Africa is rich.
Africa is not poor. Whilst many people in African
countries 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. Mean while,
they are pushingeconomicmodelsthat fuel poverty
and inequality, often in alliance with African elites.
Africa is generating large amounts of wealth and, in
some ways, is booming. For example, the largest500
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.
These are very large numbers but various reasons
explain why the majority of people in Africa do not
benefit from them, and why the present mode of
minerals extraction actually leads to impoverishment.
These include:
Foreign companies take most of the profits
generated by Africa’s natural wealth.
When multinational companies exportcommodities
such as minerals from African countries, their
governments often benefit only marginally, receiving
very little tax revenue from those companies. In key
sectors such as mining and oil and gas, companies
tend to pay low taxes, and/or are given tax incentives
that reduce them still further. Companies are anyway
easily able to avoid paying the taxes that are due,
because of their use of tax planning through tax
havens. Many African tax policies are the result of long
standing policies of Western governments insisting on
Africa lowering taxes to attract investment.
Money is leaving Africa partly because Africa’s wealth
of natural resources is simply owned and exploited
by foreign, private corporations. In only a minority of
foreign investments do. African governments have a
shareholding; even if they do this tends to be small,
usually around 5-20%. Are centre port for Waron
Want found that 101 companies listed on the London
Stock Exchange control an identified $1.05 trillion
worth of resources in Africa in just five commodities
–oil, gold, diamonds, coal and platinum. These101
companies have mineral operations in 37 African
countries and are mainly British, with 59 incorporated
in the UK. However, some 25 of the 101 LSE-listed
companies are incorporated in tax havens, principally
the British Virgin Islands, Guernsey and Jersey.
Corporations stealing wealth.
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–
that multinational companies stole around $40
billion a year from African countries through
trade misinvoicing in the decade up to2010.
Another massive problem is corporations
buying concessions at falsely knocked-down
prices, often linked to corruption and to tax
havens. In 2013, the Africa Progress Panel and
Global Witness examined five major sales
of mining rights in the Democratic Republic
of Congo in which each deal involved firms
registered in the British Virgin Islands. They
found the firms paid at least $1.36 billion
below the market value–almost double
what the DRC spends each year on health
and education combined.
Africa's poverty is much deeper than the World Bank likes to publicise.
The poverty of ordinary Africans is under-
reported and rising.The figures most widely
cited are those from the World Bank, which
states that the number of ‘extremely poor’
people in Africa has increased to 388 million
now compared with 284 million in 1990
(although the percentage has fallen, from 56%
to43%). However, the World Bank defines
the ‘extremely poor’ as those living on $1.90 a
day or less. This is misleading since someone
living on $2 a day is clearly still extremely poor.
Whilst such poverty lines are problematic and
essentially arbitrary, when higher thresholds
are considered, the scale ofpoverty becomes
much larger:
• The World Bank notes that 67% of Africans
live on $3.10 a day or less–around 670
million people.
• The World Bank has also said that 65% of
Africans lived on $3.10 a day or less in 2013
–around 615 million people. This compares
to 500 million in 1999. Soon this reckoning,
more than 100 million Africans have become
poor so far in the 21st century.
Others estimate even higher figures. The African
Development Bank estimated in 2011 that 82%
of Africans lived on less than $4 a day–this
would amount to over 800 million people.
The fact that African poverty is this
overwhelming–and rising–shows the urgency
with which the system of extracting wealth
from Africa must be reversed.
To take one country example, figures from the South Africa Reserve Bank in 2016 show foreign corporations drawing away profits from South Africa far faster than they were reinvesting or than local
firms were bringing home. The net outflow paid to owners of foreign capital reached R174 billion (US$11.9 billion) in the first quarter of 2016 alone.
Due to falls in commodity prices, multinational mining companies such as Lonmin, Anglo American and Glencore saw their share values fall and were desperate to please their foreign shareholders; thus
they increased their exported profits more rapidly in
comparison with the overseas-generated profits that
South African corporations paid to local shareholders.
The liberalisation of capital controls means there is
little that the South African government can do to
stop this outward flow.
Those controlling tax havens are enabling
the theft of Africa’s wealth
Africa’speopleareeffectivelyrobbedofwealthbya
processthatenablesatinyminorityofAfricanstoget
richbyallowingwealthtoflowoutofAfrica.Thus,
accordingtoarecentreportonAfricanwealth,there
arenowaround165,000HighNet-WorthIndividuals
livinginAfrica,withcombinedholdingsof$860
billion.20In2016,therewere24billionairesinAfrica
withacombinedwealthof$80billion.21Wheredo
thesepeoplemainlykeeptheirwealth?Intraditional,
lowtaxandsecretiveoffshoreholdingcentressuchas
theChannelIslands,SwitzerlandandtheUK.22
GabrielZucman,anacademicattheLondonSchool
ofEconomics,estimatedin2014thatrichAfricans
wereholdingamassive$500billionoffshore(i.e,
intaxhavens)–amountingto30%ofallAfrica’s
financialwealth.Thefactthatthiswealthisuntaxed
meansthatAfricaneliteshavestolen$15billion
fromtheirowncountries,accordingtoZucman’s
conservativeestimate.23
Africa is not poor. Whilst many people in African
countries 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. Mean while,
they are pushingeconomicmodelsthat fuel poverty
and inequality, often in alliance with African elites.
Africa is generating large amounts of wealth and, in
some ways, is booming. For example, the largest500
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.
These are very large numbers but various reasons
explain why the majority of people in Africa do not
benefit from them, and why the present mode of
minerals extraction actually leads to impoverishment.
These include:
Foreign companies take most of the profits
generated by Africa’s natural wealth.
When multinational companies exportcommodities
such as minerals from African countries, their
governments often benefit only marginally, receiving
very little tax revenue from those companies. In key
sectors such as mining and oil and gas, companies
tend to pay low taxes, and/or are given tax incentives
that reduce them still further. Companies are anyway
easily able to avoid paying the taxes that are due,
because of their use of tax planning through tax
havens. Many African tax policies are the result of long
standing policies of Western governments insisting on
Africa lowering taxes to attract investment.
Money is leaving Africa partly because Africa’s wealth
of natural resources is simply owned and exploited
by foreign, private corporations. In only a minority of
foreign investments do. African governments have a
shareholding; even if they do this tends to be small,
usually around 5-20%. Are centre port for Waron
Want found that 101 companies listed on the London
Stock Exchange control an identified $1.05 trillion
worth of resources in Africa in just five commodities
–oil, gold, diamonds, coal and platinum. These101
companies have mineral operations in 37 African
countries and are mainly British, with 59 incorporated
in the UK. However, some 25 of the 101 LSE-listed
companies are incorporated in tax havens, principally
the British Virgin Islands, Guernsey and Jersey.
Corporations stealing wealth.
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–
that multinational companies stole around $40
billion a year from African countries through
trade misinvoicing in the decade up to2010.
Another massive problem is corporations
buying concessions at falsely knocked-down
prices, often linked to corruption and to tax
havens. In 2013, the Africa Progress Panel and
Global Witness examined five major sales
of mining rights in the Democratic Republic
of Congo in which each deal involved firms
registered in the British Virgin Islands. They
found the firms paid at least $1.36 billion
below the market value–almost double
what the DRC spends each year on health
and education combined.
Africa's poverty is much deeper than the World Bank likes to publicise.
The poverty of ordinary Africans is under-
reported and rising.The figures most widely
cited are those from the World Bank, which
states that the number of ‘extremely poor’
people in Africa has increased to 388 million
now compared with 284 million in 1990
(although the percentage has fallen, from 56%
to43%). However, the World Bank defines
the ‘extremely poor’ as those living on $1.90 a
day or less. This is misleading since someone
living on $2 a day is clearly still extremely poor.
Whilst such poverty lines are problematic and
essentially arbitrary, when higher thresholds
are considered, the scale ofpoverty becomes
much larger:
• The World Bank notes that 67% of Africans
live on $3.10 a day or less–around 670
million people.
• The World Bank has also said that 65% of
Africans lived on $3.10 a day or less in 2013
–around 615 million people. This compares
to 500 million in 1999. Soon this reckoning,
more than 100 million Africans have become
poor so far in the 21st century.
Others estimate even higher figures. The African
Development Bank estimated in 2011 that 82%
of Africans lived on less than $4 a day–this
would amount to over 800 million people.
The fact that African poverty is this
overwhelming–and rising–shows the urgency
with which the system of extracting wealth
from Africa must be reversed.
To take one country example, figures from the South Africa Reserve Bank in 2016 show foreign corporations drawing away profits from South Africa far faster than they were reinvesting or than local
firms were bringing home. The net outflow paid to owners of foreign capital reached R174 billion (US$11.9 billion) in the first quarter of 2016 alone.
Due to falls in commodity prices, multinational mining companies such as Lonmin, Anglo American and Glencore saw their share values fall and were desperate to please their foreign shareholders; thus
they increased their exported profits more rapidly in
comparison with the overseas-generated profits that
South African corporations paid to local shareholders.
The liberalisation of capital controls means there is
little that the South African government can do to
stop this outward flow.
Those controlling tax havens are enabling
the theft of Africa’s wealth
Africa’speopleareeffectivelyrobbedofwealthbya
processthatenablesatinyminorityofAfricanstoget
richbyallowingwealthtoflowoutofAfrica.Thus,
accordingtoarecentreportonAfricanwealth,there
arenowaround165,000HighNet-WorthIndividuals
livinginAfrica,withcombinedholdingsof$860
billion.20In2016,therewere24billionairesinAfrica
withacombinedwealthof$80billion.21Wheredo
thesepeoplemainlykeeptheirwealth?Intraditional,
lowtaxandsecretiveoffshoreholdingcentressuchas
theChannelIslands,SwitzerlandandtheUK.22
GabrielZucman,anacademicattheLondonSchool
ofEconomics,estimatedin2014thatrichAfricans
wereholdingamassive$500billionoffshore(i.e,
intaxhavens)–amountingto30%ofallAfrica’s
financialwealth.Thefactthatthiswealthisuntaxed
meansthatAfricaneliteshavestolen$15billion
fromtheirowncountries,accordingtoZucman’s
conservativeestimate.23
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