some sort will be made –

because, if not, who knows how badly the damage could un-do

the extraordinary human progress the tiny nation has already made.

After all, as we always say, politics and economics are but two sides of the same coin.

 

David Caploe PhD

Editor-in-Chief

EconomyWatch.com

President / acalaha.com