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Africa loses more than it gains through aid
June 4, 2017, 10:45 am

In a time of Trump and talks about building walls and restricting trade, perhaps it is appropriate to get a few facts about Africa and African ‘aid’ on the table.

Africa is not poor; though many people are trapped in poverty, Africa has considerable wealth. African richness comes not only from its vast mineral and other natural resources, but also from its legions of skilled workers, its immense biodiversity and its lucrative investment and business opportunities in every sector of the economy.

Africa is rich; it is made poor by the policies and activities of the rest of the world, working in connivance with corrupt African politicians, leaders and elites, who together exploit the continent’s natural and human resources with impunity.

Africa is generating large amounts of wealth and, in some ways, is booming. In 2014, the largest 500 African companies recorded a combined turnover of $698 billion. Countries in Africa exported $232 billion worth of minerals and oil to the rest of the world in 2015. 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 and at first glance should have enabled countries and their populace to thrive. 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.

Rather than ‘helping’ Africa with aid, we need to stop exploiting the continent and its people. The current problem with ‘aid’ is that it casts Western countries in the role of benevolent benefactors, giving their wealth to poor countries. But exactly the opposite is true. Moreover, the rest of the world, especially Western countries and increasingly China, is extracting far more than they send through ‘aid’ to the continent.

Meanwhile, international aid and financial institutions are pushing economic models that fuel poverty and inequality, while benefitting mainly multinational corporations and a few African elites. Given the actual flow of wealth, ‘aid’ currently does not exist in any meaningful sense.

African countries received $161.6 billion in 2015 — mainly in loans, personal remittances and aid in the form of grants. Yet $203 billion was taken from Africa, either directly — primarily 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.

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. While Africans receive $31 billion in personal remittances from overseas, multinational companies operating on the continent repatriate a similar amount ($32 billion) in profits to their home countries each year.

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. An estimated $29 billion a year is also being stolen from Africa in illegal logging, fishing and the trade in wildlife/plants

Money is leaving Africa partly because Africa’s wealth of natural resources is simply owned and exploited by foreign, private corporations. A recent report found that 101 companies listed on the London Stock Exchange (LSE) control an identified $1.05 trillion worth of resources in Africa in just five commodities oil, gold, diamonds, coal and platinum. These 101companies 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.

Multinational companies are stealing $48.2 billion alone through ‘trade mis-invoicing’ according to figures produced by Global Financial Integrity. Mis-invoicing is just a euphemism for money laundering through trade. It involves moving money illicitly across borders by fraudulently manipulating the price, quantity, or quality of a good or service on an invoice. Mis-invoicing forms the largest component of illicit financial outflows from developing countries. The $68 billion stolen from Africa in illicit financial flows amounts to around 6.1 percent of the continent’s entire GDP.

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.

The article above is not meant to make the rest of the world look bad or absolve Africans of any guilt. Instead it is an attempt to portray a problem that urgently requires a solution. The world needs to change the way it talks and thinks about the continent; Africa is rich, what the rest of the world needs to do is to stop making it poorer. 

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