Neo-colonialism is a complex and multifaceted term that has been used to “denounce a multitude of different forms of dependence and interference.”
This concept, which is usually applied to the “control developed nations exert over independent developing countries,”
has been operationalized through “economic penetration, political subversion and military pressure.”
The consequence of this is that although a neo-colonial state may have all the trappings of international sovereignty, in reality, “its economic system and thus its political policy is directed from the outside.”
In its pure form, therefore, neo-colonialism has been defined as “the survival of the colonial system in spite of formal recognition of political independence in emerging countries which became the victims of an indirect and subtle form of domination by political, economic, social military or technical means.”
Based on this definition, the consequences of colonialism and neo-colonialism are the same. Their mechanisms of operation, however, are different.
The movement toward decolonization in Africa gained momentum during World War II.
The new dispensation meant that the nature of the relationship between the colonial powers and the colonized territories had to be reconstructed. Because colonization was, in the first place, driven by commercial and economic considerations,
the colonial powers were naturally interested in exploring mechanisms that could help mitigate their loss from the end of colonialism.
In this light, any meaningful study of neo-colonialism should start from the way in which the colonial powers reacted to the imminent end of colonialism. The correlation between colonialism’s loss of legitimacy and the increasing powers and influence of Africans in their governance ensured that the colonial government increasingly had limited direct levers for the control of dependent territories.
This reduced the ability of the British government “to protect British commercial interests from the predatory instincts of determined post-war economic nationalists.”
The increasing influence of Africans in local decision making and the interest of the colonial powers in mitigating their losses from the end of colonization ensured a multifaceted practice of neo-colonialism.
In the attempt to maintain some degree of control over colonial territories, the British government adopted diverse subtle—and sometimes covert—strategies such as “creating client states, which it manipulates from the distance” through mechanisms such as fanning “the fires of sectional interests, of personal greed and ambition among leaders and contesting aspirants to power.”
Client states were also created through the empowerment of a “comprador” neo-colonial ruling class with interests similar to those of the colonial power.
Neo-colonial control has also been facilitated through the design of international aid, international trade, and international financial institutions.
Given that the success of neo-colonialism depends on the ability of the colonial power to outmaneuver its ex-colony, the desire to exploit and control does not always translate to success in all spheres of economic relationships.
Neo-colonialism in its pure form is therefore not always attainable.
Given the economic backwardness of several African states, even after their attainment of political independence, it is not surprising that neo-colonialism has become a favorite culprit in the attempt to blame outsiders for the adverse economic conditions in the continent.
In probing the role of neo-colonialism in Africa’s economic backwardness, the relationship between British business interests and the colonial government during the decolonization era has been explored by scholars. Some studies have documented the increased frustrations of British businesses with the British government, especially with respect to their campaigns for concessions and constitutional and operational safeguards after World War II.
It was such disagreements and frustrations that led Nicholas White to conclude that the “business and the politics of decolonization were rarely, if ever reconciled.”
Sarah Stockwell has further argued that “although British concerns retained commanding positions in the economies of former British colonies, in a fashion which led some commentators to describe these territories as ‘neo-colonies’, this was not a consequence of British business and government working in concert.”
Nicholas White has extended this view to the post-colonial era, asserting that the British government “displayed a marked reluctance to support British business in post-colonial Malaya.”
These views are questionable, however, because lack of agreement on strategy between the two parties did not necessarily mean lack of coherence of purpose. Rather, the very idea of decolonization changed the nature and dynamics of the relationship between the colonized territories and the colonial government.
Covert and subtle forms of control replaced the overt and direct ones that dominated during the colonial era.
These dynamics continued after most African states gained political independence in the 1960s.
It is therefore not surprising that some post-colonial era case studies on the relationship between the British government and British businesses in Africa have demonstrated that the British government and British businesses worked “in concert,” with the objective of protecting wider British interests in the territories concerned.
The essence of this article is to contribute to the debate on the relationship between British businesses and the British government in post-colonial Africa using the British multinational, the London and Rhodesia Holdings (Lonrho) Limited, which, under the leadership of Tiny Rowland, became “the largest and most widely established company on the African continent,”
as a case study. The existing studies on Lonrho have thus far reached no consensus on this subject. On the one hand, Rowland was described as the “antithesis … of City orthodoxy.”
His “agenda was self-aggrandizement, a trait which was particularly disliked amongst the British ruling classes” and the “subtleties of Westminster style government held little appeal” to him.
There was therefore no love lost between Rowland and the British government and his “deepest motivation was to “fight the [British] establishment and beat it.”
On the other hand, it has been argued that the “secret of Lonrho is the secret of British strategic policy for Africa in the 20th century” and that Tiny Rowland simply represented the ugly face of neo-colonialism in Africa.
A major shortcoming of these studies on Lonrho is that they were based mainly on speculative evidence. Because of its very nature, evidence of neocolonialism is rarely made public. The objective of protecting British wider interests in a post-colonial setting ensures that the strategy of actualizing the said objective is normally planned and executed covertly. Evidence of such clandestine practices that survive are usually tucked away in national or organizational archives. In this instance, such archival records include internal memos, correspondence, strategy papers, and secret reports that were produced by various departments of the British government that were at the time involved in finding a resolution to the Lonrho crisis that would also protect wider British interests in Africa. Because of the sensitive nature of such materials, archives usually allow considerable time to elapse before making them public; for example, the National Archives in London has a minimum retention period of twenty-five years in this regard.
This article introduces newly available materials mainly from the National Archives (NA) in London into the literature on the activities of Lonrho in post-independence Africa.
The operations of Lonrho in post-independence Africa were unique because it experienced “spectacular growth” in Africa in a period when other British multinationals were shrinking their operations in the continent.
At that time, several African countries adopted various degrees of indigenization and nationalization programs.
Furthermore, in 1973, the company became the subject of a major inquiry by the Department of Trade and Industry (DTI) of the British government under Section 165(b) of the Companies Act as amended. This was sequel to a boardroom squabble that culminated in the company washing its dirty linen in public.
This led to the May 15, 1973 declaration in the House of Commons by Conservative Prime Minister Edward Heath that Lonrho represented the “unacceptable face of Capitalism.”
Evidence in this article, however, suggests that this was no more than a normative assertion and that the relationship between the British government and Lonrho was more complex than Heath’s statement may have suggested.
This article demonstrates that long before the Section 165 investigations of Lonrho (1973–1976), the British government knew about the company’s unorthodox business practices in Africa.
It chose to do nothing about them, however. Its wider economic interests ensured that the British government was “not concerned with moral judgments” at the time.
This approach also guided the British government’s conduct of the DTI investigations of Lonrho.
Although most of Lonrho’s unorthodox activities were carried out in Africa, the report was greatly limited in its exposition of the activities of the company in the continent. In its bid to protect wider British economic interests in Africa, the British government shielded the corrupt African leaders who promoted such interests to the detriment of their local economies. This strategy adopted by the British government thus falls within the more subtle definitions of neo-colonialism. This article therefore argues that Lonrho represented both the unacceptable face of capitalism and the ugly face of neo-colonialism in Africa. To achieve its aim, this article is divided into four parts. The first part chronicles the rise of both Tiny Rowland and Lonrho in Africa, and the second part documents the concerns of Britain about Lonrho’s activities and its possible consequences for wider British interests in Africa prior to the investigations. The third part summarizes the report of the investigations and the fourth concludes the article.
Tiny Rowland, Lonrho, and Africa
The history of the rise of Lonrho in Africa and Tiny Rowland are entwined,
because during “Lonrho’s first century of business no individual figured more prominently than … Rowland. No one even came close.”
Rowland’s “influence on the company’s development was immense, enough to transform a moribund mining and ranching company … into a sprawling conglomerate that straddled much of the world, with operations blanketing all of Africa.” Lonrho’s annual “sales during the three decades of Rowland’s stewardship increased 787-fold” and profits “rose 1365 times.” Under Rowland, Lonrho “was shaped into a pan-African empire.”
The 1985 Lonrho annual report also showed that the turnover of the company rose from £4 million in 1961 to £1005.5 million in 1976 and £2586.2 million in 1985. Profit after tax rose from £100,000 in 1961 to £38.6 million in 1976 and £67.6 million in 1985. Furthermore, earnings per share and net assets per share similarly rose from .4 and 7 pence (1961) to 24.1 and 113 pence (1976) and 25.6 and 241 pence (1985), respectively.
Despite his remarkable achievements, Tiny Rowland was a man with a humble beginning. He was born in the Belgaum Detention Centre in Simla, India, on November 27, 1917 as Roland Walter Fuhrhopf. He was the third child of Wilhelm Fuhrhopf, his German father, and his wife, Muriel Fuhrhopf, who was half German and half English. On their own volition, in 1907 his parents moved to India, where his father became “a modestly successful, self-employed representative of German insurance companies.”
After the outbreak of World War I, the British government ordered the liquidation of all German businesses and subsequently the internment of enemy aliens. The consequence of this was the relocation of the Fuhrhopf family to the Belgaum Detention Centre.
After the war, the Fuhrhopfs returned to London where, in 1939, at the outbreak of World War II, Roland Walter Fuhrhopf changed his name to Roland Walter Rowland. While his parents were arrested as possible spies during the war, Rowland was conscripted into the army and sent to train as an orderly in the Royal Army Medical Corps. He was later sentenced to twenty-seven days’ imprisonment for being absent from duty without leave.
In 1948, after the end of the war, he moved to southern Rhodesia, where he bought a farm, Shepton Estates, and later went into business in garages, railways, and mining. By the time Rowland joined Lonrho in 1961, he was also a director of Rio Tinto Zinc (RTZ) in Central Africa.
The history of Lonrho, however, predates the birth of Tiny Rowland. The company was incorporated in England in 1909 as the London and Rhodesian Mining and Land Company Limited to acquire mining claims and shares in mining companies in southern Rhodesia. Over the five decades following its incorporation, the company expanded its mining interests, operating a number of mines in Rhodesia. It also acquired interests in property, ranching, agriculture, and asbestos, and acted as secretary and manager to various companies and dealt in shares, especially those of mining companies.
The London and Rhodesian Mining and Land Company Limited remained relatively unknown until 1957, when a South African company, Glazer Brothers, unsuccessfully attempted to acquire 51 percent of the equity shareholding of the company. Specifically, Glazer Brothers was offering shareholders 13/3 per 5/-stock unit. This amount was later raised to 14/6. At the time, the projection was that Lonrho’s pretax profit would rise from £146,000 (1956) to £270,000 (1966). The reason for the failure of this takeover bid has been explained thus:
The bid was resisted by the Board, partly on the grounds that the asset value was in excess of 15/- per stock unit, partly on the grounds that the prospect of increased profit was good and partly because the bid was only a partial bid. The bid was opposed by three major groups of shareholders, namely the British South Africa Company and the companies associated with Mr. Harley Drayton and with Mr. Harry Oppenheimer. These three groups did not wish control to pass to Glazer Brothers and they bought stocks in the market during the course of the bid even through the price was substantially in excess of the price that had ruled during the 18 months before the bid, which had been between 5/7½ and 8/-. In the event, the bid failed and these three groups were left with a substantial holding of Lonrho’s share capital.
Between 1957 and 1961, the expected prosperity of the company failed to materialize. A major reason for the poor performance of the company was the loss of management of the Cam and Motor and Pickstone Mines by the company in April 1960. Although the mine was owned by Cam and Motor Gold Mining Company, a quoted company that was independent of Lonrho, it was managed by Lonrho until April 1960. This change came about because, in 1959, Rio Tinto acquired controlling shares in Cam and Motor Gold Mining Company and decided to terminate the management agreement with Lonrho.
It was in the light of these depressing financial circumstances that on September 22, 1961, Lonrho—at the instance of Angus Ogilvy, the representative of the Drayton Group on the board of Lonrho at the time—entered into an agreement with Tiny Rowland under which he became a joint managing director of the company.
As part of this agreement, Lonrho acquired the majority of the assets of Shepton Estates for a consideration of 1.5 million of its own shares. The agreement also gave Mr. Rowland an option to acquire a further 2 million shares.
Immediately after Rowland came on board, the fortunes of the company began to improve. From the very beginning, Rowland perceived Lonrho’s interest in Africa as being “dependent on the wider political scene.”
By the time the Rhodesian government made its Unilateral Declaration of Independence (UDI) in 1965, “the company’s turnover had increased eightfold.” Such growth emanated mainly from developments in South Africa, Rhodesia, Zambia and Malawi. In these countries, Lonrho acquired many companies and broadened the group’s operating activities in the fields of transport, publishing, construction, ranching and agriculture.
The 1965 UDI complicated the playing field for Lonrho, however, especially in Rhodesia, because the United Nations, as a consequence of the UDI, imposed sanctions on Rhodesia.
In December 1966, the British government promulgated the Southern Rhodesia (Prohibited Trade and Dealings) (Overseas Territories) Order,
which placed legal restraints on the operations of British subsidiary companies in Rhodesia.
These developments necessitated the restructuring of Lonrho with a view to reducing its operational risks. In April 1966, Lonrho’s annual general meeting approved a scheme that gave Rowland, or a company nominated by him, a new option valid until 1971 for 2 million shares. The purpose of this, which replaced the option granted to Shepton Estates in 1961, “was to prevent control of Lonrho being located in Rhodesia.” On March 6, 1967, Yeoman Investments Limited, Bahamas, controlled by Rowland, exercised this option.
By 1970, despite the UDI setback, Rowland had turned Lonrho into an international conglomerate. Rowland was widely seen as the business “rainmaker” in Africa.
The UK Daily Mail hailed him as the man who “knows how to talk to Africans” and who “understands African business methods.”
Rowland was particularly successful in Africa because most of the countries in the continent lacked strong institutions.
This characteristic, which has been linked to the continent’s colonial past, led to the emergence of corrupt and unaccountable leaders, sometimes referred to as “big men.”
On this basis, it was not surprising that courting and bribing African leaders yielded good dividends for Rowland and Lonrho.
This was the basis of Rowand’s belief in “dynamic capitalism” and his view that “the success of his activities in Africa depended on contacts at the highest possible level and that, in the African context, ex gratia payments to individuals may be required to oil the wheels of business.”
Lonrho’s share price, which began to trend upward after Rowland joined, peaked at £3 in 1969.
The fortunes of the company subsequently began to decline. The DTI Lonrho investigation report identified the company’s rapid “expansion” and “informal style of management,” especially after the employment of Rowland, as the causative factors: “Board control over the group’s affairs weakened partly due to the increased size of the group but in certain instances as an act of policy.”
Rowland, who was the dominant authority in Lonrho, once explained his perception of the authority he wielded thus: “I always assumed everything, my right to do as I pleased. … I felt the whole show belonged to me.”
Other factors responsible for this decline included the decision by the government of Zaire to place all the group’s assets in the country under surveillance. This was “largely as a result of some ill-judged political maneuvering on the part of Mr. Rowland.”
Matters were further complicated by the arrest in 1971 of Lonrho’s group finance director and some of its executives in South Africa on charges relating to the company’s abortive bid to acquire minority interests in certain companies. The charges were later withdrawn, at least in part because the South African government feared that it might bring out embarrassing evidence of Rhodesian sanctions being broken.
Despite this, the company faced serious credibility and cash flow problems as a result of the arrests.
The loss of confidence in the group, along with its increasing financial difficulties, led to serious anxieties in London financial circles about the future of the company. Lonrho’s financial advisers, S. G. Warburg and Co. Limited. and two of the company’s directors subsequently resigned. In a bid to check the increasing decline in the fortunes of the company, the board appointed Peat, Marwick, Mitchell and Co., a firm of chartered accountants, to investigate the company’s financial position and future prospects. The firm’s February 1972 report was highly critical of the “lack of an adequate management organization under Mr. Rowland’s direction.” The report also pointed out that “the group was still managed in the same manner as in the early 1960s and that the rapid expansion during the decade had rendered the existing organization unsuitable for the complex and diversified Group that Lonrho has become.” The report subsequently led to a substantial reconstitution of the board and the appointment of a new chairman, Lord Duncan Sandys.
Other directors appointed included Sir Basil Smallpiece (deputy chairman), Edward du Cann, and four additional executive directors.
Matters came to a head in March 1973, however, when the Lonrho board reviewed the financial accounts of the company for the year ending September 30, 1972. The concerns raised in the accounts were undoubtedly the last straw that caused eight of the directors of Lonrho, led by its deputy chairman, to seek the removal of Rowland as managing director on the grounds of financial irresponsibility, inability to collaborate in any form of team effort, refusal to submit to the discipline of the board, and utter intolerance of advice and criticism. Rowland subsequently offered to buy the individual shareholdings of the eight directors seeking his removal at 140 p per share. This was about 40 percent in excess of the market price of Lonrho’s shares at the time. After this offer was refused, Rowland approached the High Court and obtained an interim injunction restraining the eight directors from removing him from office. All parties therefore provided their evidence to the courts. The minute details of the Lonrho board squabbles thus became public knowledge.
On May 14, 1973, Rowland’s application to extend the interim injunction to May 31, 1973, which was the day of the Extraordinary General Meeting (EGM) of Lonrho convened at Rowland’s insistence, was denied by Justice Plowman. Given the nearness of the EGM, the eight directors “considered (and were so advised) that, in view of the undertakings which Mr. Rowland gave in open court regarding his conduct in the interim and to avoid wasting more of Lonrho’s executive time in litigation, in the Court of Appeal, the correct course was to allow Mr. Rowland to retain his position as Chief Executive for this short period of time.”
Before the vote, the influential Economist magazine predicted that the “shareholders will think, rightly, about what matters most for their own investment.” After all, there was “nothing so exceptional about Lonrho” and its investments in Africa because other “companies have made a mint, bigger and more silently, from strange foreign countries.”
The EGM subsequently decided to back Rowland, who held almost 20 percent of the company’s shares, and sack the eight directors.
Because of “greed, they voted by over six to one for all the things Mr. Heath had condemned.”
Despite the decline in Lonrho’s share prices—from £3 in 1969 to £1 in 1973—shareholders reasoned that this was in no way comparable with the share price of 2s 6d when Rowland joined in 1961. The fact that the many sins of Lonrho and some of its directors were now in the public domain, however, necessitated an inquiry. This provided a unique opportunity for the Heath government to match words with action by exposing the dirt in Lonrho and cleaning up the company. Instead of doing this, as the next two sections show, the British government carefully guided the entire investigation process with the main objective of protecting British interests in Africa. The famous “unacceptable face of capitalism” quote proved to be nothing more than a hypocritical assertion.
Prelude to the Lonrho Investigations
The concerns of the British government about the activities of Lonrho predate the boardroom squabbles that led to the attempt by eight Lonrho directors to remove Rowland. By 1971, the Foreign and Commonwealth Office (FCO), increasingly concerned about the implications of the unorthodox practices of Lonrho for its wider economic and political interests in Africa, commissioned its research department to undertake a confidential study of Lonrho and its activities. The report made it explicit that the FCO was not concerned with “moral judgments.” Rather, its objective was to “put Lonrho’s practices in Africa into perspective and to indicate the implications for British policy of Lonrho’s business methods.” The summary of the final report, dated August 22, 1972, asserted that Lonrho’s “method of operating while not unique, are often unorthodox.” It was concerned, however, that “Rowland’s close relations with many African Heads of State can sometimes be an embarrassment to HMG, especially when his personality or methods upset them, thus souring relations for other British firms or British interests generally.”
One British concern that could spell difficulty for its relationship with governments in Africa was Lonrho’s involvement in politics. The case of Sudan illustrated the degree to which Lonrho was prepared to become politically involved for the sake of its financial interests. In this case, following the coup against Gaafar Nimeiry, a Lonrho aircraft was dispatched to take his close colleague, General Abbas, from Belgrade to Cairo and Tripoli, from where he made broadcasts to Sudanese troops. These broadcasts were certainly of some significance in paving the way for the successful countercoup of July 1971.
In addition to this case, Lonrho also interfered in the internal affairs of Mozambique, Zimbabwe, Zambia, and Angola.
Despite this evidence of political interference, an FCO report concluded that “this does not reflect any consistent political philosophy” on the part of Lonrho. Rather, “it is to ensure that partners with whom Lonrho has already expended funds should remain in control long enough for the company to reap some benefit.”
As already stated, Lonrho’s unorthodox methods also included bribing top government officials. A clear example of this was its strategy for taking over the Ashanti Goldfields Corporation in Ghana in 1968. This acquisition started in August 1968, when “an emissary from ‘Tiny’ Rowland approached George Doe, Ghanaian Ambassador in Bonn with an offer of a substantial bribe and a proposal that Lonrho should take over the Ashanti Goldfields Corporation.” After this, it took only five months for Lonrho to acquire 90 percent of the equity of the company.
There was also “evidence of bribery by Lonrho of Ministers and Heads of States” in Malawi, Zambia, Zaire, and Sierra Leone.
Despite these assertions, Britain was reluctant to openly investigate Lonrho. This was because, internally, the government conceded, “It would … be wrong to suggest that Lonrho’s business methods are unique or even uncommon in the field of British commercial dealings with Africa.”
Furthermore, the British were also of the view that “allowance must be made for the fact that conditions in black Africa tend to favour unorthodox methods of the kind employed by Lonrho.”
On the face of it, the argument that the uniqueness of Africa, especially given the institutionalized nature of the abuse of political power by African leaders, was sufficient condition for the British government to turn a blind eye on British businesses that bribe African leaders may look plausible. The reality, however, remains that offering bribes was clearly against the law in Britain and all independent African states, even at the time. Covertly encouraging such illegal practices by British multinationals in Africa made the British government complicit. Although the British government condemned such practices in public, as Edward Heath did in 1973, it covertlywent to great lengths to protect the interest of Lonrho in Africa, as this article demonstrates. This was because the British government knew that the fallout from an uncontrolled Lonrho investigation could damage its wider interests in Africa.
Given the damaging information in the public domain on Lonrho, the DTI was advised that the legal condition precedent for it to set up an inquiry under the provisions of the Companies Act had been met. It subsequently decided to appoint inspectors under Section 165 with formal powers to take evidence on oath and to inspect the records of the company being investigated. The report of such an inquiry is usually published, in the absence of good reason to the contrary.
In reaching this decision, the DTI was mindful of the fact that under Section 164 of the Companies Act, a specified number of shareholders could ask the secretary of state to appoint inspectors.
At the time, DTI knew that shareholders were “trying to organize an approach under this Section” and concluded that if “we do receive such an approach we think it would be extremely difficult not to make an appointment.”
Rather than wait for the shareholders to act, DTI decided to appoint inspectors under Section 165.
Although this proactive decision may have put the DTI in a better position to skillfully guide the investigation process, it was still worried that the “setting up of an enquiry may lead to some of the individuals with whom Mr. Rowland has dealt to feel uncertain about their position and prejudice them against continuing to deal with Lonrho or possibly with UK companies generally.” Because of this, it decided that the “enquiry would be directed at the holding company in London not at the subsidiaries in Africa.” This was so despite the fact that “95% of the company’s assets are in Africa and about 90% of its income is derived from those assets.” The DTI was particularly worried that “a report based on a wide-ranging enquiry might contain material which would be embarrassing particularly in our relations with some African countries.” It was, however, “confident on the basis of past experience that with ‘sensible inspectors,’ this problem may not become a serious one.”
As seen in the next section, the entire investigation of Lonrho was carefully designed and controlled with the main objective of shielding Lonrho and other British businesses and their African collaborators from the consequences of their corrupt business practices in Africa.
The Lonrho Investigation Under Section 165(b)
From the very beginning, as stated earlier, the British government was interested mainly in protecting British economic interests in Africa. It was therefore determined to control the investigations to make sure that it did not expose the corrupt African leaders who were bribed to promote Lonrho’s business interests in the continent, as this could stir indigenous anger against such practices. This might explain why one of the two persons initially appointed as inspectors by the Secretary of Trade and Industry on May 23, 1973, Dennis Garrett, a chartered accountant, had a previous association with one of Lonrho’s major subsidiaries. Public outcry subsequently led to his resignation on June 12, 1973.
He was then replaced by Sir William Slimmings, another chartered accountant. The second inspector was Allan Heyman, QC.
It was also arguably because of this objective that the DTI decided to conduct the investigation in secret. This was opposed by Marcus Lipton of the House of Commons, who asserted that “the affairs of Lonrho stink to high heaven and the only way effectively to remove the stench is to let fresh air circulate around it.”
This protest, however, was dismissed on the grounds that there was nothing new or special in the fact that the inquiry was to be held in private.
The inspectors finally delivered their report on Lonrho to the DTI on March 1, 1976.
The report of the inspectors, which was carefully guided to focus mainly on Lonrho’s practices that were of concern only in the UK, among other issues, criticized the secret financial relationship between Rowland and two other directors of Lonrho: Ball and Ogilvy. This dated back to 1961, when Rowland joined Lonrho. As earlier mentioned, as part of the 1961 agreement, Rowland transferred the majority of the assets of Shepton Estates (Private) Limited that he owned to Lonrho in exchange for 1.5 million Lonrho shares and the option to acquire a further 2 million shares. Under a secret arrangement, however, Ball and Ogilvy, the two directors who negotiated the deal, acquired percentages of the share option from Rowland. The report specifically criticized the two concerned directors for their failure to disclose this to the shareholders or to the full board of directors.
The renegotiation of the option deal on terms more favorable to Rowland in 1966, following the Rhodesian UDI, was also criticized by the inspectors. Ball and Ogilvy, who also negotiated this second deal, were singled out for criticism. Specifically, Ball, as chairman of the board, was particularly criticized for recommending the approval by shareholders of the revised terms of Rowland’s 1966 option rights “without drawing to their attention the manner in which the option rights were to be revised in Mr. Rowland’s favour.”
Ball and Ogilvy were equally criticized for the fact that their interests were also accommodated in the ownership structure of the Bahamas company that Rowland used for the 1966 agreement. Again, the two directors had not disclosed such interests to the board or the shareholders.
Furthermore, the inspectors criticized Rowland and the aforementioned London-based directors for using Lonrho funds to finance the Shamrocke Mines and the Inyast Mines, both in Rhodesia. This act, which also breached the Rhodesian sanctions order, was done without the knowledge and authority of the board as a whole.
The inspectors further reported that Rowland also breached the provisions of the Companies Act of 1948 by being indebted to Lonrho to the tune of £306,627. More concerning to the inspectors was the fact that this amount was canceled by means of a dubious retrospective claim. The inspectors therefore criticized both the board and auditors of Lonrho for failing to make full disclosure of this matter to the shareholders.
With respect to expenses, Duncan Sandys was criticized for failing to disclose to the board or the shareholders that on becoming chairman of Lonrho in 1972, he had accepted £130,000 as compensation for ceasing to be a consultant to the company.
Several directors, including Rowland, were also criticized by the inspectors for abusing their position by using company properties for private purposes.
The most politically sensitive aspect of the investigation was that dealing with “special payments” made by Lonrho to Africans. This important section was by far the shortest section in the 667-page report. Specifically, only five pages were dedicated to this section. Here, the inspectors found that “special payments” totaling £836,499 were made from 1961 to 1973. Of this amount, £592,372 was paid through Mr. Rowland’s personal account, and the balance of £244,127 was made from Lonrho’s account. The report also noted that the “board of Lonrho as a whole exercised no supervision over the making of the special payments.” In fact, some members of the board testified that they “preferred not to know the details of the payments.”
The report then concluded:
Although we consider the procedure for controlling the making of special payments to have been inadequate, we have found no evidence that the sums drawn by Mr. Rowland were misapplied. During our enquiry, Mr. Rowland showed the greatest reluctance to disclose the names of the recipients of the cash. His view was that it was implied in the making of the payment that the name should not be disclosed. … We were able in this and various other ways to trace 77% of the sums paid through Mr. Rowland’s personal bank account to named recipients. Although we consider that the procedures followed for making the payments through Mr. Rowland’s personal bank account were unwise, we accept that this was done in what Mr. Rowland believed to be the interests of Lonrho and so that the making of the payments should have a personal flavour which might create some bond of personal loyalty to himself and to the company with which he was identified. … On the basis of the evidence available to us we believe that the special payments were made in connection with the development of the group’s business outside the UK.
Even though the “sensible inspectors” identified about three-quarters of the Africans who received special payments, “they carefully refrained from naming” them. Although the British government was confident that the inspectors would never divulge the names, it feared that this could come to light through investigative journalism or a parliamentary inquiry.
The care taken by the “sensible inspectors” to limit the information contained in the report on special payments to Africans, however, did not totally eliminate the fear that the release of the report could endanger British interests in Africa. It was therefore not surprising that the British government was not in a hurry to release the report. The British government, however, realized that its options were limited because shelving the report was bound to have political repercussions, as the investigation itself was instituted at least in part because the Lonrho activities that led to it in the first instance also raised important questions about corporate governance conduct in the UK.
The British government, however, was less concerned about the possible fallout from the disclosures in the report about Lonrho’s sanction-breaking activities in Rhodesia, despite the fact that there was pressure from the United Nations, which already had in place a sanctions committee to enforce sanctions against Rhodesia. This was further complicated by the fact that at the time, UK companies were among those suspected by the committee to be actively aiding their Rhodesian subsidiaries.
As would be seen later, the attitude of the British government was no doubt influenced by the fact that at the time it was already determined to respect the sanctions. It therefore had no incentive to hide anything.
When the draft report was ready, the British government sent copies to all the British heads of mission in Africa. Lonrho also received a copy of the report, as required by law.
The chairman of Lonrho, Lord Duncan Sandys, strenuously opposed the publication of the report, arguing that “the section on secret payments is likely to cause serious embarrassment, if not worse to the recipients of those payments.” He also alleged that a large proportion of such secret payments “formed part of a series initiated at the suggestion of the governor of a former British colony, which he has refused to name, around the time it became independent.”
Rowland also strenuously opposed the publication of the report, arguing, among other things, that “Lonrho had done no more than other British companies had done or were doing in Rhodesia with the knowledge and connivance of HMG.”
Rowland and Lonrho also produced a 200-page “red book” critiquing the entire report and exposing the underhanded tactics of other British multinationals in Africa. Rowland equally threatened “to make violation of sanctions by UK firms a major issue in the forthcoming Organization for African Unity [OAU, now African Union AU] meetings in Mauritius.”
Although the FCO doubted that Rowland would be able to substantiate his allegations (with one or two possible exceptions), it made it explicit that the government was unwilling to shield any company that violated the sanctions.
Specifically, an internal memo of the FCO clearly stated that the “few UK firms that had been discovered attempting to trade with Rhodesia have been taken to court and heavily penalized. Fines up to £50,000 have been imposed.”
The possible consequences of investigating Lonrho and/or the publication of the resultant report on British economic and political interests in Africa at the time varied from country to country. In the case of Kenya, for instance, an FCO report documented that Lonrho’s interests in the country comprised a network of about 45 companies. In most cases, such ventures were undertaken in partnership with government parastatals or private organizations whose names did not indicate their connections with Lonrho UK. One exception to this was the main holding company, Lonrho East Africa, which was chaired by the president’s son-in-law, Udi Gecaga, who was also on the main Lonrho board in London. “Other members of the Kenya establishment serve[d] on the board of the subsidiary companies or … [were] substantial shareholders in them.”
The report therefore concluded that the Kenyan government would be “very embarrassed” by the publication and that “President Kenyatta would probably blame the British government for causing this embarrassment.” This would especially be so if any allegations were made subsequent to publication that implied that Kenya was particularly involved in the special payments aspect. In such circumstance, “the powerful group in control of Kenya could be driven to react in a way damaging to our political relations and other interests.”
In Ghana, this debate came after Ghana had already promulgated legislation to regulate foreign investments in the country. Lonrho’s main investment in Ghana at the time was its shareholding in Ashanti Goldfields Corporation.
With respect to the possible implications for the publication of the report for Ghana, Mills pointed out that Tiny Rowland had a close relationship with the Ghanaian head of state, General Acheampong, Commissioner for Lands and Mineral Resources, and probably other officials, “all of whom are likely to be in receipt of favours and special payments.”
This special payments issue, however, was “likely to be embarrassing only if Acheampong is named otherwise it would only add to the rumours about Acheampong’s corruption which are already rife.”
Arguably because Acheampong was not named in the report, Mills advised that the report be published, as damage to British interests in Ghana was not likely to be great.
Long before the Lonrho investigations commenced, the British government had concluded that such investigations would have limited negative impact on its interests in Nigeria, Zaire, Tanzania, Mauritius, and Uganda.
In Zaire, for instance, the British reasoned that in light of the fact that Lonrho had already fallen out of favor with the Zairean establishment, such an enquiry would be welcome and might be advantageous to Britain’s “general commercial relations provided … no members of the Zaire government were implicated in any dubious transaction.”
In Nigeria, the British also had little to fear, asserting that it was “unlikely that much dirt about Lonrho’s activities in Nigeria would emerge in a DTI enquiry or that whatever emerges would cause much stir in a country as accustomed to dubious practices as Nigeria.”
The Secretary of State for Trade subsequently decided to publish the report and fixed July 6 for its release to the public. British missions abroad, however, were briefed on how to handle the possible fallouts from the release of the report. With respect to the issue of special payments, for instance, they were advised not to encourage questions in this direction.
Because the investigation was carefully planned and controlled, the report had limited repercussions, especially with respect to threatening British interests in Africa.
The biggest threat, the release of the names of African leaders who received gratification from Lonrho, has remained a secret until today. This article demonstrates that the 1976 Lonrho investigation report was carefully designed and controlled by the British government with the main objective of promoting and protecting British interests in Africa. The British government realized that exposing Lonrho’s corrupt practices in Africa was likely to anger the “big men” African leaders that benefited from such practices, to the detriment of their wider economic interests in the continent. This focus explains why the British government was willing to gloss over the corrupt business practices of Lonrho in Africa even when practices such as bribery contravened the law in Britain and the concerned African states. The view that the British government did not act “in concert” with British businesses from the time political independence became imminent to give them operational advantage in ex-colonies has thus not been supported by the archival evidence in this Lonrho case study.
In its pure form, there is little difference between the consequences of colonialism and neo-colonialism for ex-colonies. Evidence in this article suggests that the activities of Lonrho in post-independence Africa and its relationship with the British government did not fit within the pure definition of neo-colonialism. The fact that Lonrho’s strategy was not successful across all African states and that its spectacular growth in the continent was not replicated by other British business interests is evidence that the British were not totally in control, as was the case during the colonial era. Evidence in this article, however, shows that the public rebuke of Lonrho as the “unacceptable face of capitalism” by Edward Heath was no more than a hypocritical assertion. This explains why the British government did little to expose Lonrho’s corrupt practices in the continent. Rather, it went to great lengths to manipulate the entire Lonrho investigation, with the main objective of protecting wider British economic interests in the continent. The fact that Lonrho’s corrupt practices breached the law in Britain and the various host African states did not change this fact. The covert support provided for Lonrho by the British government, which was aimed at placing wider British economic interests in a vantage position, challenges the view that the British government did not work “in concert” with its multinational businesses once political independence of colonies became imminent. This article, therefore, adds to the growing number of studies that have demonstrated that the British Government and British businesses worked “in concert” in postcolonial Africa to protect wider British interests in the continent. Such a relationship falls within the more subtle definition of neo-colonialism. Lonrho, therefore, represented both the unacceptable face of capitalism and the ugly face of neo-colonialism in Africa.
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