Africa is an extremely resource rich continent, yet, despite its natural wealth, Sub-Saharan Africa is at the bottom of the Human Development Index, with 50% of people living in extreme poverty. The Overseas Development Institute estimates that $30bn of aid goes into the continent each year, but huge parts of the African population remain in poverty. A report by 15 charities, Honest Accounts? The true story of Africa’s billion dollar losses* sheds light on why this might be.
Africa has been bled dry over centuries by slavery, colonisation and imperialism, at an incalculable economic and human cost. Today this takes the form not of physical chains, but huge debts, debilitating theft of income and imposed policies that prevent the independence of nations. As Honest Accounts? explains:
‘While $134bn flows into the continent each year, predominantly in the form of loans, foreign investment and aid; $192bn is taken out, mainly in profits made by foreign companies, tax dodging and the costs of adapting to climate change. The result is that Africa suffers a net loss of $58bn a year.’
Rather than a net recipient of international aid, the continent is really a net creditor to the world. Less than $30bn is given in aid to Africa each year. The African countries are losing nearly six and a half times what they are receiving in aid each year – £640 lost for every £100 given in aid.
The report sets out the different ways that Africa is looted including loans and debt, and the use of tax havens, before going on to analyse the imperialist use of development aid.
Loans
Africa spends $21bn on debt repayments every year. The UK counts loans to Africa which have a lower than 7% interest rate as ‘aid’. The purpose of these loans is to generate profit via interest, or to create favourable conditions for multinational corporations (MNCs). Honest Accounts? explains how imperialist nations such as Britain, Germany, Japan, and France, borrow money from other imperialist nations and banks at low interest rates and then loan it to African nations at extortionately high rates. Britain often guarantees loans only if they are spent on products produced by companies they back.
When the International Monetary Fund and the World Bank deliver loans, they cripple the ability of a country to make money by introducing policies such as selling off industries and public services to MNCs, enforcing government cuts in essential services and deregulating the economy. Davison L Budhoo, a whistleblower from the IMF, lifted the lid on their intentions in 1988: ‘The IMF was never designed to help the Third World or end poverty. It was established by the Bretton Woods conference of 1944 to restore economic and financial order to the Western world. There was no element of compassion for humanity in its formulation. The Fund’s aim is first and foremost to secure the interests of developed countries.’ Since the global crash of 2008, lending to African governments has drastically increased from $9.9bn in 2006 to $23.4bn in 2012, as imperialists seek higher rates of return on their investments.
Tax havens
Honest Accounts? reveals that half of Britain’s aid investments go through ‘secrecy jurisdictions’ – or tax havens. It estimates that $35.3bn is looted from Africa through tax havens every year. One technique they use is trade mispricing. This is when an African subsidiary of a MNC sells a product to another subsidiary of the same parent company based in a tax haven – for considerably lower than its value. The subsidiary based in the tax haven can then sell on the product for the real value paying minimal tax. The subsidiary will often charge their African counterpart extraordinary fees for services such as ‘management services’. In 2013 ActionAid found that only two of the 100 companies listed on the London Stock Exchange did not use tax havens, with the banking sector being the most significant users. Global Financial Integrity estimates that the percentage of money being stolen from Africa due to tax evasion is 60-65% of the total – whereas corruption is only 3%.
In 2013 the African Progress Panel found that the Democratic Republic of Congo (DRC) lost $1.4bn in two years from under-pricing mining assets sold to companies based in tax havens. This is almost double the country’s combined annual budget for health and education.
Aid?
In 2012 the UK invested £600m in aid to ten African countries in a G8 sponsored scheme in partnership with MNCs to improve investment in agriculture. According to Honest Accounts?, since then these ten countries have made over 200 policy changes that will make it easier for companies to do business in Africa. This includes setting aside thousands of hectares of farm land for corporations and relaxing rules on long-term land leases. Donor nations retain the power to withdraw aid if the country rejects policies forced upon them. The revolutionary leader of Burkina Faso, Thomas Sankara, refused to take aid, stating: ‘He who feeds you, controls you’. In a profit-driven system there is no such thing as ‘aid,’ only investment.
Break the chains!
There are various other ways wealth is robbed from Africa. Illegal transactions, fishing and logging, payment fees and foreign currency reserves account for a further estimated $45bn. Africa is purposely being prevented from developing through legal financial measures introduced by imperialists and through plunder. Colonisation never stopped, and for capitalism to continue capital must exploit the resources of the world. Racism is a tool used by imperialism to justify and sustain its plunder. What African nations need is self-determination, self-sufficiency and to refuse to pay their debts. However, this threatens the domination of imperialism and is the reason countries like Libya (2011), Burkina Faso (1987) and Congo (1961), which tried to become self-sufficient, were attacked. We must stand in solidarity with all countries resisting the neo-colonialism of the IMF, World Bank and imperialist states, and stand and fight imperialism here.
Eric Ogbogbo
* Honest Accounts? The true story of Africa’s billion dollar losses, July 2014 www.healthpovertyaction.org/speaking-out/honest-accounts
FRFI 246 August/September 2015
