Illicit Financial Flows: Multinationals bleeding Africa
Lazarus
Sauti
Africa is a
resource-endowed continent but sadly the continent is reeling in poverty. With
its vast resources that are finite in nature mostly in the mining sector, the
continent is trailing other continents in terms of socio-economic development
and as a result Africans are poor.
Professor Mthuli Ncube,
chief economist and vice-president of the African Development Bank, agrees:
“The African continent is resource-rich. With good resource husbandry, Africa
could be in a position to finance much of its own development.”
The question that
haunts every caring and concerned African is, “With all our vast resources, why
are we poor?”
The answer is simple,
the rape of the continent of Africa is happening faster, more violently and
with less resistance today than at any time in its history. An economist in
Zimbabwe believes Africa is desperate for investment and this is leading to
some problems affecting her.
Furthermore, resources
are being lost and squandered by the failure of African governments to manage
them competently and the greed of ruthless and predatory multinational
companies that exploit this weakness.
President Robert Mugabe
is always on record saying several natural resources in Africa have been
exploited by foreign elements while Africans benefitted merely as labourers – a
very sad scenario.
“Africa is well-endowed
with natural resources that are of a finite nature. These natural resources
have over the years been exploited, largely for the benefit of multinational
corporations and other foreign business entities. Foreigners are getting huge
profit turnovers from minerals, forests, tourist facilities and wildlife while
the indigenous people (Africans) are benefitting nothing at all. This must
stop,” President Mugabe says.
Because of this,
multinational companies are undermining development and exacerbating inequality
and poverty not only in the African continent but in other developing states.
They disadvantage smaller domestic firms and transfer money that could be put
towards poverty eradication into the hands of the rich.
Immediate past
President of South Africa Thabo Mbeki recently said multinational companies
operating in Africa account for about 60 percent of the illicit financial
outflows which drain the continent’s domestic reserves and depriving it of
crucial investment funds.
According to the United
Nations, Global Financial Integrity, the World Bank and others, illicit
financial flows are monies that are illegally earned, transferred, or utilised.
Somewhere at its origin, the movement or use of these monies broke laws and
hence they are considered illicit.
Speaking at a
high-level event, “Tackling Illicit Financial Flows and Inequality in Africa,”
on the sidelines of the World Economic Forum on Africa in Abuja, Nigeria, Mbeki
said that the continent was losing needed funds and something needs to be done
about it.
“In terms of the work
we have done, it is clear that the principal source of this illicit outflow,
are in fact the multinational companies. The estimate that we have is something
like 60 percent of the outflows originate from the activities of large
commercial companies that operate from Africa,” disclosed Mbeki, who is also
the chairman of the panel on illicit financial outflows set up by ministers of
finance in Africa.
It is estimated that
Africa has lost over US$1.4trillion in illicit financial outflows in the last
three decades, which is about US$50billion to US$80billion yearly.
It is against this
background that Mbeki’s disclosure challenges traditional thinking that corrupt
practices such as bribery and embezzlement by African politicians are the major
sources of illicit financial outflows.
Supporting Mbeki, Anne
Versi, writing for the African Business Magazine, an AIC Publication, said:
“... While the outside world has always been very quick to pin the corruption
label on Africa, we have always argued that it takes two to make this deadly
dance work. Now it is obvious that powerful multinationals are as complicit, in
fact more so, in sucking Africa’s lifeblood as the worst local despot.”
Sadly, the value of the
illicit flows surpasses the amount of Official Development Assistance entering
developing countries by an order of magnitude.
“Illicit financial
flows siphon revenue out of poor countries, robbing them of much-needed assets
and forestalling economic development,” said Global Financial Integrity
director Raymond Baker.
According to estimates
by Global Financial Integrity, a United States-based research and advocacy
organisation, corrupt activities such as bribery and embezzlement make up only
about 3 percent of illicit outflows; criminal activities such as drug
trafficking and smuggling make up 30 to 35 percent and commercial transactions
by multinational companies make up a whopping 60 to 65 percent.
Mbeki, therefore, said
multinational companies have become the new actors as regards the causative
agents of internal displacement in Africa through land grabs.
He also said there are
“a whole number of ways” these multinationals cause illicit flows of funds
which include trade mispricing, transfer pricing, mis-invoicing and others.
Sharing same
sentiments, President Mugabe said multinational companies have a tendency of
implementing corporate social responsibility programmes which promote the
dependency syndrome among African communities.
“The corporate
responsibility programmes, which have been implemented by some businesses, have
tended to reinforce the dependency syndrome and generally speaking, the major
weakness of the corporate social responsibility programmes has been the failure
to consult the local communities and their authorities,” he said.
Consequently, Mbeki and
President Mugabe called for strong and purposeful political leadership among
African nations to cause policy realignment in reversing illicit financial
flows by multinational corporations.
Unfortunately, African
governments do not have competencies equal to the companies that have huge
legal resources to draw up agreements. Action at the local, national, regional
and continental level could, therefore, be key for the continent of Africa to
effectively curb illicit financial flows.
More so, collective
action would increase Africa’s bargaining power.
African media should
also play a leading role in fighting the bleeding of Africa through illicit
financial flows. It should fill the void created by Western media in its
reportage about Africa and also expose the West’s clear form of hypocrisy and
modern colonisation.
The Western media has
kept silent and has not raised a middle finger against what its governments,
intelligence services, corporations and businessmen are doing to Africans.
Furthermore, Africa
must demand transparency since it is not only in politics where transparency is
wanted but in business too. Thus, clearness is required because Africa and her
citizenry are owners of natural resources, and that position should be
respected in the economic and political terms.
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