Foreign Firms, Africa’s Elite and Africa’s Poverty

Nairobi’s Daily Nation, MONDAY JULY 10 2017

By RASNA WARAH

A report released about a month ago, but which for some reason did not make headlines in the African media, shows that while African countries receive $161 billion in loans, aid, grants and remittances every year, the continent pays out $203 billion in debt repayments, multinational company profits, illicit financial flows, and illegal fishing, among other costs.

The report, Honest Accounts 2017: How the World Profits from Africa’s Wealth”, published by a consortium of civil society organisations, including Jubilee Debt Campaign and Global Justice Now, shows that Africa is a net creditor to the rest of the world to the tune of $41 billion a year, which is more than double what it receives in official aid.

Some more shocking statistics: African countries receive around $19 billion in grants, but over three times this amount ($68 billion or six per cent of the entire continent’s GDP) leaves Africa through illicit financial flows, mainly through multinational companies that deliberately misreport the value of their imports or exports to evade or reduce tax.

PAYMENTS

African governments received $33 billion in loans in 2015, but paid $18 billion in debt interest and principal payments.

Further, an estimated $29 billion a year is being stolen from the continent through illegal logging, fishing and trade in wildlife and plants.

“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 public that their aid programmes are helping Africa.

“This is a distraction, and misleading,” say the authors of the report.

DR CONGO

Africa is not poor. It is estimated that the untapped mineral reserves in the Democratic Republic of Congo — where the average citizen wallows in poverty and where civil conflict has raged for decades — is worth $24 trillion (yes, trillion!).

In 2015, African countries exported $232 billion worth of minerals and oil to the rest of the world.

Yet, about two-thirds of the continent’ people still live on less than $3 a day.

Why is this so? There are two main reasons. One, when multinational companies export commodities such as minerals from Africa, these countries benefit only marginally.

MINING

In key sectors such as mining, oil and gas, foreign companies tend to pay low taxes or are given tax incentives that reduce these taxes even further.

African governments have a very tiny shareholding in these companies (between five and 20 per cent), which means that Africa’s wealth is largely owned and exploited by foreign companies.

One report found that 101 companies listed on the London Stock Exchange control $1 trillion worth of resources in Africa in just five commodities – oil, gold, diamonds, coal and platinum; more than half of these companies are British.

The second reason Africa remains poor is because these companies and the African elite who benefit from this wealth (see the other stories below), are able to avoid paying tax altogether because they use tax havens in places such as the Channel Islands, Switzerland and the United Kingdom.

WEALTH

Super-rich Africans ensure that their wealth remains outside the continent.

It is estimated that Africa’s richest people hold a total of $500 billion offshore.

What is to be done to reverse this situation? The report offers solutions that may not be palatable to neoliberals and their free-trade mantra.

One is that African governments should adopt protectionist policies that favour domestic companies over foreign investors.

INTERNATIONAL MARKET

This means nurturing local companies and industries until they are in a position to compete in the international market.

Another is to ensure that stock exchanges do no permit companies to be listed unless they can show that they do not use tax havens and that they pay taxes wherever they are located.

African governments must also stop putting their faith in the extractive sector to avoid the “resource curse” that has plagued so many countries, such as the DRC and Nigeria, among others.

Instead, governments should focus on promoting other economic activities, such as agriculture and manufacturing, that foster sustainable growth.

The media and non-governmental organisations must also dispel the myth that Western countries are playing a leadership role in Africa’s development when, in fact, these countries are benefiting the most from Africa’s wealth.

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And previously on Sambagate.Com

 

Africa is not poor … 5 Richest Nigerians …

in Gambia Travel — by editor —           May 25, 2017 — Edit

Africa is not poor, we are stealing its wealth

By Nick Dearden (Courtesy of Aljazeera 25.05.2017)

(Re-edited by Dida Halake with the addition of the “Nigeria’s Richest 5 Persons story below)

It’s time to change the way we talk and think about Africa.

We like to say “Africa is poor, but we can try to help its people”.

It’s a simple statement, repeated through a thousand images, newspaper stories and charity appeals each year, so that it takes on the weight of truth. When we read it, we reinforce assumptions and stories about Africa that we’ve heard throughout our lives. We reconfirm our image of Africa.

Try something different:

“Africa is rich, but we steal its wealth”.

That’s the essence of a report from several campaign groups released today. Based on a set of new figures, it finds that sub-Saharan Africa is a net creditor to the rest of the world to the tune of more than $41bn. Sure, there’s money going in: around $161bn a year in the form of loans, remittances (those working outside Africa and sending money back home), and aid.

But there’s also $203bn leaving the continent. Some of this is direct, such as $68bn in mainly dodged taxes. Essentially multinational corporations “steal” much of this – legally – by pretending they are really generating their wealth in tax havens. These so-called “illicit financial flows” amount to around 6.1 per cent of the continent’s entire gross domestic product (GDP) – or three times what Africa receives in aid.

Profits Repatriation

Then there’s the $30bn that these corporations “repatriate” – profits they make in Africa but send back to their home country, or elsewhere, to enjoy their wealth.  City of London is awash with profits extracted from the land and labour of Africa.

There are also more indirect means by which we pull wealth out of Africa. Today’s report estimates that $29bn a year is being stolen from Africa in illegal logging, fishing and trade in wildlife.

$36bn is owed to Africa as a result of the damage that climate change will cause to their societies and economies as they are unable to use fossil fuels to develop in the way that Europe did. Our climate crisis was not caused by Africa, but Africans will feel the effect more than most others. Needless to say, the funds are not currently forthcoming.

If African countries are to benefit from foreign investment, they must be allowed to – even helped to – legally regulate that investment and the corporations that often bring it.

Debt Slavery

In fact, even this assessment is enormously generous, because it assumes that all of the wealth flowing into Africa is benefitting the people of that continent. But loans to governments and the private sector (at more than $50bn) can turn into unpayable and odious debt.

Ghana is losing 30 per cent of its government revenue to debt repayments, paying loans which were often made speculatively, based on high commodity prices, and carrying whopping rates of interest.

One particularly odious aluminium smelter in Mozambique, built with loans and aid money, is currently costing the country £21 for every £1 that the Mozambique government received.

British aid, which is used to set up private schools and health centres, can undermine the creation of decent public services, which is why such private schools are being closed down in Uganda and Kenya.

African Elite Benefit from Africa’s Robbery

Of course, some Africans have benefitted from this economy. There are now around 165,000 very rich Africans, with combined holdings of $860bn. But, given the way the economy works, where do these people mainly keep their wealth? In tax havens. A 2014 estimate suggests that rich Africans were holding a massive $500bn in tax havens.

Africa’s people are effectively robbed of wealth by an economy that enables a tiny minority of Africans to get rich by allowing wealth to flow out of Africa.

The Answer – Ask The Robbers For Mercy!

So what is the answer? Western governments would like to be seen as generous beneficiaries, doing what they can to “help those unable to help themselves”. But the first task is to stop perpetuating the harm they are doing. Governments need to stop forcing African governments to open up their economy to privatisation, and their markets to unfair competition.

If African countries are to benefit from foreign investment, they must be allowed to – even helped to – legally regulate that investment and the corporations that often bring it. And they might want to think about not putting their faith in the extractives sector. With few exceptions, countries with abundant mineral wealth experience poorer democracy, weaker economic growth, and worse development. To prevent tax dodging, governments must stop prevaricating on action to address tax havens. No country should tolerate companies with subsidiaries based in tax havens operating in their country.

Aid is tiny, and the very least it can do, if spent well, is to return some of Africa’s looted wealth. We should see it both as a form of reparations and redistribution, just as the tax system allows us to redistribute wealth from the richest to the poorest within individual societies. The same should be expected from the global “society”.

To even begin to embark on such an ambitious programme, we must change the way we talk and think about Africa. It’s not about making people feel guilty, but correctly diagnosing a problem in order to provide a solution. We are not, currently, “helping” Africa. Africa is rich. Let’s stop making it poorer.

Nick Dearden is the director of UK campaigning organisation Global Justice Now. He was previously the director of Jubilee Debt Campaign.

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5 Richest Nigerians Could Lift Country Out Of Poverty

By Merrit Kennedy, Oxfam

The five richest men in Nigeria could bring nearly all Nigerians out of extreme poverty for one year, according to a new Oxfam report on inequality in the country.

Obscene Inequality

It’s one of many stark conclusions drawn by the charity. Oxfam Nigeria’s Good Governance Programme Coordinator Celestine Okwudili Odo describes the level of inequality as “obscene”: “Extreme inequality is exacerbating poverty, undermining the economy, and fermenting social unrest. Nigerian leaders must be more determined in tackling this terrible problem.”

Govt Minister Objects!

Nigerian government officials such as Minister of State for Budget and National Planning Zainab Ahmed criticized the “language, tone and style” of the document, according to the BBC. She also questioned the goals and methodology of the report.

But, Fact Is 112 Million Negerians In Poverty

Inequality is growing in the populous West African nation, with more than half of its people living in extreme poverty, according to the report. The number living below the poverty line has grown from 69 million in 2004 to 112 million in 2010.

Here are a few figures from the report:

“While more than 112 million people were living in poverty in 2010, the richest Nigerian man will take 42 years to spend all of his wealth at 1 million per day.”

“In one day, the richest Nigerian man can earn from his wealth 8,000 times more than what the poorest 10% of Nigerians spend on average in one year for their basic consumption.”

“A Nigerian lawmaker receives an annual salary of about $118,000 … 63 times the country’s GDP per capita (2013).”

“Between 1960 and 2005, about $20 trillion was stolen from the treasury by public office holders.”

This issue is not due to a lack of resources but “to the ill-use, misallocation and misappropriation of such resources,” the report argues. “At the root there is a culture of corruption and rent-seeking combined with a political elite out of touch with the daily struggles of average Nigerians.”

It points to a regressive tax system as one source of the growing inequality, as “the burden of taxation mostly falls on poorer companies and individuals.” At the same time, the report states, “big multinationals receive questionable tax waivers and tax holidays, and utilize loopholes in tax laws to shift huge profits generated in the country to low tax jurisdictions.”

Salako Hunsa’s Canoe Home Story

Salako Hunsa lives in a canoe in the Makoko waterfront settlement in Lagos, Nigeria. His home was burned down last month. At 5:30 a.m. on April 9, Salako Hunsa awoke to the sound of gunfire. He left his wife and five children inside the house, and ran out to a shocking scene: A squad of police officers shooting indiscriminately and setting fire to his neighbors’ homes.

“I had to run for my life,” Hunsa says.

By the time the sun rose, the neighborhood was levelled, thousands of people were homeless and one young man was dead. The attack was a dramatic turning point in an ordeal that for Hunsa and thousands of his neighbors is far from over.

Hunsa was a lifelong resident of Otodo Gbame (pronounced BOM-ay), an informal waterfront settlement in Lagos, Nigeria, that is the front line of an ongoing conflict over the rights of some of the city’s poorest residents.

Africa’s most populous city is situated between a large lagoon and the open Atlantic. At dozens of locations across the city’s coastlines, at the boundaries where frantic markets, office towers and high-rise apartments meet the water, more than 300,000 people inhabit slums like Otodo Gbame (which translates roughly from the local Egun language to “community in the bush,” a nod to its origin as a swamp). Most residents eke out a living by fishing from hand-built canoes. They live in makeshift homes made of wood and scraps and elevated on stilts as a precaution against flooding. Access to clean water, electricity, schools and other vital services is scarce or nonexistent.

These communities are perhaps the most visible manifestation of the profound income inequality in Lagos. While the oil and finance industries have buoyed a few thousand Lagosians into stratospheric wealth (marked by gleaming black Escalades and boutique markets selling French oysters), one-fifth of the city’s 21 million residents are either living in or at risk of poverty, according to a 2016 Oxford University study.

Residents of the waterfront settlements represent the city’s lowest socioeconomic tier. But they also happen to occupy prime real estate in the city with Africa’s fastest-growing population, where waterfront property increasingly rivals the prices of New York or Miami.

Now they’re the target of a government eviction campaign that city officials say is motivated by health and security concerns, and because the settlements are “illegal, without any title or appropriate government approval.” But residents and watchdog groups say the evictions are no more than a blatant, and sometimes violent, grab for land that’s been occupied by the same families for generations.

“This is the problem, they are surrounded by wealth,” says Morayo Adebayo, a researcher at Amnesty International Nigeria. That makes the land an attractive acquisition for “the posh places” nearby, she says.

Residents of waterfront settlements have experienced harassment from the police and wealthy neighbors for years. Trouble escalated in October, when Lagos State Governor Akinwunmi Ambode issued a warning that he planned to order the “demolition of all the shanties around the creeks in Lagos State and also around our waterways.” His concern was that some communities may have been sheltering suspected kidnappers (a major crime problem in Nigeria). That accusation was vigorously denied by the Justice and Empowerment Initiative (JEI), a local legal nonprofit representing community residents in court.

On November 9, a large fire ripped through the settlement and left 30,000 people homeless. The cause of the fire is disputed, but JEI co-director Megan Chapman believes that “the police prevented residents’ fire-fighting efforts and actually spread the fire.” The government denied any responsibility for the blaze but didn’t seem to mind its outcome; in a statement on the fire it said that Otodo Gbame “clearly fell within the prime waterfront areas where Lagos State Government would prefer to have better development, befitting of a prime area in a megacity.” The statement added that the government “was mindful of the fundamental rights of the various residents living in the area.”

In January, the Lagos State High Court spelled out those rights in an injunction that found the government’s practice of forced evictions amounted to “inhuman, cruel and degrading” treatment incompatible with Nigerian and international human rights law. The court put a stay on future evictions and initiated a process to mediate some kind of agreement between residents and the government. Nevertheless, in March the police returned with a crew of demolition workers and bulldozers, this time with a mission to “clear” structures “to ensure that the waterfront area is free from environmentally injurious and unsanitary habitation.” Another 4,700 residents lost their homes, according to JEI.

“So you create a humanitarian crisis to avert an environmental crisis?” Adebayo says. “You see the reasons keep shifting.”

The final blow came April 9, when the remaining few thousand residents were chased out and what was still left of the community razed. In the melee, a 22-year-old resident named Daniel Aya was shot in the neck and killed. Residents blame the police or thugs working for them, but the government denied responsibility. An investigation is pending while Aya’s body waits in a morgue, his father, Hungbo Aya, says.

By the time Salako Hunsa realized what was happening that day and rushed back inside to collect his wife and children, they had already fled. Because police had blockaded the shore, there was nowhere to go but the water. Hunsa jumped in and swam for 30 minutes until he was picked up in a friend’s canoe. All of the family’s possessions were left behind and destroyed in the fire, along with virtually every structure in the settlement. Drone footage captured by activists after the eviction reveals the extent of devastation.

Hunsa found himself paddling to the city’s largest waterfront settlement, Makoko, along with most of his neighbors. When they arrived a few hours later, they parked the canoe in one of the countless narrow canals that wind through the neighborhood. He found his family, and they’ve been living there since — inside their canoes.

Makoko is already overcrowded, and the more than 1,000 displaced Otodo Gbame residents who are now living there have no choice but to sleep in the vessels that brought them. Hunsa’s canoe is big enough to accommodate several people; they sleep on mats on the floor underneath mosquito nets hung from a makeshift roof of metal sheeting. A steel oil drum with a discarded satellite dish for a lid serves as a cabinet. The canal inches below where they sleep serves as a public toilet and waste dump.

Getting food is a daily struggle that involves some combination of borrowing it from others, food aid from local NGOs or buying it with cash from the occasional odd job. Hunsa was a rare exception to the prevailing fisherman profession; he washed clothes at a laundromat in a nearby neighborhood and was fired when he didn’t show up after the eviction.

But even the fishermen are unable to find work. Most of their equipment was lost during the eviction. The waters around Makoko are unfamiliar, so they don’t know where to look for fish. And the Makoko fishermen are territorial, so the newcomers aren’t welcome.

There’s a cruel irony to the plight of the displaced peoples: Castigated as squatters in one place, they have been chased to a place where they truly are squatters and admit as much.

“Otodo Gbame is our fathers’ land, it is where we were born,” says Pascal Tosinhun, a displaced fisherman now living in Makoko. “Here we are squatters. We can’t do anything here.”

Tosinhun said he knows it’s only a matter of time before they wear out their welcome in Makoko, but that most people don’t know where they will go next. The situation reveals a fundamental flaw in the government’s approach, JEI’s Chapman says.

“Demolitions aren’t a solution to slums. They just push people deeper into poverty, and they move to a different slum,” she says.

The primary legal objective of the residents’ case against the government, she says, is to regain access to their land, although she acknowledges it’s an “uphill battle” given that the land is adjacent to an estate owned by one of Lagos’ wealthiest families, is still blockaded by police and is already being bulldozed to make way for future construction projects.

A hearing in late April got stalled on a technicality and rescheduled, so any resolution would take some time. At a minimum, Chapman says, the government should provide “compensation for lives lost and injuries, and prosecution of people involved in demolition.”

With the governor’s original ominous warning (“demolition of all the shanties”) still lingering, residents of Makoko fear that their waterfront settlement could be next. Chapman’s legal strategy is to think big. “We want to make this as painful as possible for the government as a deterrent to future evictions,” she says. For Otodo Gbame’s former residents, there’s little more to do than to stand by and hope for the best.

“We have total commitment to that community,” Tosinhun says. “If it was announced today, we would all go back today.”

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