26 April 2015

Plundering Africa

According to the media, Africa is the continent of poverty, hunger, conflict and crises. A lost case, a basket case that has to be supported by international aid to survive. But is this a true reflection of the reality of Africa?

A group of 16 organisations commissioned a study published in July 2014 that gives an entirely different picture of Africa and shows that, rather than the world financing Africa, it is Africa that finances the world.

According to the team of researchers who conducted the study, every year Africa pays a net $58 billion to the rest of the world, the balance of an inflow of $134 billion and an outflow of $192 billion! For the sake of comparison, this negative balance is close to the total GDP of Tanzania and about twice the total cost of eradicating hunger from the world (not just from Africa!)

The table above shows that the main inflows into Africa consist in official aid (21.8%), followed by loans to governments (17.5%) and net FDI equity (17.4%). Major outflows are constituted by profits by multinationals (24.1%), illicit financial outflows (18.4%) and climate change mitigation costs (13.5%). Some will argue that all these flows are not comparable, particularly those pertaining to climate change which do not correspond to actual financial flows. To these objections it is possible to reply that these costs have effectively to be borne by Africa, while the responsibility for climate change is clearly outside of the continent.

Africa’s deficit (or its net contribution to the rest of the world) is roughly equivalent to the sum of costs of illegal logging and fishing and of the costs related to climate change.

Based on these figures, the report states that ‘‘a combination of inequitable policies, huge disparities in power and criminal activities perpetrated and sustained by wealthy elites both inside and outside the continent are keeping its people in poverty’’.

Aid therefore cannot be the solution to Africa’s problems. Rather policies implemented by African governments and by their ‘partners’ should be changed so as to address the unacceptable resource flows that contributes to the plunder of the continent:

1. -ending of tax havens, some of which are hosted by the most influent rich countries
   

2. -control of multinational companies (rather than opening wide avenues for them in Africa as through private-public alliances or co-funding through EU’s blending or USAID’s Global Development Lab) by imposing a code of conduct that respects the interests and preferences of local communities, taxes and oblige companies to reinvest in the continent a large share of their profits
   

3. -undertake a global international effort to combat illegal logging and fishing
   

4. -taking bold steps to reduce drastically greenhouse gas emissions to avoid unmanageable climate change
   

5. -convert loans to governments into grants.
   

The report provides a wealth of data and analyses presented in a short, readable and quite accessible way, explaining the details of some of the main processes at work.

A must read.

———————————

To know more:

1. -Sharples, N. et al., Honest Accounts? The true story of Africa’s billion dollar losses, July 2014

Last update:    April 2015

For your comments and reactions: hungerexpl@gmail.com