By Timo Shihepo
Windhoek – Rich nations continues to plunder Africa of its resources through unethical means including tax dodging, profit repatriation and debt repayments, according to the latest Honest Accounts 2017 report, produced by a group of non-governmental organisations.
They said while US$161.6 billion flowed into Africa, mainly through loans and aid, $203 billion has been siphoned out of Africa by the Western countries, including their multinational corporations, in 2015 alone.
The $203 billion was taken from the continent either directly – mainly through corporations repatriating profits and by illegally moving money out of the continent – or by costs imposed by the rest of the world through climate change.
Statistics show that while Africans receive $31 billion in personal payments from overseas, multinational companies operating on the continent repatriate a similar amount, $32 billion, in profits to their home countries each year. African governments received $32.8 billion in loans in 2015 but paid $18 billion in debt interest and principal payments, with the overall level of debt rising rapidly.
An estimated $29 billion a year is being stolen from Africa in illegal logging, fishing and the trade in wildlife and plants.
These figures could, however, be more because there are other ways in which the rest of the world extracts resources from Africa, but for which figures are not available.
For example, trade policies mean that unprocessed agricultural goods are often exported from Africa and refined elsewhere, causing the vast majority of their value to be earned abroad.
“In many countries and certainly in the Namibia context, the amount of money lost through illicit financial flows is much more compared to the aid the country receives from donors. Most of these is lost through tax evasion as well as luring this illicit money with goods coming in or out of the country,” Namibia’s Minister of Finance, Calle Schlettwein, told The Southern Times.
The $68 billion stolen from Africa in illicit financial flows amounts to around 6.1% of the continent’s entire GDP. Multinational companies are stealing $48.2 billion alone through “trade misinvoicing”, according to figures produced by Global Financial Integrity.
Previous research by the UN Economic Commission for Africa found similar figures indicating that multinational companies siphoned around $40 billion a year from African countries through trade misinvoicing in the decade up to 2010.
The figures show that the rest of the world is profiting from the continent’s wealth, more so than most African citizens. Yet rich country governments simply tell their publics that their aid programmes are helping Africa. This can be classified as a distraction and misleading.
“This is absolutely capital flight. It’s a general problem not just in Africa but in developing countries around the world,” University of Stellenbosch Business School head of development for finance programme, Charles Adjasi told The Southern Times.
He said there are several problems why more money is going out of the continent compared to what’s coming in.
These include foreign companies hiding repatriating profits to smuggle them out of African countries.
The other is that some African countries do not have the necessary skills in offices such as revenue agencies, finance ministries and customs, which makes it difficult to detect if the right amount is really getting out of the country.
“The money is also stolen from Africa through trade misinvoicing.
When it comes to misinvoicing, multinational companies dupe the government officials. The development world has to deal with these problems because those that are taking the money from the continent will not stop,” he said. He added that most of these are commercial loans and they are expensive. Most of the times these loans are provided without teaching people how to utilise them.
In the end, Africa will end up paying more in interests on the loan even higher than the original amount. It means the continent will be stuck with these loans for many years.
“There is nothing wrong to take out a loan but how to utilise it is what is important,” Adjasi said.
Africa is rich
The Honest Accounts 2017 report states that Africa is not poor and that while many people live in poverty, the continent has considerable wealth.
A key problem is that the rest of the world, particularly Western countries, are extracting far more than they send back. Meanwhile, they are pushing economic models that fuel poverty and inequality, often in alliance with African elites.
“African countries receive around $19 billion in aid in the form of grants but over three times that much ($68 billion) is taken out in capital flight, mainly by multinational companies deliberately misreporting the value of their imports or exports to reduce tax,” the report states.
Africa is generating large amounts of wealth and, in some ways, is booming.
For example, the largest 500 African companies recorded a combined turnover of $698 billion in 2014.
In 2015, countries in Africa exported $232 billion worth of minerals and oil to the rest of the world.
The value of mineral reserves in the ground is of course even larger – South Africa’s potential mineral wealth is estimated to be around $2.5 trillion while the untapped mineral reserves of the Democratic Republic of Congo are estimated to be worth an astronomical $24 trillion.
The report further states that Africa’s people are effectively robbed of wealth by a process that enables a tiny minority of Africans to get rich by allowing wealth to flow out of the continent.
Thus, according to a recent report on African wealth, there are now around 165,000
High Net-Worth Individuals living in Africa, with combined holdings of $860 billion.
In 2016, there were 24 billionaires in Africa with a combined wealth of $80 billion.
The African wealth repot says these people keep their wealth in traditional, low tax and secretive offshore holding centres such as the Channel Islands, Switzerland and the UK.
Namibia’s minister of finance, Schlettwein, said it was necessary to continue updating the legal framework concerning the illicit financial flows to tighten the loopholes but warned that the criminal world was a huge tangible web, which requires modern and enormous resources to combat it.
The Honest Accounts 2017 report says the key task is to dismantle the system extracting wealth from Africa.
This requires action by African civil society organisations to press for change in their countries, and action by civil society organisations in the countries that are enabling this wealth extraction to take place, such as the UK.
It added that global elites have no intrinsic interest in changing a system that benefits them. It is critical for civil society organisations to expose the role of multinational corporations and western governments in impoverishing Africa and to step up their work in building coalitions to end tax dodging and other unfair resource transfers out of Africa.