/ 22 February 2024

Britain changed its former colonial territories into financial enclaves

The African Renaissance monument celebrates freedom from colonialism.
The African Renaissance monument celebrates freedom from colonialism.

A few years ago, during a visit to the city of Jos in northeast Nigeria, someone pointed to a vast, well-maintained area behind a fence, saying: “This ranch belongs to the Queen of England.” This statement was surprising, because there is often an assumption that independence in the 1960s resulted in a divorce between Britain and its former colony. This piece of evidence raised more questions than answers. 

Did Africa truly achieve political independence from European powers, and what were the terms for this independence? Slowly but surely, it is becoming increasingly clear that land, minerals and other natural resources were not really transferred to the new states. European powers, including England, France and Portugal, annexed territories to contribute to their economic well-being, making it unlikely that they would simply leave after the colonies became independent.

Former colonial powers rarely relinquished their grip willingly. This means decolonisation was not a clean break but rather a transfer of power with strings attached, often maintaining economic and political influence. Narratives of African independence often highlight French influence in West Africa and the Portuguese destruction of Mozambique’s infrastructure in 1975, dumping cement down plumbing and sewer systems before handing over the country.

Britain repurposed colonial structures to help it transform from an imperial power to a financial powerhouse in the last century. Thus, colonialism is not a historical phenomenon but rather an ongoing reality that continues to shape post-colonial territories. 

Michael Oswald’s documentary, Spider’s Web: Britain’s Second Empire’ (2017), says, “At the twilight of the British Empire, bankers, lawyers and accountants from the City of London set a spider’s web of offshore secrecy jurisdictions that captured wealth from across the globe and funnelled it to London.” This allowed Britain to continue to wield economic dominance through wealth extraction, thereby perpetuating the legacies of colonialism in the form of present-day financial dependency and unequal economic partnerships.

Using Egypt as a case study illustrates the limited independence granted by many European powers in Africa. Britain granted the North African country partial independence in 1922 but retained control of the Suez Canal, a strategic and economic lifeline. When president Gamal Nasser nationalised the waterway in 1956, Britain reacted angrily by declaring war on Cairo. Britain and France invaded Egypt and seized control of the canal.

These actions are reasons Africa has generally fared poorly on the economic and political fronts. Britain’s postcolonial strategy involved transforming from direct coloniser to uncontested owner and mass looter of resources, perpetuating exploitative dynamics despite formal independence.

The mixed economic fortunes of most African states can be ascribed to brutal British financial power and financial interests of a lesser-known political entity in Westminster called the City of London. This effectively makes London the de facto capital of financial deregulation in the world; neither New York nor Zurich even come close. London owes its status as the world’s foremost financial centre to its tax haven of sorts within the jurisdiction of the large city. 

France set the tone on how to handle decolonisation

In the first round of colonial independence, the English and French faced significant losses, with the Thirteen Colonies in North America breaking away in the 1700s. The Treaty of Paris in 1783 marked the formation of the US as a sovereign state, with France, Netherlands and Spain supporting the US against Britain. But France set a precedent in how European powers later dealt with political independence, exemplified by Haiti’s freedom in 1804. 

Writing for Forbes magazine, Dan Sperling explains that in 1825 the island nation was “forced to begin paying enormous ‘reparations’ to the French slaveholders it had overthrown”. Sperling says Haiti had to pay France about $21 billion to save its independence from threats from all slave-owning countries (particularly the US) as well as its very existence from “rankled racist sensibilities globally.”

Similarly, the weakened Spanish empire meant the carcass was there for the taking. From 1808 to 1826, numerous wars of independence were fought in Latin America. Liberation hero Simón Bolívar solicited the Haitian military and financial support to free Venezuela, Bolivia, Colombia, Ecuador, Peru and Panama. Wars of independence were fought by Spaniards born in the New World (criollos) against those born in Spain (peninsulares). As a result, these post-colonial states’ economic and social structures did not change much as political power, and the economy remained with Europeans to this day.

France faced potential losses in its African territories. West African states endured economic bondage to France, with Paris holding their wealth and exerting political and economic control. The new states were required “to vest their foreign exchange reserves with the French central bank”. David Hundeyin suggests that this “neo-colonial tax” contributes a sizable portion of the $2.5 trillion-strong French economy. 

Britain’s transformation from coloniser to landowner and mass looter

Britain, along with France and Portugal, lost valuable African possessions, yet their former treasures are still bound to colonial heritage through structures such as the Commonwealth of Nations, Comunidade dos Países de Língua Portuguesa and Organisation Internationale de la Francophonie.  But, the story does not end there: Britain remains the largest owner of land and minerals in independent Africa. In countries such as South Africa and Kenya, the British have messed up the system of land ownership through finance. 

The loss of colonies enhanced or reconfirmed Britain’s status as a criminal state, a fact that was known even during the Opium Wars with China in the mid-19th century. Britain tried everything, starting with the slave trade and drugs, to gain the infamous tag of the world’s first narco-state, colonialism and finance. For most people the link between land ownership and finance would not seem obvious. 

Britain granting partial independence to Egypt in the 1920s marked the beginning of its decline and rise in influence as the world’s financial capital, mainly to protect its foreign commercial interests that were threatened by the decolonisation drive. 

Additionally, themes such as tax avoidance, organised crime and transfer pricing are usually treated as anomalies, but they are integral to the enduring legacy of colonialism and imperialism. The interconnection of world history, particularly the growth of capitalism, underscores the challenge of separating capitalism and banks from brutality and criminality. 

For tax purposes, British courts in 1876 began distinguishing a company’s place of registration from its control location. This precedent was reaffirmed in 1929, allowing the Egyptian Delta Land and Investment Co Ltd, registered in Britain but owned by Egypt, to evade British taxes. This legal development not only laid the foundation for tax havens and money laundering practices globally but also anticipated Britain’s post-independence treatment of its colonies in Africa, Asia and beyond.

Memories of the humiliation in the Suez Canal debacle meant that Britain, especially its financial industry, grew extremely alert in protecting domestic wealth and influence. 

The Tax Justice Network reasons that this position resulted in two of the most important things that continue to shape the world of finance today. First, offshore “Euromarkets” emerged in London, a newly deregulated market that grew explosively and forced through global financial deregulation. Second, a post-imperial network of British “satellite” tax havens developed around the world, for example, the Cayman Islands. 

As suggested by Oswald’s documentary, in the 1960s Britain transformed itself from a colonial power to a financial powerhouse. This transformation entails Britain’s parasitic life and ransacking of wealth in former colonies through several strategies, including tax havens located at its many offshore jurisdictions to fund political instability and corruption. 

Mainly British-controlled tax havens continue to syphon trillions from the developing world to these quasi-states. Britain is in charge of global financial centres such as the three Crown Dependencies (Jersey, Guernsey and the Isle of Man) and the 14 Overseas Territories, including offshore giants such as the Cayman Islands, the British Virgin Islands and Bermuda. 

The Tax Justice Network regards the United Kingdom as “one of the biggest, if not the biggest, single player in the global offshore system of tax havens (or secrecy jurisdictions)”. But, when examining the Financial Secrecy Index, Britain generally features in a moderate position. This is because it externalised its looting to its network of offshore financial jurisdictions. 

The UK ranks in the top bracket of financial secrecy together with Switzerland, Luxemburg, Belgium and the Netherlands. 

Is it a coincidence that the major corporations that left South Africa in the past two decades such as the South African Breweries, Anglo-American and Naspers went to these countries? But what about the role of individuals in the post-apartheid South African state who used their positions to facilitate the country’s financial drain through flexible exchange controls and similar interventions? What about the continuing resistance to the nationalisation of the South African Reserve Bank, economic transformation and expropriation of land without compensation? All these questions will hopefully shed some light on many mysteries that exist in South Africa today.

Death at independence – free Africa was born into criminality

When African countries gained independence in the 1960s, their economic control was overshadowed by the continued dominance of London. The Cold War can be viewed as an economic phenomenon driven by fears in London and the West of losing wealth to the Soviet Union. The Marxian base-superstructure maxim highlights the influence of economic interests on politics, shaping post-colonial states’ affairs by London barons. 

The legacy of the Cold War contributes to the finance curse, evident not only in the UK but also in countries such as South Africa, where British ownership extends to significant assets in land and mining. A 2016 report from the NGO War-On-Want reveals the extensive dominance British companies have over Africa’s crucial mineral resources, such as platinum, copper, oil, gas and coal. For example, more than 100 companies listed on the London Stock Exchange have mining operations in 77 African countries and collectively own more than $1 trillion of Africa’s most valuable resources.

Britain the undisputed landowner in Africa

The over-financialisation of the South African economy serves as a hedging strategy against political uncertainty for Britain and similar countries, as seen in 2015 when former president Jacob Zuma removed Nhlanhla Nene as finance minister. The JSE reportedly lost R170 billion, and the currency devalued overnight. This implies that the UK uses economics to weaken countries by using tax havens, currencies, finance portfolios and other forms of indirect influence.

The collapse of the Zimbabwean economy is a hallmark of this strategy. Others, like South Africa, who wish to implement land reform are quickly reminded of what will befall them should they go ahead. It is not surprising that former British diplomat Robin Renwick moved from London to join the fight against those seen to be threatening UK interests in South Africa. Thus, the idea of state capture displays Britain’s uncompromising political madness to protect its prized possessions in South Africa.

Land parcels in South Africa are held in trust by the British Crown. Economist John Christensen estimates that these trusts worldwide are worth as much as $50 trillion. This form of ownership (trusts, a form of secrecy) is also used to conceal the identities of the actual owners of land. The Land Audit of 2017 revealed significant land ownership by trusts (31%) and companies (25%), contributing to the hindrance of land reform. 

Additionally, the exit of Anglo-American and other companies from South Africa did not bring the expected change in mining dynamics, because land, mining and the economy still reflect the British strategy of financialisation. The economic structure, highlighting the financial sector and commodity dependence, is seen as a manifestation of British imperialism.

Interestingly, there is a belief that South Africa’s economic woes can be solved using mainstream economic tools: that is the greatest fallacy. The strength of the financial industry and dependence on commodities are by design, and this does not help anyone. The structure of the economy is an expression of British imperial dominance. Political economist Moeletsi Mbeki points out that the South African economy was designed to serve foreign interests. 

South Africa is feeling the brunt of the British global financialisation strategy. 

While France maintained dominance over foreign reserves in former colonies, the UK retained land ownership and mines in South Africa, placing it firmly under its influence. Former UK prime minister Boris Johnson once remarked that the Commonwealth “is a real asset for the UK”. Additionally, the multi-state visit in 2018 by Johnson’s predecessor, Theresa May, indicated that Britain’s attention was again on Africa. The choice of Nigeria, Kenya and South Africa was not random; it showed where British wealth was stored. 

Finance, not guns, plays a huge part in Britain continuing to fly the Union Jack over Africa and other parts of the world.

Siyabonga Hadebe is a PhD candidate in international economic law and a labour market expert based in Geneva.