Executive Summary.

Violence occurring in the CAR is a manifestation of a broader underlying economic and political problem

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Out of a population of 4.7 million, over 800,000 are currently internally displaced persons or refugees in neighbouring countries.

Illicit and predatory economic activities have largely contributed to the on-going violence and instability in the Central African Republic (CAR). Local elites and foreign investors are widely reported to have capitalized upon illicit financial flows from activities that include smuggling, trafficking, and control of government revenues. In this way, they have profited from the instability produced by the conflict and obtained the funds and resources required to finance and sustain armed violence. The impacts have been deeply destabilizing to the CAR. According to the United Nations High Commissioner for Refugees, out of a population of 4.7 million, over 800,000 are currently internally displaced persons or refugees in neighbouring countries, while the latest available assessment by the World Food Program indicates that 1.5 million people, or 35% of the population, are food insecure.

Despite the significant turnover in the groups and individuals in power, a kleptocratic economic system that predates the current conflict has persisted.

This brief aims to address this gap by categorizing and providing contextual analysis of the economic system that enables conflict and violent kleptocracy in the CAR. The typologies in this brief are all derived from real-world examples of the economic system of the CAR’s economy and highlight some of the various incentives and mechanics that structure this system. All examples in this brief are supported by disparate open sources that include global public records, media reporting, government documentation, and independent investigation. These typologies are not meant to be seen as exhaustive or definitive, but rather as representative of broader trends of corruption and illicit activity. Throughout the entirety of this report, an illicit activity is defined as an activity that could be perceived as contrary to international norms and standards, but is not necessarily illegal. As such, no illegality is implied by the content herein unless explicitly stated.

We identify seven key trends that contribute to illicit activity in the CAR

  1. Extractives and Resource Trafficking
  2. Security Sector and Procurement and Abuse
  3. Corruption and Illicit Financial Flows
  4. Regulatory and Sanctions Evasion
  5. Disguised Beneficial Ownership
  6. Elite Financing and Offshored Assets
  7. Convergence of Licit and Illicit Systems

An effective strategy to combat violence and instability in the Central African Republic must look beyond the direct perpetrators of violence. Armed groups complicit in the ongoing conflict control major revenue streams across the country, but they do not exist in a vacuum. Instead, they rely on larger networks of predominantly foreign facilitators who are not directly connected to the conflict, but who, perhaps unwittingly, provide expertise and access to international financial, trade, and transportation systems that allow local actors to sustain themselves, and launder profits out of the country for personal enrichment. These points of convergence, where illicit schemes rely on legitimate global financial and transportation infrastructure, at times represent the most profitable and vulnerable links in the conflict value chain, and are where policy, enforcement, and regulatory efforts should be focused.

Context.

The World Bank ranks the Central African Republic as one of the poorest countries in the world. Its official GDP of $1.5 billion in 2013 would not even register as a mid-sized company in the United States, although much economic activity is believed to be unaccounted for within the informal economy. This small economic prize is the reason the country’s various armed factions are fighting. The potential revenue is large enough to sustain a wide array of illicit schemes and networks that support militias, military campaigns, and the commission of mass atrocities, as well as allow elites to transfer significant wealth abroad. Given the comparatively small size of the CAR’s economy, relatively minimal enforcement interventions may have significant impacts in disrupting the entire illicit system.

The on-going conflict in the CAR began in December 2012 when the largely Muslim Séléka rebels broke out of their northeastern strongholds to take half the country. By March 2013, they captured Bangui and ousted President François Bozizé, who had ruled since 2003 after rising to power in a military coup. Their brutal rule gave rise to the largely Christian Anti-Balaka community militias. The Séléka officially dissolved in September 2013 and soon after, retreated out of Bangui. As of June 2015, the new interim transitional government has little control outside the city of Bangui, and the country is divided and controlled among various fragmented militias. The ex-Séléka now control most of the country’s eastern region through two major factions: Front Populaire pour la Renaissance de Centrafrique (FPRC) and Unité pour la Paix en Centrafrique (UPC), with a combined strength of 1,500 to 3,750 fighters. Human Rights Watch has reported that the Anti-Balaka are decentralized sub-militias that spread across western CAR, and include members of the former army and Presidential Guard, as well as various community self-defense militias. Collectively, they are estimated to account for about 7,300 armed fighters of widely varying degrees of experience and access to equipment.

While values may be small, limited dollar amounts can finance very significant armed groups that can destabilize entire regions. Nearly all combatants in the CAR are dismounted light infantry, and while levels of equipment and organization vary greatly between different ‘units’, they are equipped with small arms at best, or often little more than a machete or homemade bow and arrow. A 2007 global survey listed AK-47 prices in the CAR among the lowest in the world at $150 per rifle, and prices have reportedly fallen even further to $80 as a result of the proliferation of weapons from Libya and looting of arms depots when Séléka took power. Weaponry like the Type 82-2 grenade that is ubiquitous in the CAR is similarly cheap, selling for just US$0.50 to 1.00 each in 2014, or less than a can of Coke. Ammunition, on the other hand, particularly 7.62 mm rifle ammunition, can be quite expensive selling for as much as US$0.17 to 1.00 per round. Vehicles are fairly uncommon, especially among Anti-Balaka, while daily sustainment costs, such as rations and other equipment, are unlikely to exceed US$1-2 per day per combatant according to analyst estimates. Wages are meager, with published accounts reporting earnings of US$1-5 per day, the majority of which, just like weapons, vehicles and other commodities, are foraged or looted from civilian populations rather than disbursed through the chain of command.

As seen in estimates below, presuming all costs are paid for through the chain of command and not looted (a conservative estimate), sustaining 1,000 well-equipped combatants for a year could cost as little as US$1.4 million.

The following typologies attempt to categorize and provide examples of how the kleptocratic economic system enables conflict in the Central African Republic. No illegality is implied unless explicitly stated. Instead, the goal is to provide examples of how theoretical trends manifest themselves in real-life. The examples do not purport to be exhaustive, but rather representative of broader trends. The seven typologies are as follows:

I. Extractives and Resource Trafficking

Pillaging, trading, and trafficking within the extractives sector continue to be primary sources of funding for armed groups. The Kimberly Process banned rough diamond exports from the CAR following the Séléka capture of Bangui in March 2013. However, diamonds continue to be trafficked out of the country in significant volumes, along with a range of other products whose extraction directly and indirectly supports armed group financing. The territory being fought over by armed factions has closely correlated to areas with high concentrations of natural resources. Armed groups have positioned themselves directly at mines, major transport arteries, and exit points including airstrips and border crossings. The Séléka’s surge into the western CAR in early 2013 clearly prioritized securing diamond producing areas, while one of the Anti-Balaka’s few coordinated offensives in 2014 attempted to control supply lines leading out of the Séléka-controlled Ndassima gold mining area. The funds that sustain armed groups are raised from both manipulation of the formal economy and from the parallel informal economy, with a heavy reliance on extracting and taxing natural resources in ways that may constitute the war crime of pillage. This dependence is representative of the broader economy. In 2012, before the conflict erupted and the economy collapsed, diamonds accounted for 57% of all export earnings, as compared to declared gold earnings at 0.01%, according to UN Comtrade data. These figures, however, do not account for the true value of trade, as estimates suggest that as much as 30% of the diamonds and 95% of the gold mined in the CAR are currently smuggled out of the country. In October 2014, the UN Panel of Experts on the CAR estimated that 140,000 carats of diamonds, valued at US$24 million, had been smuggled out of the CAR since the onset of the Kimberly Process ban in May 2013. The Panel of Experts also estimated gold trafficking at roughly 2 tons per year and valued at over US$60 million. It is worth noting that the smuggling of natural resources may be decreasing as the economy has collapsed, transport arteries have closed, and formal mining operations have ceased with the fighting. Tax revenues collapsed by 63.5% and reached a rate of 5.2% of GDP, the lowest in the world. Resource trafficking is not limited to the CAR, but extends into transnational trafficking chains as well. An investigation by the UN Panel of Experts showed diamonds seized in Belgium had originated from the CAR after having been sent through the Democratic Republic of Congo and Dubai before arriving in Belgium.

II. Security Sector and Procurement Abuse

There is no shortage of weaponry in the CAR, particularly given the relatively rudimentary needs of most armed groups. The UN has maintained an arms embargo since 2013, but the flow of weapons has continued, emanating from neighboring countries like Sudan. Furthermore, actors in the CAR have attempted to leverage transnational enablers, some in Western jurisdictions, to procure arms. Heavier weapons such as aircraft and armored vehicles are largely only available to international forces, but in the pre-Séléka era, these items were available to the government of the country as well. These planned sales would have involved a much broader range of international, and possibly Western, suppliers and facilitators, and could possibly be up for discussion once more should stabilization strategies move towards rebuilding and strengthening a national army. Arms transfers to the CAR often involve a range of facilitators and enablers far removed from the messy realities on the ground.

III. Corruption and Illicit Financial Flows

According to several published reports by governmental and other international entities, governance in the CAR is plagued by gross mismanagement and misappropriation of public funds, the capture of illicit and patronage networks, and the elevating of loyalists to revenue-generating segments of the government and private businesses. Certain ministries are particularly powerful due to their control of major budgets or revenue generating sectors of the economy. According to the International Crisis Group, in the Patassé government of the 1990s, members of the President’s ethnic group controlled 29 of 36 public companies, a trend that has been reflected in subsequent governments. Bozizé was notorious for stacking key ministries with his family members and loyalists, including stacking his own family members as one fifth of the parliament. According to press reports, the subsequent Séléka government under President Djotodia also moved quickly to capture government institutions. Of the 34 newly appointed ministry heads in 2013, half were from the President’s ethnic and regional groups in the northeast, as reported by Mail & Guardian. Moreover, the Mail & Guardian reports that all nine of the most important ministries including finance, mines, energy, defense, security, and the police were reportedly controlled by Djotodia’s close associates, including four by his direct family members.

IV. Regulatory and Sanctions Evasion

Regulatory, sanctions, and enforcement authorities aimed at ending the conflict in the Central African Republic are limited in scope and are insufficient to deter or disrupt the conflict, questionable trade, or their actors and enablers. On May 12, 2014, under Executive Order 13667, the United States Department of the Treasury’s Office of Foreign Assets Control began implementing a sanctions regime on the CAR following United Nations Security Council Resolution 2127. However, as of June 2015, there are only five individuals from the CAR listed for asset freezes and travel bans by the United States, one of whom is now dead, and only two of whom are listed by the UN. Targeting such a small group is clearly insufficient, but even when examining the success of the sanctions on these individuals, there is some evidence of their lack of practical impact. For example, there have been published reports that former President Bozizé, sanctioned by the United States and the United Nations in May 2014, has traveled between Yaounde, Nairobi, Kampala, Addis Ababa, Juba, Paris, and Brussels since his ousting in 2013.

V. Disguised Beneficial Ownership

Some foreign investment in the CAR has led to murky ownership of companies and has allowed actors to conceal their identities. The CAR is the ultimate frontier market, often attracting a breed of investor that thrives on the high-risk and loose regulatory environment, but that also prizes privacy. The CAR itself is not a “secrecy” jurisdiction, but companies registered in the country can often be difficult to track given the poor standards in maintaining public records, while others are registered in jurisdictions known for lax reporting standards that can be equally difficult to track. As such, major economic projects in the country are controlled by entities about which very little is known.

VI. Elite Financing and Offshored Assets

Illicit proceeds in the CAR are both reinvested in military and patronage activities domestically, and offshored abroad for personal use. The amount of wealth generally appears to correlate with the amount of time an individual or group is able to exercise control over a major revenue-generating pipeline. France24 reports that elites surrounding the Bozizé regime are believed to have embezzled significant amounts of money, given that they were in power and controlled key ministries for a decade. By contrast, the Séléka government had less than a year in power to accumulate wealth, although they controlled major northeastern natural resource corridors for a greater period of time. Overall, the amounts believed to have been offshored abroad are relatively small by global standards, but nonetheless constitute an enormous outflow for the fledgling economy.

VII. Convergence of Licit and Illicit Systems

Due to the emerging, underdeveloped banking sector, much of the CAR’s illicit trade is believed to be cash-couriered. However, some elites who have amassed significant wealth and seek to offshore their ill-gotten gains are believed to use high-end wealth management services from international banks, including those in secrecy jurisdictions, whose purposely lax disclosure and reporting standards provide escape from tax and financial regulations, corporate governance rules, and even criminal laws.

 


 

 

Conclusion.

Conflict in the CAR does not occur in a vacuum. The direct perpetrators of violence are mere manifestations of a broader underlying economic and political system that is oriented toward violent competition for control of the country’s economic resources. This system has created strong incentives and precedence for actors across the ideological spectrum to use power as a means for profit, and to prioritize the use of public resources for private gain.

Conflict actors in the CAR are closely integrated into the broader illicit economy, using all available revenue streams, including control of government resources and trafficking systems, to fund and sustain themselves. However, these direct perpetrators rely on larger networks of facilitators who are not directly connected to the violence, but who, often unwittingly, provide the expertise and the access to international systems of finance, trade, and transportation that allows local actors to realize their profits and to launder them out of the country for personal enrichment.

An effective strategy to combat violence and instability in the Central African Republic must look beyond the direct perpetrators of violence, and instead focus on identifying, disrupting, and ultimately dismantling the broader networks that sustain the country’s violent kleptocracy. In particular, by focusing on the points of convergence where illicit schemes rely on legitimate global financial and transportation infrastructure, the international community may be able to leverage a broad range of existing tools and mandates to pressure the most profitable and vulnerable links in the conflict value chain.

 

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