Introduction: Extractivism


Africa’s wide variety of resources (oil, minerals, forests, agricultural products and fisheries) are at the mercy of several extractive industries. Fertile land, natural resources and fish reserves are being sacrificed on the altar of a never-ending growth that is based on unbridled consumerism.



As providers of cheap labour and / or suppliers of raw materials or low-priced land, developing countries are often poorly paid links in global value chains, while most value is added to the commodities elsewhere. Then there are the economic losses and the social and environmental costs that are often paid by developing countries. A good example illustrating this exploitation is the spectacle of a copper mine deserted by an extractive company when it is no longer profitable: it extracted what it needed, then withdrew, leaving behind a devastated and polluted site.[1]


Financial Extractivism: Vulture funds


In this edition of the Echoes, we are addressing the issue of financial pillaging, especially vulture funds. Africa is suffering from the flight of capital caused in various ways, such as illicit trade flows caused by corporate practices. There is for example, transfer pricing, tax evasion and repatriation of profits in which tax havens often play a central role. In addition to this financial hemorrhage, vulture funds also play their part in the pillaging of Africa’s treasures.


Vulture funds purchase debts on secondary markets from a creditor state at a time when the debtor state risks defaulting. Faced with this risk, creditor states are more inclined to get rid of their securities and sell them at low prices. The vulture funds seek to buy the debts at this stage with the main objective being to achieve the highest possible profit margins. Then, the vulture funds refuse to participate and accept the restructuring of the debts of the debtor countries whose debt securities they hold. In general, the vulture funds claim the repayment of the whole debt, i.e. the principal plus interest and possible arrears.[2]


Clearly, the refusal of vulture funds to participate in restructuring plans jeopardizes the achievement of a timetable and debt relief for the country in question. This is particularly painful for developing countries that want to revive economically but are hampered by the heavy debt burden, sometimes even ‘an odious debt’.[3]


Vulture funds cynically wait for the time when their victim is most vulnerable before demanding complete repayment of the debt, for example, when a debtor country is facing a surge in foreign debt, a recession or hyperinflation. The vulture funds then go to tribunals; often the procedures are lengthy, complex and costly for the debtor states. When the court decides in their favour, the vulture funds seize goods from the state in question.[4] In this way, they make huge profits (of about 300% to 2,000%).[5] These profits are down to the large difference between the price of redeeming the debts and the payment obtained from the debtor states. Then these profits are lodged in tax havens. According to the Ziegler Report, Africa is the continent most targeted by vulture funds, with eight actions per year brought to court – and often lost by the debtor nations. The money cashed in in this way by vulture funds represents from 12% to 13% of the GDP of African countries![6]


At the beginning of the 80s, Zambia was suffering from very low world copper prices which led to a shortage of foreign currency and consequently problems serving its foreign debt. In 1984, the Zambian government declared it was stopping payment of a debt to Romania. This debt was bought by a vulture fund in 1999. Initially, in 2003, the Zambian government came to an agreement with the vulture fund. Nevertheless, after paying $3.4 million, the government stopped making payments because of the shady way (suspicion of corruption) that the agreement had been reached. The vulture fund filed a suit before a British tribunal and won – and came away with a profit of 370%![7]


This type of judgment clearly compromises the capacity of African countries to finance their public services such as education, health, access to water, sanitation, food, housing and reducing poverty as the funds earmarked for them have to be redirected to debt servicing. In the example of Zambia, the vulture funds extracted about 15% of the budget for social protection.[8] A further example comes from the DRC where a vulture fund earned $70million from an initial debt of $18million[9] incurred at the time of president Mobutu. This put extra pressure on the country’s public finances.


Fortunately, attitudes are changing and the UN Human Rights Council is calling for an international mechanism to restructure sovereign debt, to cut the grass from under the feet of vulture funds. Another interesting project concerns the African Legal Support Facility of the African Development Bank to help African countries cope with vulture funds. Some countries, such as Belgium, have adopted legislation to eliminate incentives for vulture funds. This law stipulates that where there is a “manifest disproportion” between the value of the redemption of the claim and the sums or nominal value subsequently claimed by the creditor (in this case the vulture fund) in the debtor country, the creditor may only charge the redemption price. [10]  The vulture funds contest this Belgian law and have challenged it before the Belgian Constitutional Court.




Clearly, vulture funds divert funds for development and basic public services. From a political point of view, the financial burden imposed on debtor countries reduces their economic and social sovereignty because alongside the obligation to repay the vulture funds, these countries become more dependent on loans from international financial institutions and their conditions. Finally, if vulture funds are added to other illicit financial flows, it is easy to understand that in order to change the situation; we must try to stop all the causes of the catastrophic financial haemorrhage suffered by African countries.


Gino Brunswijck

Policy officer


[1] [1] Bednik, Anne, « Une Dette qui ne sera jamais payée », CADTM, « Dette écologique & extractivisme », AVP N° 67, 2016, pp. 10-17, to consult :

[2] CADTM Presentation, R. Vivien, Brussels, 26 October.

[3] Principal of international law that states: “In international law, odious debt, also known as illegitimate debt, is a legal doctrine that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable.”

For more information:

[4] CADTM Presentation, Ibid.

[5] United Nations, Human Rights Council, 33rd session, « Rapport du Comité consultatif du Conseil des droits de l’homme sur les activités des fonds vautours et leurs incidences sur les droits de l’homme », A/HRC/33/54, 20 July 2016,

[6] United Nations, Ibid.

[7] United Nations, Ibid.

[8] United Nations, Ibid.

[9] United Nations, Ibid.

[10] For other conditions that have to be fulfilled, see: point 38, p.12 « Ziegler report » :