Britian Deals Legal Blow to ‘Vulture Funds’
Friday, April 9, 2010, 20:09
Campaigners have called on the United States to outlaw “Third World Debt profiteering” after the practice was banned in Britain on Thursday. The British Debt Relief bill is the world’s first law that restricts so-called Vulture Funds, which buy up poor country’s debt at a cheap price and then take the country to court to recover the full amount.
Nick Dearden, director of the Jubilee Debt Campaign, a Britain-based group that campaigns for the complete cancellation of poor country debts, says over half of “vulture” cases are tried in the United States and Britain.
“If both Britain and the United States manage to pass legislation on this it will make a huge difference to the ability of vulture funds to extract profits from the poorest countries in the world so that’s what we hope will happen next,” he said.
“Vulture funds” buy the debts of poor countries at a knock-down price. Often the country has defaulted on that loan and, after the debt has been written off by Western governments, the “vulture” sues for the full debt along with interest and additional costs.
If the country refuses to pay, the “vultures” threaten to sue anyone who deals with the country.
Dearden says it’s the world’s poorest that are hit the hardest.
“They end up making extortionate profits off the backs of countries as poor as Liberia, Zambia, Cameroon, Nicaragua and so on,” he said.
The law passed in Britain this week applies to the debt of the 40 countries in the World Bank and International Monetary Fund’s Heavily Indebted Poor Countries initiative.
“Vultures” suing these countries will now have to accept a steep discount on the amount that they can claim – up to 90 percent, says Dearden.
“What in effect this will mean is that vulture activity becomes impossible in these cases. So hopefully it’s a real attack on the vulture model in these cases of the very poorest countries,” he said.
But Dearden says the law needs to be passed elsewhere in the world and not only affect the very poorest.
“We see this as a step towards making the lending system and third world debt a little more just, a little more responsible but there’s a long way to go in terms of cleaning up the financial system and the way that it works,” he said.
The law comes into force later this year. It will block a move to extract around $20 million from Liberia for a debt dating back to the 1970s.
[Voice of America]
Labels: VOA, VULTURE FUND
Read more...
MPs act to keep the vultures at bay
Ashley Seager
The Guardian, Wednesday 6 May 2009
MPs will today seek to curb the activities of "vulture funds" that prey on poor countries by buying their sovereign debt cheaply and then going to court to enforce repayment of the full value.
Labour MP Sally Keeble will lead a group of 12 cross-party MPs in calling in parliament for a Developing Country Debt (Restriction of Recovery) bill that would seek to ban hedge funds and other creditors from taking legal action to make large profits out of the debts of some of the world's poorest countries.
Such funds, many of which are based in the US or the British Virgin Islands, often use British courts and law firms to pursue claims against poor countries, such as Zambia, the Democratic Republic of the Congo and Liberia.
"These vulture funds have been engaged in completely unregulated profiteering in third world debt," Keeble said. "This bill puts forward some basic measures to clip their wings."
The bill is backed by anti-poverty group Jubilee Debt Campaign, which is leading a campaign against the funds.
"This bill would represent a major step forward in tackling these odious funds," said Nick Dearden, the group's director. "It cannot be right that companies are allowed, in British courts, to make enormous profits out of the suffering of millions of the world's poorest people. Tackling vulture funds should be an urgent priority."
Gordon Brown, the prime minister, has often criticised vulture funds and called for international action to ensure they cannot thrive. He wants the World Bank to help poor countries eliminate their commercial debts and creditors to establish a legal fund to help countries defend themselves.
But despite an early-day motion signed by 110 MPs a couple of years ago urging the government to follow the example of influential US Congressman John Conyers, who pressed President George Bush to change US law to outlaw vultures, no action has been taken.
Vulture funds buy the debt of poor countries on the open market - usually at very low prices because of the small likelihood of it ever being repaid. The funds then go to court to demand repayment of the face value of the debt, which is often many times higher than they paid for it. The debt was often run up by corrupt dictators who have long since gone.
At least 54 companies are known to have taken legal action against 12 of the world's poorest countries in recent years, for claims amounting to $1.8bn (£1.2bn). Vulture action is being undertaken against Ethiopia, Cameroon, Argentina, the Democratic Republic of the Congo and others, according to World Bank reports.
The bank has said, though, that its figures are unlikely to reflect the true value of such actions, which could be much higher.
In 2007, Donegal International, based in the BVI, made the news when it won $15.5m repayment in the high court for Zambian debt it had bought several years earlier for $3.3m. Two-thirds of Zambians live on less than $1 a day, and debt relief was intended to free up vital resources for healthcare and education.
The Keeble bill provides for an end to hedge funds and other investors buying up poor country debt at cut-rate prices and then suing them through the British courts. UK legislators are working in conjunction with counterparts in the US, where similar legislation, the Stop Vultures Act, is being introduced to the House of Representatives this month by Congresswoman Maxine Waters.
The US and UK are the two most popular jurisdictions for vulture funds to take legal action, with the UK alone accounting for about one-fifth of vulture cases. Firms such as Allen & Overy, Weil Gotshal, and Dechert all count vulture funds among their clients, which include Donegal, Kensington International and Elliott Associates.
Last month the Liberian government announced it had reached a deal with its commercial creditors to pay off its vast commercial debt at a rate of three cents on the dollar.
The total cost of the buyback of $1.2bn in commercial debt was $38m and was financed by the debt reduction facility of the World Bank, with contributions from the International Development Association, the US, Norway, Britain and Germany. It said 97% of Liberia's commercial creditors had participated in the buyback, meaning that vulture funds were effectively barred from taking action against the country in future.
Labels: MAXINE WATERS, MPs, SALLY KEEBLE, VULTURE FUND
Read more...
Jubilee advises public leaders to help maintain accountability
By Nomusa Michelo
Sunday April 29, 2007 [04:00]
JUBILEE Zambia has called on government and church leaders in the country to help find the lost sense of financial accountability and patriotism by civil servants. The call follows the ruling in which a UK court has asked the Zambian government to pay Donegal International US$15.5 million for a debt owed. UK Judge Andrew Smith on April 24, 2007 ruled that Zambia should pay Donegal International a settlement of US$15.5 million instead of the US$55 million demanded by Donegal International. This is repayment on a former bilateral debt purchased by the Donegal over a decade ago from Romania.
Jubilee Zambia national coordinator Nachilala Nkombo said the case of the Donegal debt points to critical lessons Zambians must draw on the way public loan matters should be handled in future, if Zambia’s integrity and development is to be preserved.
“We did not need to pay US$15.5 million to learn that we need to have in place stronger control of public debt contraction in order to stem the tide of unscrupulous outflows of financial resources from our public purse,” Nachilala said.
Meanwhile, Jubilee Zambia and its international collaborators Oxfam-UK and Jubilee UK and Jubilee USA have welcomed the announcement by Judge Smith to reduce the payment that Donegal International was demanding from Zambia from US$55 million to US$15.5 million.
However, Jubilee Zambia has noted that although the repayment has been reduced, the US$15.5 million would significantly affect government’s income available for development spending.
“For example, the US$15.5 million is approximately three quarters of the poverty reduction budgetary allocation for recruitment of new teachers in the 2007 budget,” Nachilala said. “Given that Zambia is ranked at 165 out of 175 of the poorest countries by the United Nations Human Development Index, this payment will certainly derail some of the envisaged progress in terms of poverty alleviation and achievement of the Millennium Development Goals (MDGs).”
Nachilala said the implications of this payment would be immediate, as the court has ordered payments to start in the near future.
“The court order on the 24th of April 2007 to pay Donegal International came a day after the Belgian government on the 23rd of April awarded Zambia further debt relief amounting to US$5.5 million in recognition of the Zambia’s deep need to accelerate poverty reduction,” Nachilala said. “The implication of this is that this contribution to debt relief by the Belgian tax payer’s will not reach the intended beneficiaries in the poorest parts of the country, but might go in the pockets of an already wealthy businessman from the US.”
Nachilala said Zambia worked closely with Oxfam UK and Jubilee UK and Jubilee USA to expose the activities of Donegal, which is headed by a US citizen Michael Sheehan.
“Post judgment, campaigners now expect that the issue will be raised at the G8 summit Germany in June this year,” Nachilala said. “Global leaders namely, George Bush, Gordon Brown and Germany, development minister Heidi Maire Wieczorek-Zeul have expressed the deep concern on this issue and its negative impact on poor countries.”
Jubilee-Zambia stated that vulture funds have to be legally blocked because it is through litigation against countries with limited abilities to pay that they target to reap their profits.
“Ultimately the international community led by the G8 now more than even before have a moral duty to institute a fair, comprehensive and binding framework for dealing with poor country debt which will ensure that commercial creditors will never again have the chance to profit in this way,” Jubilee Zambia observed.
Jesuit Centre for Theological Reflection (JCTR) director Father Peter Henriot observed that although the ruling was a legally correct decision, it is a morally wrong decision.
Fr Henriot noted that even World Bank president Paul Wolfowitz has described the case against Zambia as “appalling”.
Jubilee-Zambia network members and its partners are now calling on G8 representatives to take a stand on the case in which poor countries are tricked out of some benefits of debt relief, and bring an end to vulture funds.
Jubilee Zambia network members, are also calling on government to break the silence on Donegal by telling the nation how systems of government permitted the country to find itself in this situation and what correction measures will follow to ensure the Zambians involved in the Donegal debt deal are held accountable.
Jubilee Zambia is also asking what immediate legal and institutional arrangements the government will initiate to ensure greater transparency and accountability in governments’ handling of public debt matters in future.
Donegal International is a vulture fund that specializes in buying debts of countries struggling to repay and later claims the full amount of the debt with huge interests. Donegal International is registered in the British Virgin Islands.
Labels: CIVIL SERVANTS, CORRUPTION, JUBILEE ZAMBIA, VULTURE FUND
Read more...
Levy makes more appointments
By ANGELA CHISHIMBA
PRESIDENT Mwanawasa has appointed Chitambo member of Parliament Nassim Hamir as Deputy Minister of Lands. And Mr Mwanawasa has also appointed former Zambia National Commercial Bank (ZNCB) Managing Director Likolo Ndalamei as Deputy Secretary to the Cabinet in charge of Finance and Economic Development at Cabinet Office.
Special assistant to the President for Press and Public Relations John Musukuma announced this in a statement yesterday. In the letter of appointment to Mr Nassim, President Mwanawasa said, “This appointment underscores the tremendous confidence that I have in your ability and leadership qualities to guide this important ministry which I have assigned you. “You will no doubt agree that the efficiency of your ministry is critical if the performance of our economy is to improve appreciably.”
The appointment and transfers are with immediate effect. The office of deputy minister of Lands fell vacant after Mr Moses Muteteka was relieved of his duties to pave way for investigations into the alleged illegal allocation of land at the Ministry of Lands.
And Mr Mwanawasa has transferred Eastern Province Minister, Boniface Nkhata, to the Ministry of Mines and Minerals Development where he would serve as deputy minister. He has taken over from Mr Lameck Mangani who has been transferred to Eastern Province as provincial minister.
And the new deputy secretary to cabinet was relieved of his position at ZNCB when Rabobank of Netherlands acquired 49 per cent shares in the Zambian bank. Mr Ndalamei previously worked for the Bank of Zambia between 1992-1996 as assistant director in charge of economics. He was then seconded to the Ministry of Finance and National Planning where he served as Director of Budget. He was later appointed permanent secretary in charge of Budget and Economic Affairs until June 2002, when he was appointed Managing Director of ZNCB.
Meanwhile, KANGWA MULENGA reports that the Public Service Division (PSD) has appointed Ministry of Lands chief registrar in the lands and deeds department, Fortune Kachamba, as new Commissioner of Lands. Mr Kachamba takes over from Mr Frightone Sichone who is on suspension on allegation of corrupt activities. Minister of Lands, Bradford Machila, confirmed the appointment of Mr Kachamba. “I can confirm that Mr Kachamba has been appointed as Commissioner of Lands. His appointment was done on Monday.
He is an experienced officer who has worked in the Ministry for over 20 years and has also worked with several Commissioners of Lands before his appointment. “The new Commissioner of Lands is an experienced advocate and has a masters degree in land administration,” Mr Machila said in an interview yesterday. Mr Machila said the absence of the Commissioner of Lands stalled work at the ministry. The minister said with Mr Kachamba's good reputation, the Ministry of Lands would now administer land issues according to the public's expectation. “We now want to speed up the handling of land matters that were affected by the absence of the Commissioner of Lands, and other outstanding issues such as giving offers and signing of leases and titles,” Mr Machila said.
He also commended the public for the cooperation rendered to the Ministry in the absence of the Commissioner of Lands. The Minister further disclosed that a national conference on the draft lands policy would soon be held and that several stakeholders and members of the public would be invited to perfect the policy.
http://www.daily-mail.co.zm/press/news/viewnews.cgi?category=3&id=1128063253
Zambia to pay Vulture Fund $15.4m
By KANGWA MULENGA
THE United Kingdom Royal Court of Justice in London yesterday ruled that Zambia should pay US$15.4 million to Donegal International, the Vulture Fund that sued Zambia for US$55 million debt. And commenting on the judgement in an interview in Lusaka last night, Attorney General Mumba Malila described the outcome as good news for Zambia. This is according to the Jubilee United States of America website which also stated that court would determine the share of legal costs later. It also described the judgement as a small victory for Zambia.
The anti- Vulture Fund campaign organisation further said that the injustice of the result could not be clearer.
And Mr Malila said the outcome of the case was a plus for Zambia and commended the lawyers for having fought hard to bring down the amount from US$55 million to US$15.4 million. He said the judgement of such an amount was a plus for Zambia unlike the earlier claim. British Virgin Islands-based International paid US$3 million for a debt Zambia owed Romania but later sued for US$55 million repayment.
The debt originally had a face value of US$15 million, but Donegal International claimed that unpaid interests and other charges raised the amount to US$55 million. Zambia had paid back US$ 2 million, but Donegal International successfully sued the Zambian government on February 15, 2007 in the UK court. In 1979, the Romanian government lent Zambia money to buy Romanian tractors. Zambia was unable to keep up the payments and in 1999, Romania and Zambia negotiated to liquidate the debt for $3m. But before the deal could be finalised, Donegal International, which is part owned by US-based Debt Advisory International stepped in and bought the debt from Romania for US$3m.
Labels: APPOINTMENTS, CABINET, LAND, VULTURE FUND
Read more...
‘Vulture fund’ eyes Zambian UK assets
By Bivan Saluseki
Tuesday March 13, 2007 [02:00]
Donegal International is trying to identify assets belonging to Zambia in the United Kingdom that it could seize when its award is decided in six weeks time. And a London court on Friday put off for at least six weeks the decision on how much Zambia would have to pay the 'vulture fund'.
Jubilee Debt Campaign which has been in the forefront campaigning against the vulture funds yesterday stated that Donegal International was making moves to seize Zambia's assets after the courts announced the award.
The company, Donegal International, took Zambia to court trying to claim more than US$55 million for a debt it bought originally for just over US$3 million.
Jubilee Debt Campaign and Oxfam have been urging the vulture fund to drop its claim and the UK government to help keep 'the vultures' at bay in order to make the same cases impossible.
In the first judgment on February 15, 2007, the judge found that Donegal International was not entitled to the whole US$55 million it was claiming, but was entitled to something from Zambia.
He also found that Donegal's witnesses had been "dishonest".
The amount is yet to be determined, but could be as much as US$20 million.
Friday's hearing had put off the date when the actual award will be decided to anytime in April
In the meantime, efforts are being made in the USA to clamp down on the director of Donegal International, a US citizen.
Some congressmen have been calling for congressional hearings into his activities.
Women for Change (WfC) acting executive director Lameck Simwanza in a message of thank you to Jubilee Debt Campaign said the vulture fund was another way of perpetuating debt by countries in the north on those in the south.
"The vulture money being demanded from Zambia would go a long way in fighting poverty, improve access to health and education," he said.
Simwanza appealed to Jubilee and the people of the United States of America to continue putting pressure not only on the US government but also to other countries in the north to put a stop to what he called a very immoral act.
Activist Jesse Jackson published an article in the Chicago Sun Times urging the Bush administration and Congress to stop providing a safe haven for vulture funds.
Jackson stated that because the United States provided a comfortable home for companies that prey on countries like Peru, the Congo, and Zambia, the US had become a much-hated nation.
"At the same time the US sends aid, it literally disempowers these developing nations to help themselves," stated Jackson.
Labels: VULTURE FUND
Read more...
'Vulture funds'
By Sam Barrait, Head of Media, Oxfam
Friday February 23, 2007 [02:00]
Recent reports highlighted a misunderstanding concerning the appearance on BBC Newsnight of Martin Kalungu-Banda when that programme reported on the case between Zambia and Donegal international last week.
Oxfam and Jubilee are campainging against the action which Donegal has taken and have been working with the BBC to bring the matter to international attention so that cases like this one can be prevented. Martin was offered to Newsnight as a spokesperson to speak as a Zambian citizen on behalf of Oxfam.
Newsnight knew that he had been a special consultant to the President and were aware that he is now a staff member of Oxfam. However, they made an error in referring to him as an advisor to the President.
The campaingn has already had an impact. After seeing the BBC report, congressman John Conyers in the USA has brought this case to the attention of President Bush who has indicated willingness to tackle the issue of ‘vulture funds’.
Oxfam will be campaigning when the court reconvenes in March to decide the amount that Zambia must pay. We hope that Donegal will not take the money from Zambia where it is urgently needed to pay for more doctors, nurses and teachers.
http://www.postzambia.com/post-read_article.php?articleId=23005
Donegal Vs Zambia
By Evans Chisanga
Friday February 23, 2007 [02:00]
As a concerned taxpayer, I wish to express my heartfelt emotions about the Donegal Vs Zambia case in the London courts which has been ruled against our country. While it is clear that Donegal and 'vulture' organisations like them belong to the other side of the moral spectrum, it has emerged from the trial that there were collaborators from the Zambian government side.
It is they that I wish to turn the spotlight on. Details from the trial suggest that Donegal 'donated' $2m to the scandalous and illegal PHI, and some undisclosed amounts to individuals. If that is not betrayal of an entire nation then what is it? This is extremely serious. Furthermore, I would like to express my dissapointment with the government spokesman VJ for seeming to embark on a campaign of illusiveness on just about any issue on which the public are demanding answers from government.
On the issue at hand, VJ chose to deflect questions on government's position on this case and preferred to censure the BBC for having mistaken a Banda they interviewed as an advisor to the President.
If you didn't know, that was pathetic. Why should the Zambian public be relying on foreign media to give us detailed information on a case involving our country? In fact Zambians should thank the BBC for having brought the issue to light as our government was evidently intent on keeping quiet about it.
http://www.postzambia.com/post-read_article.php?articleId=23002
Sata and Taiwan
By Daniel Maimbo
Friday February 23, 2007 [02:00]
The Post on 15 February 2007 carried a story in which PF president Michael Sata was explaining his exploratory visit to Taiwan. I admire Sata's stand on a number of issues but I was deeply disappointment with his shallow reasoning and conclusions about Taiwanese development.
Sata was comparing China to Taiwan and glorified the development he saw in Taiwan without going to China to have a fair comparison. To attempt to compare the Chinese economy to that of Taiwan without having visited China and to draw conclusions on merely what you have seen with your own eyes in Taiwan alone is not only wrong but also exposes blind loyalty, narrow-mindedness and above all hypocrisy. The indisputable and acknowledged fact world over is that China is the fastest growing economy in the world.
Sata is also quoted as having said that, "There are so many Taiwanese companies in mainland China. So the quality goods you are seeing here are from Taiwan and inferior ones are from mainland China."
What a conclusion! Honestly, even though Sata tailors his message towards the underprivileged, he should understand that not all Zambians are so daft as to buy conclusions without logic and intellectual analysis.
Sata should read Animal Farm by George Owell. He has indeed deliberately closed his eyes and says, Taiwan is always right and China is always wrong. Whatever comes from China is always poor quality and whatever comes from Taiwan is always good quality.
Finally, even though Sata's warning that "We have to be careful because if we leave them (the Chinese) unchecked, we will regret.
China is sucking from us; we are becoming poorer because they are getting our wealth", is important and welcome, this sounds merely petty jealousy against China but in favour of Taiwan as this warning is applicable to all countries Zambia is doing business with, not just China.
Labels: SATA, VULTURE FUND
Read more...
Dear all, thanks to all who responded to yesterday's call-in action. Though the phone at Debt Advisory International's office was not being attended, a number of you left messages on the answering machine or sent in emails. We will be following the case of "Zambia's debt and the Vulture Fund" closely and are considering other ways to put pressure on the company before March 9, when the British high court is expected to rule on the amount that the company will be awarded.
I'd also like to remind you that these actions and updates are made possible by the hard work of our small but dedicated staff. When we have visitors from abroad, they are often shocked to see that our office consists of only two staff people and a handful of volunteers. Like other progressive organizations, we survive on a shoestring budget that is only made possible through the generous contributions of supporters like yourself. If you value these updates, the analysis we provide and having a progressive voice opposing corporate globalization in the heart of the U.S., please consider making a contribution through our website, at www.50years.org/donate . You can also contribute by calling our office at (202) IMF BANK or by sending a check or money order to the address below. March is the last month of our financial year, and we need your support to make it to the next one. If everyone who receives this email donates just ten dollars, we will reach our fundraising goal for this month. Of course we recognize that many people on this list are not in a position to contribute, and therefore if you are able to contribute, please consider making the biggest donation you can. If you contribute $35 or more, you will be eligible for one of our premiums, which include:
Ten Things You Really Should Know About the World Bank, a rebuttal to the World Bank's widely-distributed public relations vehicle, 10 Things You Never Knew About the World Bank. Our booklet lays out the facts and corrects the misinformation circulated by the World Bank.
The Grassroots Guide to the IMF and World Bank, which offers an in-depth and easy to understand look at the international financial institutions and the global economic system they dominate.
Most importantly, you'll be showing your support for the work that the 50 Years Is Enough Network does in exposing the workings of the IMF and the World Bank and joining the global community calling for an alternative, sustainable and just global economy. In the coming months, that work will include:
Supporting the U.S. Social Forum in Atlanta, Georgia. From June 27 to July 1, U.S. social movements will converge on Atlanta. Under the banner of "Another U.S. is Possible" we will be among those talking exploring how structural adjustment affects communities in the U.S. and abroad and working to reclaim our rights - to affordable housing, to good education, to a better tomorrow - that governments and corporate elites have stolen from communities in the U.S. and around the world. For more information, click here.
Global Economic Justice Workshops. Together with some of our allies in the progressive community, we will be sponsoring a series of global economic justice workshops from mid-March to mid-April. The trainings are designed to link together communities of struggle around the U.S. and come to an understanding of grassroots work in the U.S. as part of a grassroots movement for social and environmental justice around the world. If you would like to host a training in your community, please contact us at 202 IMF BANK as soon as possible or fill out this online form.
The IMF: Shrink It Or Sink It Campaign. Together with allies in the Global South, we are taking part in an exciting new initiative to curb the powers of the infamous International Monetary Fund. For too long, the IMF has projected its market fundamentalism onto development theory without any evidence to back up its views. While governments in the Global South say "enough", we will be pushing new campaigns and possibly legislative initiatives to clip the IMF's wings. This is a project we're really excited about, but it's one of our new initiatives that may be in danger if we cannot find funding for it. For the latest article on the IMF by myself and former 50 Years Is Enough Policy Analyst Soren Ambrose (now with the Solidarity Africa Network) click here.
Thanks again for your support. Like all the work of the 50 Years Is Enough Network, these initiatives are made possible through your contributions. If you are as excited about these initiatives as we are, please make the best contribution you can.
In Solidarity,
Sameer Dossani
Director, 50 Years Is Enough: U.S. Network for Global Economic Justice.
Labels: VULTURE FUND
Read more...
Shakafuswa advises UNZA students not to hero-worship corrupt wealthy individuals
By Mwala Kalaluka
Wednesday February 21, 2007 [02:00]
FINANCE deputy minister Jonas Shakafuswa has advised University of Zambia (UNZA) students not to hero-worship individuals that have amassed wealth through fraudulent means. And UNZA economics lecturer, Professor Venkatesh Seshamani said the government must not use the Donegal case as an excuse to reduce financial allocation to key areas in the social sector. Addressing students during a post-budget discussion held at UNZA Library auditorium on Monday evening, Shakafuswa said certain rich individuals did not deserve respect or praise due to the dubious manner in which they obtained their wealth. "There are some of you here who praise or hero-worship some of these corrupt people," Shakafuswa said. "Do not praise these people because most of them if you establish where they got their money from, you will find that they are not supposed to be respected."
He said the attitude by Zambians to get rich quickly had allowed a situation where corruption had become a way of life.
Shakafuswa told the cheering students that the Anti-Corruption Commission would now be a permanent feature at the Ministry of Finance to ensure that all those that are fraudulently getting money from the government are weeded out.
On the allocation to the education secdtor in this year's budget, which is 16 per cent of the total K12 trillion estimated budget, Shakafuswa said the government had made additional allocations that had brought the 16 per cent to about 20 per cent.
He said the additional financial allocation would go towards the construction of a third university, enhancing annual enrolment at the two public universities, while a K100 billion would help off-set outstanding bills at UNZA. Shakafuswa said he was aware that the money might not be adequate but with combined efforts from the public, the government would find a way of meeting all its obligations.
And Prof Seshamani, who questioned the government's insistence on having a third university when it was failing to properly run the already existing ones, said the government should not use the 'vulture fund' issue as a scapegoat against increasing funding to the education sector. Prof Seshamani also asked Shakafuswa to explain how the government had allocated additional money to the education sector, when the total budget had remained unaltered.
Labels: CORRUPTION, VULTURE FUND
Read more...
Vulture fund
By Mweelwa Muleya
Tuesday February 20, 2007 [02:00]
The case in the London High Court where a private company sued the Zambian government for US$42 million over a debt it bought at US$3.2 million has attracted widespread attention and condemnation. A vulture fund, Donegal International, based in the British Virgin Islands and is partly owned by US-based Debt Advisory International, in 1999 bought a debt of US$3 million from the Romanian Government which the Zambian government had contracted in 1979. The Zambian government had signed a loan agreement for purposes of acquiring agricultural machinery. However, in 1999- 20 years later - Donegal International acquired the rights of Romania to debt in accordance with the assignment agreement between Romania and the Zambian Government.
According to the BBC report quoting the International Monitory Fund and British Exchequer, Gordon Brown’s definitions, vulture funds are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest-which might be ten times what they paid for. Indeed, Donegal International is reported to have paid US$3.2 million to the Romanian Government and was now claiming an initial amount of US$42 million out of the claimed US$55 million due to interest.!
Five years ago, Brown-who is tipped to be the next British Prime Minister after Tony Blair-told the United Nations that the vulture funds were perverse and immoral. He is quoted as saying, “We particularly condemn the perversity where vulture funds purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount owed-a morally outrageous outcome”. A lot of statements, condemning the “immorality” of the vulture funds while acknowledging the legality of such funds, have so far been issued. According to the BBC reports, the Zambian case is just but one of the many such cases taking place. They cited the company owned by a New York billionaire, Paul Singer, “who virtually invented vulture funds”, which paid US$11 million for some discounted Peruvian debt and then threatened to bankrupt the company unless they paid US$58 million, which they got. Currently, the company is reported to be suing Congo Brazzaville for US$400 million for a debt they bought for US$10 million. Commenting on the Zambian case, Norwegian Ambassador to Zambia, Terje Vigtel, pointed out that the London High Court judgement while regrettable that it may adversely affect Zambia’s economy, was a lesson that the country should service foreign debts. He added that Zambia was lucky because such amount could have been doubled (Zambia Daily Mail, February 17th 2007).
Oxfam Consultant, Martin Kalungu- Banda is reported to have stated that while the repayment might be legal, it arose from debts accrued when the country was under an undemocratic system”. The question people should be asking is: has the process of contracting foreign debts and servicing them been democratised?.
This is a critical question which should lead to legal, institutional and procedural reforms that will promote transparency and accountability in the manner the country sources and services debts, be they domestic or foreign. From the little information that has filtered through to the public from the London High Court judgement, there are speculations of impropriety in foreign debt management by some people in strategic and privileged positions to have access to foreign debt information.
For instance, it is reported that the Zambian legal team led by William Blair QC, Tony Blair’s brother, argued in the London Court that a “US$2 million bribe was offered to the former Zambian president to make it easier for the vulture funds to claim their money. They showed the court an e-mail disclosed in the Zambian case, saying that a payment to the president’s favourite charity had allowed them to do a more favourable deal (BBC Features Story, Times of Zambia February 17th 2007)” There are other individuals being mentioned in the Zambian case in the London High Court judgement, which point to the need to act on the long-standing demand for all foreign debts to be ratified by Parliament before committing the country to some of the debts that have continued to impoverish the nation.
There are reports alleging loan agreements stipulating huge sums of money being signed but in actual fact Zambia continues to receive more documents than money. Most of the funds borrowed are spent in creditor nations who supply technical, human and financial resources. Through loans, some creditor nations facilitate the awarding of contracts to their companies, private or public, in debtor countries. Then such companies are paid in their countries by their respective governments and just send documentation to Zambia while the money continues to add value to the economies of such creditor nations.
Hence, the significance of some loans is more on siphoning the little resources from poor countries through debt repayment and enriching unscrupulous local agents than on improving the living conditions of the majority of the poor in debtor countries. Certainly the need to stop some unscrupulous individuals from conniving with vulture funds to “swindle’ debtor countries through foreign debt repayment is more than ever before. Instead of the government trying to be transparent by promising to table the whole judgement of the London High Court in Parliament, it should accept the demand to transfer the authority of contracting loans to Parliament as a way of providing checks and balances.
There is also need to release full details of loan agreements to various stakeholders such as civil society organisations for purposes of monitoring the utilisation of the funds as well as the servicing of such loans. There is need for concrete legal and institutional frameworks that will promote transparency and accountability in the manner Zambia contracts and services foreign debts. On their part, Jubilee Debt Campaign have called on Brown to turn his moral outrage about vulture funds into action if he becomes British Prime Minister by changing the law to make the Zambian case the last to appear in a British Court.
As long as the country remains vulnerable to loopholes for inefficiency, negligence and corrupt practices in managing foreign debts, “vultures” will continue feasting on it. It happened in 1993 when the Chiluba government gave coupons to farmers. Some unscrupulous companies reaped supper profits by cheaply buying off coupons from desperate and vulnerable farmers and then claimed the full amounts plus interest from the government. One wonders whether or not there was no government official benefitting from that transaction
Labels: VULTURE FUND
Read more...
‘Kalungu-Banda not Levy’s advisor’
By ANGELA CHISHIMBA
GOVERNMENT has said Mr Martin Kalungu-Banda is not an advisor to President Mwanawasa and therefore his comments on the vulture fund court case in London did not represent the views of the state. Chief Government spokesperson, Vernon Mwaanga, said in a statement in Lusaka yesterday that on February 16, Zambia's High Commissioner to the United Kingdom, Anderson Chibwa, was authorised to write to the editor-in-chief of Newsnight programme of the BBC Television Centre, to correct the misleading report. The High Commissioner was told to react to a statement, which quoted Mr Kalungu-Banda as an advisor to the Zambian President.
"I am now releasing Mr Chibwa's letter to BBC for publication," Mr Mwaanga said. In the letter to the BBC, Mr Chibwa said Mr Kalungu-Banda was not President Mwanawasa's advisor. He said the report on the vulture fund threat to Third World countries on February 14, and Zambia’s loss of the vulture fund case sent on February 15, was factually incorrect in reference to Mr Kalungu-Banda as advisor to President Mwanawasa.
"Referring to recent statements in the news article, the BBC Newsnight has presented Mr Martin Kalungu-Banda as presidential advisor to the Zambian President, His Excellency Mr Levy P. Mwanawasa, SC.,” Mr Chibwa said. “The High Commission of the Republic of Zambia in London wishes to correct the impression portraying Mr Martin Kalungu-Banda as an advisor to the President."
Mr Chibwa said Mr Kalungu-Banda had no authority to pass comment on behalf of the Zambian government in this case.
Labels: VULTURE FUND
Read more...
OP seal off Magande's office
By Brighton Phiri
Tuesday February 20, 2007 [02:00]
The Zambia Intelligence Security Services (ZISS) commonly known as OP have sealed off finance minister Ng'andu Magande's office and ordered all his staff to vacate the premises. And the government has explained that consultant Martin Kalungu-Banda had no authority to speak on its behalf over the vulture fund case in London. Chief government spokesperson Vernon Mwaanga yesterday confirmed that the security agencies had sealed off some of the offices at the Ministry of Finance headquarters.
"Yes, some of the offices at finance ministry have been sealed off by the security agencies to facilitate full investigations into the powder substance that was delivered for Hon Magande’s office last week,” Mwaanga said.
He said the security agencies’ action was a normal precaution to enable them to investigate the matter thoroughly. Mwaanga described Magande’s condition as healthy. “But he is not operating from his office at the moment,” Mwaanga said. Magande’s office was last Wednesday poisoned after a parcel containing some suspected poisonous chemical was delivered there.
And in his letter to the editor-in-chief of BBC Newsnight programme, which was released by Mwaanga yesterday, Zambia’s High Commissioner to London Anderson Chibwa explained that Kalungu-Banda was not an advisor to President Mwanawasa as quoted in an article entitled: “Vulture fund threat to Third World.” He said it was incorrect for the report to refer to Kalungu-Banda as advisor to the President of the Republic of Zambia. “The High Commission further wishes to advise that Mr. Martin Kalungu-Banda has no authority to pass comment on behalf of the Zambian government in this case,” read the letter in part. Kalungu-Banda, quoted as Zambian presidential advisor and a consultant to Oxfam last week told Newsnight “that US $40m is equal to the value of all the debt relief we received last year.”
Vulture funds - as defined by the International Monetary Fund and Gordon Brown amongst others - are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest - which might be ten times what they paid for it.
Labels: MAGANDE, VULTURE FUND
Read more...
Donegal shouldn't accept money from Zambia - debt campaigners
By Bivan Saluseki
Monday February 19, 2007 [02:00]
DEBT campaigners have said Donegal - a 'vulture fund' should not accept any money from Zambia. Donegal International had sued the Zambian government and Ministry of Finance before the London High Court for US$55 million plus compound interest at eight per cent on a debt the company secured from Romania in 1999 for US$3.2 million. Royal Courts of Justice ordered that Zambia should pay a much-reduced sum (to be decided next month) to US Company, Donegal International, as repayment on debts incurred by Zambia from Romania in 1979. Donegal's claim was for over US$55 million, but the judge decided that although the original agreement with Zambia was legal, the award should be significantly less.
Donegal bought the debt from Romania in 1999 when Zambia was on the verge of renegotiating it.
Adrian Lovett, director of campaigns and communications at Oxfam said Zambia, a poor country, desperately needed the money for its basic health and education services. "The judge was unable to dismiss the whole claim but it is clear that while the actions of Donegal International were not strictly illegal, they were immoral. When a country is as poor as Zambia, in desperate need of money to pay for basic services like health and education, it is unconscionable to pursue an inflated claim for a debt that should have been written off years ago. Donegal should not take the money," said Lovett.
Trisha Rogers, director of Jubilee Debt Campaign, said Vulture funds' predatory practices should be put to an end. "There is a clear need for a fair, comprehensive and binding framework for dealing with poor country debt, which will ensure that commercial creditors will never again have the chance to profit in this way. Gordon Brown, as UK Chancellor and Chairman of the IMF Finance Committee, is in a strong position to make this happen. He has previously stated that he is against vulture funds: he should use his position to put a stop to their predatory practices," said Rogers in a statement. The campaigners stated that vulture fund must not take cash from Zambia. UK Chancellor, Gordon Brown, has condemned vulture funds in the past.
The campaigners said Donegal International's claim threatened to undermine Zambia's plans for poverty reduction. A London court stated that witnesses for Donegal had at times been "dishonest". Jubilee Debt Campaign and Oxfam are arguing that the phenomenon of vulture funds targeting poor countries in this way is fundamentally immoral - and that the system needs to change to prevent it.
Visiting United Nations Development Programme executive director for legal empowerment of the poor Naresh Singh said the vulture fund tactics were ruthless.
Labels: DEBT, VULTURE FUND
Read more...
VJ condemns ‘vulture funds’
By Noel Sichalwe
Saturday February 17, 2007 [02:00]
CHIEF government spoke-sperson Vernon Mwaanga has said the concept of 'vulture fund' is unacceptable as it is used to exploit poor countries. Mwaanga was commenting on the London High Court case that determined the disputed Zambia's debt settlement agreement with Donegal International involving US$55 million. He said the situation called for the international community to outlaw the practice in the interest of financial equity and justice.
Mwaanga said this was the first 'vulture fund' case before the English courts in which a sovereign debtor has successfully challenged the ‘vulture funds’ claim prior to judgment. "Furthermore, the judge's findings of facts have vindicated the then Attorney General George Kunda's decision to suspend payments under the settlement agreement following concerns that had been expressed by the Task Force on Corruption," Mwaanga said. He thanked cooperating partners that have financed the corruption fight and witnesses that gave evidence in the matter. "The judge has significantly reduced the liability of the Zambian government by finding the clauses in the agreement were 'penal', that is, that they were unfair and unjustly penalising Zambia," he said. "The exact extent of liability has not yet been determined. A hearing is still to take place on March 9, 2007 at which time the liability will be established and the issue of legal costs will also be addressed. The indication that has been given by the court is that the sum will be closer to US$14 million, the original settlement, than the US$55 million being claimed by Donegal, which would represent a substantial service of just over US$40 million."
Donegal was seeking to enforce a claim against Zambia for US$55 million despite having bought it from Romania eight years ago for US$3.2 million. Donegal is alleged to have bought the debt behind the back of government representatives. Among the people that were mentioned in the judgment was then director of external resources mobilisation at the Ministry of Finance, Stella Chibanda, who rejected government recommendation to implement the debt buy back.
Judge Andrew Smith also described Donegal's action in obtaining confidential information about the debt from the Zambian government officials as unlawful and immoral. He said Donegal International witnesses that included their local representative Fisho Mwale were dishonest and unreliable having been evasive and misleading. On April 17, 1979 Romania and Zambia signed a loan agreement in respect of acquisitions of agricultural machinery. By an assignment dated January 19, 1999, Donegal acquired the rights of Romania to the debt pursuant to an assignment agreement between Romania and the Zambian government. The Zambian government then acknowledged the assignment to Donegal and the registration of Donegal as current holder of the debt on February 12, 1999. Donegal International Limited was claiming an initial amount of about US$42 million debt that later accumulated to over US$55 million from the Republic of Zambia with interest. This claim was made on April 1, 2003 and was signed by Michael Sheehan on behalf of Donegal while then finance minister Emmanuel Kasonde signed on behalf of the Zambian government. The court proceedings arose strong emotions since Zambia, being a poor country, saw itself as being vulnerable to vulture funds.
Judge Smith said the claim of more than US$55 million was an improper attempt by Donegal to exploit Zambia's vulnerability. Donegal has since responded that their purpose was to make profit and that it was legitimate to pursue the claim of more than US$55 million through the court proceedings against the Zambian government. However, the Zambian government and Donegal sought to reach an amicable settlement in relation to the debt on the terms set out in accordance with the agreement.
Labels: VERNON MWAANGA, VULTURE FUND
Read more...
