‘Foreign companies milking Africa dry’
Windhoek – Global mining and energy companies are using Africa as their nest eggs, profiting from the continent’s natural resources whilst doing nothing to help Africans out of grinding poverty.
This is the assessment of African Development Bank (AfDB) President Dr Donald Kaberuka.
Dr Kaberuka told the G8 meeting in the UK that multinationals profiting from the continent’s natural resources should pay more taxes to help finance infrastructure development and eradicate poverty.
“The reality is, Africa is being ripped off big time. Africa wants to grow itself out of poverty through trade and investment-part of doing so is to ensure there is transparency and sound governance in the natural resources sector,” Dr Kaberuka was quoted by news agencies saying.
The continent has lost more than US$1 trillion over the past two decades due to transfer mis-pricing by multinationals. Money flows out of resource-rich countries but very little finds its way towards development due to the existence of shadowy and secretive tax havens.
Dr Kaberuka said the G8 must support efforts to bring greater transparency on taxation issues in Africa’s extractive sector.
“There is an internal governance agenda in the natural resources. But the international community must do its part, to ensure balanced contracts, minimise tax avoidance, let alone tax evasions, and bring light and transparency in the natural resource, at the moment very opaque,” Dr Kaberuka said.
“It is only in this way that our countries will be able to find the financial resources they need to fund infrastructure, to fund trade corridors, which are now very dependent on donor funding,” he added.
He said the AfDB is trying to tackle tax evasion in the natural resources sector through a facility called Africa Legal Support. The facility assists African governments negotiate complex contracts and unbundle others.
“This is done with the aim of ensuring the countries get what they deserve, investors get the return they look for and everyone is a winner,” Dr Kaberuka said.
The AfDB President said Africa commits $2 billion to economic integration but has a huge infrastructure financing gap.
He pointed out that the infrastructure bottlenecks, high costs of electricity and poor connectivity could result in African economies failing to grow beyond seven percent per annum.
The fragmentation of the African market imposes huge opportunity costs and is a brake on investments, Dr Kaberuka lamented.
Opening up the continent to greater integration and trade would add US$45b a year to Africa’s GDP and also help to improve the diversity of supply chains.
Dr Kaberuka said public budgets and donor finances alone cannot plug the infrastructure funding gap.
A joint report by AfDB and Global Financial Integrity earlier this month revealed that Africa lost more than US$1t in net resources outflows between 1980 and 2009, making it a net creditor to the whole world.
The Africa Progress Panel chaired by former UN Secretary-General Kofi Annan recently singled out the case of DRC, which it said loses around US$1.4b yearly in opaque mining deals with companies domiciled in tax havens.
“Secret companies-often incorporated in tax havens, or in the world’s key financial centres-are a key means by which corrupt leaders and irresponsible businesses hide the proceeds of their crimes and misdemeanours,” the Panel said.
Paul Collier, Professor of Economics at Oxford University, adds that African countries lose more through tax avoidance than they get through aid.
“At the moment Africa and other poorer countries are haemorrhaging their own money through corporate tax avoidance and illicit flows … the numbers show that for Africa the outflows are more than double the aid inflow,” Prof Collier says.
He says while corrupt government officials are largely to blame for the losses, the secrecy surrounding tax havens and financial engineering oil the machinery that is milking Africa of huge sums of money.
“In corruption it takes three to tango – the bribed official, the bribing company and the lawyers who provide the gateway car for that corrupt bribe, so it can be parked in an anonymous bank account somewhere in a secrecy haven,” Prof Collier has said.