Rwanda: History, Development and the Risk of Unrest between 2021 and 2030

Since the end of the 1994 Genocide, Rwanda's Human Development Indicators (HDIs) have been on a steady uptrend as Illustration 1 below shows:

Illustration 1 (click on illustration to zoom in)

While Rwanda's HDI Indice is still below the African average (Rwanda's was 0.429 in 2011 versus 0.448 for the rest of Africa), Rwanda's progress is, by all standards, phenomenal. The nation's government and development partners should be lauded for their achievements.

Rwanda has been on most frontier market investors' radars for a while. However, the "media attention" that the country is attracting has compelled most investors to stay on the sidelines while they wait and see how the situation progresses.

Truth be told, I did not know much about Rwanda's history until last week; i.e.  I did not know much about Rwanda's history until I went through the expert testimonies from the December 11th 2012 Africa Sub-Committee hearing on The Crisis in the DRC.

As I watched the hearing video, I was confronted by the superficiality of my knowledge on the history of Africa's Great Lakes region.

In this blog post, I will share what I learnt about Rwanda as I poured through a voluminous collection of articles, books, research publications and current affairs discussions.

I will start by discussing the "ethnic" make-up of Rwanda and how colonization morphed it into a caste system. I will then discuss the causes of the 1994 genocide; particularly how they were linked to high population density and falling coffee prices.

I will close off by discussing the developmental challenges that Rwanda is certain to face in a decade, and, I will exposition the risks that they would create.


...Tutsi and Hutu

 "History is mostly guessing; the rest is prejudice"

 - Will Durant

Illustration 2 below sums up the most probable origins of the two major ethnic groups in Rwanda and Burundi; Tutsi and Hutu:

Illustration 2 (click on illustration to zoom in)

Generally, anthropologists assert that Hutu are a Bantu people. According to Joseph Greenberg's widely accepted theory on the origins of Bantu peoples, they originated from South Western Nigeria.

Around 1500 BC, see B1 in Illustration 2, the first wave of Bantu people left its ancestral homeland and headed towards the Great Lakes region. There is the remote possibility that modern day Hutu descended from this Bantu stock.

Alternatively, Hutu could have descended from the 8th wave of Bantu migrants who relocated from the South West of Africa, see B8 in Illustration 2, around 500 BC. In my opinion, the latter hypothesis has got a higher probability of being valid.

However, it is important to stress that the Great Lakes region was a Bantu migration hub, i.e. a locus point of Bantu migration; the Hutu could have originated from members of other Bantu migration waves who elected to stay in the Great Lakes region, while their clansmen moved on.

Rwanda was an attractive settlement choice for the first Hutu owing to the following characteristics:

• High Altitude: Mosquitoes and Tsetse flies do not breed at high altitudes. Thus, settling in the Rwanda region meant fewer cases of malaria and "sleeping sickness", i.e. better health and better quality of life.
• Moderate Precipitation: The precipitation was moderate and favorable to agriculture (the Bantu were predominantly farmers).

When the Hutu settled in the Great Lakes region, they lived alongside the indigenous inhabitants of the land, who are called the Twa (or pejoratively referred to as the pygmies). The Twa were/are a hunter gatherer people who live/lived within the peripheries of equatorial rain forests. [5]

It is difficult to establish if there were interactions between the Twa and the Hutu. However, there are strong indications that the groups remained in relative isolation from each other.

According to the Hamitic Hypothesis (which was propounded by John Hanning Speke and later served as the rallying point for génocidaires), the Tutsi were a Nilotic group of pastoralists that settled in the Rwanda-Burundi region sometime after AD 800.

They may have originated from Chad [1]. A small group of the Tutsi wandered to the South East, see C? in Illustration 3, and settled in Rwanda and Burundi.

They assimilated Hutu into their societal structure as Illustration 3 below shows:

Illustration 3 (click on illustration to zoom in)

In his essay which is entitled The Cultural Face of Rwandan Genocide, Christopher Taylor asserts that the Tutsi king, in Illustration 3, was regarded as a divine being; through him, blessings suppossedly flowed to the rest of mankind. In hard times, i.e. "when the flow of blessings would be blocked", the Tutsi King would be sacrificed to unblock the flow of blessings.

The Courtiers or Elders, in Illustration 3, were a small group of Tutsi aides to the king.

As Illustration 3 shows, the majority of the Tutsi were commoners [2].

According to Jarred Diamond's account in Collapse: How Societies Choose to Succeed or Fail, The Hutu joined the ranks of the Tutsi commoners, as is shown in Illustration 3, where they intermarried with Tutsi and could switch to become Tutsi (if they switched economic roles from crop farming to animal husbandry).


...Colonial History

When the Germans (and later the Belgians) colonized Rwanda and Burundi, they found it expedient to govern through Tutsi Intermediaries. They believed that Tutsi were racially superior to Hutu (because of the Hamitic appearance of Tutsi).

Under Belgian rule, anyone who had a Hamitic appearance or at least eight head of cattle was regarded as a Tutsi, and the rest were Hutu. Different privileges came with the different labels.

In 1930, everyone was required to carry an identity card that would stipulate their ethnicity.

The colonial Rwandan-Burundian society was gradated as follows:

Illustration 4 (click on illustration to zoom in)

As Illustration 4 shows, of the African peoples in Burundi and Rwanda, Tutsi had the superior status. And, the Twa lay at the very bottom of the pyramid. Under Belgian rule, the ethnic make-up of Rwanda and Burundi was essentially similar, as Illustration 5, below, shows:

Illustration 5 (click on illustration to zoom in)

During the late 1950s, the Hutu in Rwanda and Burundi grew restless with the social order. Owing to this, they created political movements that would champion their causes.

Increasingly, the conservative members of the Belgian elite were being supplanted by more liberal elites who were sympathetic to the Hutu. In 1962, this liberal metamorphosis of the Belgian power structures culminated in the independence of both Rwanda and Burundi.

As independence was approaching, the Hutu movement, in both Rwanda and Burundi, geared itself to overturn the pecking order by supplanting "Tutsi domination" with "Hutu domination". Violent skirmishes broke out and they festered into bloodletting orgies in which Hutu killed Tutsi and Tutsi killed Hutu.

Illustration 6 below sums up the key events that occurred in post-1950 Rwanda and Burundi. 

Illustration 6 (download image for a better view)

In Burundi, Tutsi hegemony was retained, while it was supplanted by Hutu domination in Rwanda.


...Mass Killings

From Illustration 6, Illustration 7 below, can be derived. It sums-up the key mass killings that occurred in Rwanda in the post-independence era.

Illustration 7 (click on illustration to zoom in)

As Illustration 7 shows, power in Rwanda generally changes hands between a Tutsi elite and a Hutu elite. At these transition points, mass killings occur.

The mass killings that occurred in Rwanda can be summed as follows:

1. In 1963, a contingent of Tutsi refugees, who had fled the unrest in Rwanda and settled in Burundi, formed a rebel group that made a failed incursion into Rwanda. In response to this, the Hutu in Rwanda killed at least 20,000 Tutsi.
2. Between 1971 and 1973, Hutu in Burundi tried to seize power violently. They failed and the government in Burundi killed at least 100,000 Hutu. In Rwanda, revenge killings of Tutsi ensued immediately (it is hard to establish the exact body count).
3. The 1994 Genocide in which between 800,000 and 1.3 million people were killed by the Interahamwe Hutu militia and Hutu civilians (the majority of the murdered people were Tutsi and moderate Hutu, and, around 10,000 Twa). A further 25,000 - 60,000 Hutu were killed by the RPF's mostly-Tutsi army (i.e. reprisal killings occurred). [3] [4]
4. Between 1997 and 2003, an unsubstantiated number of Hutu refugees and militia, who lived in refugee camps in the DRC, were killed by the RPF-backed Banyamulenge militia.
5. Between the late 1990s and now: (I did not include this in Illustration 7) In the North Kivu region (DRC), there are approximately 22 militia groups that roam the rain forests. These groups are predominantly off-shoots of the groups that participated in the Rwandan genocide and the first Congo war. Unable to fend for themselves in the rain forests, and with limited support from the outside world; these rebel groups periodically "prey upon" the Twa (in both the literal and figurative sense). The Twa refer to these groups as Les Effaceurs (i.e. the erasers). 

One thing that stands out about the mass killings that occurred in Rwanda and Burundi is: there is a causative link between the massacres; the massacres that occurred in Rwanda were inversely related to the massacres that occurred in Burundi.

Succinctly put, killings of Tutsi in Rwanda triggered killings of Hutu in Burundi, and killings of Hutu in Burundi triggered killings of Tutsi in Rwanda.


...Genocide

The widely accepted narrative of the Rwandan genocide originated from Allison Des Forges's expert testimony. This is the version that I'll abbreviate in this post [6]:

The Rwandan genocide was not spontaneous, it was concocted by hardliners in Habyarimana's government - who did not want the Arusha Peace Agreement to be implemented. The genocide had five principal phases:

• Phase 1: Like a classical coup, Phase 1 involved eliminating the moderates. This was done in the hours following Habyarimana's death by members of the presidential guard and the army. It basically entailed taking-out anyone who supported the implementation of the power sharing agreement, or, anyone who could impede the ethnic cleansing agenda.
• Phase 2: Take-out influential Tutsi and Hutu who would benefit from the emergent political dispensation, and Tutsi who were suspected of supporting the RPF. This was done in the hours between Habyarimana and Uwilingiyimana's deaths.
• Phase 3: Mount "elimination checkpoints" on every highway/street in Rwanda. This was initially done by members of the presidential guard. And, it was subsequently taken over by Interahamwe militia who initially sprayed suspected Tutsi with bullets. When the bullets ran out, they hacked people with machetes.
• Phase 4: Mobilize the masses to form autonomous killing brigades that would take-out their Tutsi neighbors and moderate Hutu. This struck fear in the heart of Tutsi and Hutu moderates, which set the tone for Phase 5.
• Phase 5: Encourage Tutsi and moderate Hutu to congregate at "protected/safe" places, like churches, stadiums, government buildings, hospitals and halls. This "round-up" strategy made the task of locating targets easier for the Interahamwe, and accounted for the lion's share of the body count.

Evidently, Phase 4 of the genocide harnessed the energies of civilians, which begs the question: What made the masses amenable to killing their relatives, colleagues, neighbors, teachers, students, doctors and their friends?

Illustration 8 below uses the metaphor of a bomb to exposition the confluence of the internal and external factors that spawned the Rwandan Genocide:

Illustration 8 (click on illustration to zoom in)

In this post, I will only discuss three factors using empirical data. They include Inequality, Falling Coffee Prices and High Population density:

1) Inequality

As Illustration 9, below, shows, Rwanda's Gini coefficient reached the 0.4 threshold for social unrest in the first quarter of 1993, i.e. exactly a year before the 1994 genocide:

Illustration 9 (click on illustration to zoom in)

Hence, one can conclude that an incident of social unrest of the "class warfare variety" was regrettably inevitable in Rwanda. The Hutu political elites knew that their popularity was waning and youth unemployment was high. They managed to harness and channel that public discontent towards the extermination of Hutu political foes and Tutsi.

2) Falling Coffee Prices

Rwanda's principal exports were coffee and tea, and, as Illustration 10 below shows, the price of coffee was on a steady downtrend since November of 1989:

Illustration 10 (click on illustration to zoom in) Adapted from: Index Mundi

Around that time, 70% of Rwanda's population engaged in agriculture. By and large, most of the people were semi-subsistence farmers. Plummeting coffee prices intensified the suffering of the Rwandan poor; it created a restive population.

3) Overpopulation

In 1994, Rwanda had a population density of around 760 people per square kilometer as is shown in Illustration 11 below:

Illustration 11 (click on illustration to zoom in) Adapted from: NASA Visible Earth

Rwanda was, and still remains, the most densely populated country in Africa. In 1985, all arable land in Rwanda, apart from National Parks, was being used for agriculture, such that, by 1994 the average Rwandan farm was smaller than one hectare. Thus, plots could no longer be periodically left fallow to preserve their fertility; they tended to be over-exploited. 

Over-exploitation of land, in a country with a hilly topography, translated into the rapid erosion of fertile top soils. This, in turn, translated into declining yields while population was steadily growing at the rate of 3% per year. Generally, hungry people are angry people.

According to Jarred Diamond, high population densities essentially meant that all the land in communes like Kanama was taken-up. Owing to this, young adults were increasingly delaying to start their own households. In Kanama's 20-25 year cohort, the percentage of young women who were still staying at home with their parents rose from 39% in 1988 to 67% in 1993; while for young men the number rose from 71% to 100% (during the same time-period). Crudely put, there were no young men who were independent in the Kanama region. It is such dependent young men who were recruited into killing brigades.

...Whither Rwanda?

In his book, entitled An Essay on the Principle of Population, Malthus wrote: "The power of population is indefinitely greater than the power in the earth to produce subsistence for man". When I look at charts, like Illustration 12 below, I tend to see the merit in Malthus' assertion:

Illustration 12 (click on illustration to zoom in)

As Illustration 12 shows, the two most recent incidents of mass killings that occurred in Rwanda / that had "Rwandan involvement", transpired just after the rate of population growth exceeded the food production per capita growth rate. Hence, I wonder if this avers Malthus's above-mentioned assertion; would Malthusian checks, materializing in the form of mass killings, be acting to "bring population down to the carrying capacity of the land"? Or, are these mere coincidences?

***

According to Illustration 13, below, all Rwandans were able to get the minimum recommended daily intake of calories by the beginning of 2008:

Illustration 13 (click on illustration to zoom in) Adapted from: World Bank Data

However, Rwandans' daily intake of protein fell below the recommended daily intake mid-2010, and the nation's intake of lipids still hovers below the recommended daily intake. Therefore it is reasonable to anticipate, in the very near future, a proliferation of the following diseases, especially in the poorest areas:

• Protein deficiency diseases like Marasmus in young children, Kwashiorkor in infants, and, Chachexia in people with cancer, AIDS, chronic kidney failure, heart disease, chronic obstructive pulmonary disease and rheumatoid arthritis.
• Lipid deficiency diseases like tooth decay and lipid oxidation disorder.

These diseases could have a negative impact on the productivity of Rwanda's population in the future.

The rate of economic growth in Rwanda (7.5% in 2010) still hovers above the population growth rate (2.82% in 2010). And, as Illustration 13 unequivocally shows, Rwanda's calorific intake lies comfortably above the WHO recommended daily intake of calories. Therefore does this imply that Rwanda has escaped the Malthusian trap? My answer to that question would be: Yes. Does this imply that the risk of societal unrest in Rwanda has gone down? To answer that question, I will quote from a paper that was authored by Korotayev et al (2011) entitled A Trap At The Escape From The Trap? Demographic-Structural Factors of Political Instability in Modern Africa and West Asia:

"El Salvador, Iran, and Algeria, whose populations in the early 1960s were at the level of undernourishment, or even famine, all managed to achieve a very significant progress in the decades before instability struck. El Salvador increased its per capita food consumption by 700 kcal/day and by 1980— the year when civil war broke out —almost reached the WHO recommended norm of 2300 kcal/capita/day (Naiken 2002). Iran also increased its per capita food consumption by 700 kcal/day (from 1800 in 1960 to more than 2500 in 1979) at the point when the country was swept by the Islamic Revolution. Algeria achieved even better progress, going over the WHO norm in 1977 with continuing growth thereafter. The civil war broke out in 1992 when per capita food consumption reached more than 2900 kcal/day, or nowhere near the undernourishment level (and approaching that of overeating). In Albania, Egypt, Liberia, South Korea, and Syria, similarly, outbreaks of political violence occurred against the background of rapidly increasing per capita food consumption. Thus, Liberian food consumption went up from 2100 kcal/capita/day in 1960 to 2500 (better than the WHO norm) by 1989, the year of civil war start."

Succinctly put, escape from the "Malthusian trap" does not immunize a society against civil unrest.

***

Rwanda aims to transform itself from a subsistence agricultural to a knowledge-based economy by 2020. One of the goals of Rwanda's'Vision 2020’ is to decrease the population dependent upon agricultural
activities from 85% to 50%. This translates to a decrease of 35 percentage points by the year 2020. The country is making serious strides towards this desired end state, they include:

• Building a super-fast information communications grid: According to the NetIndex Household download Index, Rwanda has got the fastest household internet download speed in Africa. It currently stands at number 65 in the world with an average household download speed of 8.11 Mbps.
• Creating competency-building partnerships: Recently, the Rwandan government partnered Carnegie Mellon for the development of graduate engineering degrees. Under this partnership, "Carnegie Mellon will establish and operate an academic program in Kigali, Rwanda, initially offering a Master of Science in Information Technology program. In addition to the academic program, CMU-Rwanda will collaborate with the Government of Rwanda to develop an innovation incubator, advanced practical training programs, executive education programs and a mobility research center." (source)
• Establishing technology hubs: Early in 2012, Rwanda announced its plans to launch a technology hub called kLab. The hub will be based in Rwanda’s ICT Park and it envisages to co-locate students, engineers and designers. This should allow different ideas to cross pollinate and spawn an ecosystem of tech start-ups.
• Securing lines of financing: In conjunction with the United Nations Economic Commission for Africa (UNECA), the Rwandan government established the Rwanda Innovation Endowment Fund (RIEF) to foster the development of innovative start-ups.

It would be interesting to follow the companies that are spawned by these initiatives.

***

As Illustration 14, below, shows, the contribution that agriculture is making to Rwandan GDP is on a steady downtrend, while the contribution of services to Rwandan GDP is on a steady uptrend:

Illustration 14 (click on illustration to zoom in) Adapted from: World Bank Data

These trends suggest that non-agricultural sectors will dominate future narratives of Rwanda's growth story.

Although the Rwandan agricultural sector's contribution to GDP would continue to be dwarfed by the contribution of non-agricultural sectors, its productivity will probably continue to follow the trend in Illustration 15 below:

Illustration 15 (click on illustration to zoom in) Source: World Development Indicator database

The combination of growing non-agricultural sectors, increasing agricultural sector productivity and Rwanda's youth bulge give Rwanda a high probability of following the green trajectory in Illustration 16 below:

Illustration 16  (click on illustration to zoom in) Adapted From: Korotayev et al 2011

Such a trajectory is associated with a high risk of political instability that stems from an explosive growth in the urban youth population. 

In their research, Korotayev et al (2011) teased data from 1960 to 2005 and found that "the probability of major internal violent conflicts in countries with very low young urban population growth rates (less than 15 percent increase per 5 years) was very low. For countries with intermediate values of these rates (20–30 percent increase per 5 years) the probability of such conflicts was close to 50 percent. However, even for this group of countries there was not a single occurrence of a particularly violent internal political upheaval in the given period. In countries with high young urban population growth rates (30–45 percent increase per 5 years) the probability of avoiding major political upheavals falls down to a very low level (about one chance out of four). Additionally, the probability of a particularly violent civil war becomes very high in these countries (also about one chance out of four). In countries in which the young urban population growth rates were very high (>45 percent increase in 5 years) not a single one managed to avoid major political shocks. The risk of a particularly violent civil war was very high for these countries (about one chance out of two)."

In their paper, entitled A Trap at The Escape From The Trap? Demographic-Structural Factors of Political Instability in Modern Africa and West Asia, Korotayev et al (2011) computed the risk of instability of African countries using the above-mentioned link between population structure and destabilization. Their findings can be abbreviated in Illustration 17, as follows:

Illustration 17 (click on illustration to zoom in) Adapted from: Korotayev et al 2011

According to Illustration 17, the entire Great Lakes Region, including Rwanda, faces medium to high risks of political destabilization between 2021 and 2035.This begs the question of what type(s) of political destabilization. The answer to that question is: it depends on the confluence of different factors that are too difficult to forecast accurately, at this point.

Keep watching Rwanda!

***

[1] In school, most Rwandan baby boomers were taught that the Tutsi came from Ethiopia. And, that, it was in fact the Hutu who came from Chad and Niger.

[2] According to some accounts, a Tutsi king called Rujugira consolidated the Rwandan state in the eighteenth century. He built a large military apparatus and proceeded to subjugate disparate clans (some clans were made up of both Tutsi and Hutu). The protracted military campaigns required funding, and, an administrative bureaucracy, that was largely made up of Tutsi was created to collect taxes.
[3] It is important to note that the mass killings only stopped when Kagame's RPF defeated the Hutu militia. When the RPF arrived in most towns, the Tutsi population had been completely decimated. And, the Hutu militia were now eliminating prosperous Hutu. Kagame's victory was swift because 1) the Hutu militia had mounted multiple road blocks on every road - it had spread its forces out - and thus, it could not mount a coordinated resistance effort (with critical mass); 2) the Hutu militia had run out of ammunition when it was eliminating civilians, and, the arms embargo that had been instituted by the international community meant that it could not replenish its stocks; 3) The Hutu army experienced a number of defections - some soldiers were repelled by what was happening and joined Kagame; 4) The Hutu militia were undisciplined - they spent their time drinking and raping women - they were not in fighting shape, and; 5) The Hutu militia had numerous parallel lines of command that often passed conflicting orders.
[4] A few lessons for survival that I gleaned from researching the Rwandan Genocide: 1) Whenever politicians are being assassinated and there is rhetoric about exterminating a certain ethnic group, run away immediately -  the violence will only cascade – no one is safe; 2) If you have to hide when a paroxysm occurs, do not hide in designated "safe places" - as it makes it easier for the exterminators to find you; 3) The international community will not act unless it is in its strategic interests to do so - it will never intervene to JUST save civilians; 4) International peace keeping forces are always under resourced, and more often than not, they fail to keep civilians safe; 5) It takes a long time for international peace keeping forces to be deployed - because generally no one wants to foot the bills, contribute the troops or the hardware; 6) If enough soldiers from a peace-keeping force are killed, there would be outrage in the home country of the peacekeeping force, and the peace keeping force would be withdrawn - leaving civilians vulnerable; 7) It helps to be a citizen of the US - the US government always makes provisions for the evacuation of US citizens when a conflict occurs in any region in the world; 8) In times of great upheavals trust no one, and; 9) When the rule of law breaks down, and violent conflict occurs, it does not pay to be a law abiding citizen -  obedience will mean a certain death. 

[5] A lot of theories were propounded to explain the Twa people's very short stature and they can be abbreviated as follows:

• There are low ultraviolet levels in the rain forest  i.e., where the Twa lived. Owing to this, the Twa synthesized few fats into vitamin D, which fosters the uptake of calcium. Thus, this deficit of calcium is largely responsible for their small skeletal size.
• Their small stature is an adaptation that allows them to move quickly through dense forests, subsist on a very low calorie diet (rain forests have got a scarcity of food) and thrive in hot humid conditions.
• High mortality rates caused their central nervous systems to prioritize reproduction over growth. Hence their small stature.

A common thread runs through all these theories: the rain forest conditions contributed to the Twa's small stature. They are built like other peoples who live in similar latitudes (i.e. along the equator) across the globe (e.g. in Australia, Thailand, Malaysia, the Andaman Islands, Indonesia, the Philippines, Papua New Guinea, and Brazil.). 
[6] Postscript 17 April 2014: For the sake of balance, I felt that it was prudent to notify you of the existence of competing narratives: Prior to her death, Allison Des Forges revised her official narrative to incorporate abuses that were committed by the Kagame-led army. Further, for an alternate version of what happened in Rwanda, see this resource. It was prepared by Professors Allan Stam and Christian Davenport. Furthermore, in a paper titled "Let's Be Friends" Luc Reydam uses declassified US government documents to construct an alternate narrative of the events that transpired in Rwanda. Another resource of interest is Rwanda: L'Histoire Secrète by Abdul Joshua Ruzibiza. 

Assessing Expropriation Risk: The Dynamics of Expropriation

Direct frontier markets investment is associated with a host of risks, of which expropriation is the most prominent. [4]

In this post, I will outline an approach that could be used to estimate expropriation risk. Further, I will also discuss the dynamics of expropriation using: the J-Curve; a conceptual tool that was developed by Ian Bremmer, and; the assertions that I drew from Bruce Bueno De Mesquita and Alastair Smith's text entitled "The Dictator's Handbook".

 ***

The questions that would be used to shape this blog post can be abbreviated as follows:

• When does expropriation occur?
• What are the drivers of expropriation?

When does expropriation occur?

The following quote, from David Landes's text entitled "The Wealth and Poverty of Nations", has got clues on the political conditions that amplify the risk of expropriation:

"In despotisms, it is dangerous to be rich without power. It arouses cupidity
and invites seizure."

- David Landes (The Wealth and Poverty of Nations)

From the assertion that was made by David Landes, one can infer that the risk of expropriation increases in conditions of despotism, i.e. where political power is repressive and concentrated. The concentration of political power in a society can be estimated by employing the following "selectorate index": The number of people who are eligible to vote under the laws of a nation divided by The number of people who would be eligible to vote if the nation adopted international standards of democracy and universal suffrage. [1]

To this inference, I would also add the following supposition: the risk of expropriation increases in conditions of high inequality, i.e. where wealth is concentrated. Why? Because in conditions of great inequality, the masses tend to support radical redistributive policies; which naturally "emboldens office bearers". The level of income inequality in a society can be estimated by using the Gini coefficient.

Hence, the abovementioned inference and supposition can be used to plot the following graph:

Illustration 1: Click on illustration to zoom in

In Illustration 1, the movements upwards and to the left, depicted by red arrows, indicate an increase in expropriation risk. The greatest increase in the general expropriation risk is depicted by the movement from Quadrant 2 to Quadrant 1. The move from Quadrant 3 to Quadrant 1 indicates an increase in the probability of a mass revolt and an increase in the expropriation risk of politically well-connected entities. And, the movement from Quadrant 4 to Quadrant 3 represents a moderate increase in the short term risk of expropriation; however,the move is usually ensued by the movement from Quadrant 3 to Quadrant 1 - so it represents a high increase in the risk of expropriation within a 3 to 5 year period. [8]

The conceptual framework in Illustration 1 can be supplemented by the adaption of Ian Bremmer's J-Curve in Illustration 2:

Illustration 2: Click on illustration to zoom in

I'll start by explaining the general concept of the J-Curve, by using an excerpt from "The J-Curve" book press release: "If you take a cross section of nations and measure each one’s stability in relation to its political and economic openness to the outside world, and then plot the resulting data points on a graph, the result is a curve shaped like a J. Nations to the left of the dip in the J are less open; nations to the right are more open. Nations higher on the graph are more stable; those that are lower are less stable. Movement from left to right along the J curve demonstrates that a country that is stable because it is closed must go through a period of instability as it opens to the outside world."

To give the conceptual framework in Illustration 2 practical utility, the following proxies can be employed:

• Percentage Change in Exports for Openness.
• Percentage Reduction in Incidents of Social Unrest for Stability.

In Illustration 2, the yellow circle that overlays the J-Curve is labelled "The Zone of the Greatest Danger of Expropriation". This italicizes the following mutually exclusive features of expropriations:

1. Expropriations occur when a country is starting to become more open: When a country is starting to become more open stability falls, as it moves up the J-Curve. In Illustration 2, this is illustrated by the move towards point a from the left hand side of the J-Curve. Usually, when this shift occurs, the entities that were closely associated with a deposed autocratic regime stand the risk of expropriation.
2. Expropriations occur when a country is increasingly becoming more closed: When a country is becoming more closed, stability falls as it moves down the J-Curve. In illustration 2, this is illustrated by the move towards point a from the right hand side of the J-Curve. Usually, when this happens, the following entities face the risk of expropriation: Foreign entities, Entities that were closely associated with a deposed political faction/party and Entities from sectors of the economy that are of the most importance and generate the most revenue (in forex terms).

What are the drivers of expropriation?

In their text entitled "The Dictator's Hand Book", Bruce Bueno De Mesquita and Alastair Smith state that there are generally three constituencies of political importance in a society [2]: The Nominal Selectorate, The Real Selectorate and The Winning Coalition. Illustration 3 below describes the constituencies, and, it positions them in terms of their political importance to an incumbent political leader:

Illustration 3: Click on illustration to zoom in

According to De Mesquita and Alastair, an incumbent politician's chief concern is to stay in power. To stay in power, a politician requires the support of The Real Selectorate and a subset of The Real Selectorate that they term The Winning Coalition (see Illustration 3). This support is, according to the authors, essentially "bought with money".

Therefore, it is reasonable to assert that the risk of expropriation of an entity increases when:

• The support base of an incumbent is dwindling: When this happens, the price of the support of The Real Selectorate increases, i.e. it would take more money to get them to rally behind an incumbent. If additional funds can only be accessed with more effort than the effort that is required to expropriate assets, the incumbent will do the logical thing: expropriate assets.
• When The Real Selectorate grows: When this occurs, more money is needed to buy the support of an increased number of key people. Again, if additional funds can only be accessed with more effort than the effort that is required to expropriate assets, the incumbent will do the logical thing: expropriate assets.
• When a country is undergoing financial hardship: Traditional sources of funds dry-up and new sources of funds need to be secured to buy the continued support of The Winning Coalition. The said "new sources of funding" may be the expropriated assets that are owned by "dispensable entities".
• When political rivals can make better offers to The Real Selectorate: An incumbent would be forced to make a higher bid. And, this naturally requires more money. Again, if additional funds can only be accessed with more effort than the effort that is required to expropriate assets, the incumbent will do the logical thing: expropriate assets.
• The entity is a marginal member of The Real Selectorate: According to De Mesquita and Smith, incumbents prefer a Winning Coalition that is as small as possible. They periodically cull-out members of The Winning Coalition who: 1) Have the power to depose them; 2) Have got questionable loyalties; 3) Have got great abilities and ambitions, and; 4) Are dispensable. [5].
  

I know that this sounds a bit radical, so I will close off with a story that will illustrate some of the above-mentioned drivers in action:


Dokolo - wealthy beyond the dreams of avarice

In the late 1960s, there lived, in Zaire (now called the DRC) a man called Augustin Dokolo Sanu. He was wealthy beyond the dreams of avarice and he had interests in Banking (The Bank of Kinshasa), Agriculture, Food Processing, Car Dealing, Mining, Transport, Printing, Insurance Brokerage, Customs Clearance, Real Estate and Trading.

By all accounts, Dokolo's empire aroused both admiration and envy. Just about every prominent member of the Zairean society wanted to be associated with him. Between the 1960s and the 1980s, Dokolo was offered numerous public sector positions. Being the time pressed man he was, he always declined by saying that he didn't have enough time to focus on anything that was not related to his business interests.

Dokolo's wealth largely depended on a strong copper price. And, when the demand for copper started to soften, most of his bank's debtors, copper miners, found it difficult to service their debt. Owing to this,  support from the central bank was needed to enable The Bank of Kinshasa to fulfil its commitments to foreign creditors.

Around 1985, The Bank of Kinshasa (BK), was charged onerous "new" interest rates for borrowing from the Zairean central bank. These interest charges (including the principal) amounted to 97% of Dokolo's "revised" networth (i.e. According to the valuations of the Zairean central bank; which accused him of using his real estate company to inflate the valuations of his assets [7]). Unbeknownst to Dokolo, these new interest rate charges and revised valuations were to mark an inflection point in the trajectory of the Dokolo empire.

As fate would have it, Dokolo didn't have enough liquid assets to cover the predatory interest charges. Naturally, this put depositors' funds at risk. Thus, he was forced to surrender the majority of his personal fortune as surety and his bank went into "indefinite" administration; i.e.  he never got his bank back and he never got back the assets that were surrendered as surety [6]. The long and short of it is: his assets were nationalized by the government of Mobutu Sese Seko.

Mobutu is the man who once said something that lends credence to the assertion that was made by De Mesquita and Smith (i.e. the assertion that political leaders buy the support of key constituencies with money), and I quote:

"What is important here is cash. [A] leader needs money, gold and diamonds to run his hundred castles, feed his thousand women, buy cars for the millions of boot-lickers under his heels, reinforce the loyal military forces and still have enough change left to deposit into his numbered Swiss accounts."

I think the quotation has got clues on what Dokolo's expropriated wealth was used for...

***

[1]  It is important to point out that this formula is a crude method of estimating the concentration of power in a society and it was merely used for illustrative purposes.
[2]  Bruce Bueno De Mesquita is an academic and a consultant with the C.I.A. He developed a computerized system that is underpinned by Game Theory and Graph Theory; the system can predict future events that involve complex negotiations between numerous entities. And, according to the C.I.A, the system has got a 90% accuracy rate when it comes to predicting events that occur on the global geopolitical landscape. Because of this, people call Bruce a modern Nostradamus.
[3]  The authors' assertions are underpinned by rigorous quantitative and qualitative analyses, and, they are backed up by empirical evidence from across the globe. Please read the book, in its entirety, before you dismiss these assertions.
[4]  According to Investopedia, expropriation is "the act of taking of privately owned property by a government to be used for the benefit of the public".
[5]  The first step is usually an arrest or legal proceedings. The second step in culling-out the named entities is usually financial dismemberment via expropriation.
[6]  Dokolo never recovered from the expropriation of his assets; he spent the remainder of his life in mourning.
[7]  It is almost impossible to verify whether this charge had any substence.
[8] These are generalizations. Contextual information is needed to interpret the true implications of these shifts.