17 December 2012

Africa: Multinational Firms 'Rob' Continent

Dar es Salaam — It has been revealed that a total of US$538bn leaves Africa illicitly as proceeds of bribery, theft, kickbacks and tax evasion and avoidance.

According to the Tanzania Shadow Finance and Economic Affairs Minister Mr. Zitto Kabwe, only $80b flows into Africa as Foreign Direct Investment (FDI) and aid combined.

Presenting a paper on 'Commitment to Africa Initiative' during the economics conference in Berlin, Germany, Kabwe said, Africa is being robbed of its resources through tax avoidance done by multinationals.

"As of between year 2000 and 2010 more than $844bn was flown out of developing countries yearly through capital flight and 69% of this was from Africa," Zitto said in his presentation as he quoted the Global Financial Integrity Report 2011.

He added that the global FDI inflow in 2011 was $1.5trn while capital flight from developing countries is averaged at $0.84trn per year and $0.58trn of this money is from Sub-Saharan Africa.

The total FDI to Africa was a mere $37bn in 2011 almost same figure to total foreign aid flows to Sub Sahara Africa.

According to Zitto who is also a deputy leader from opposition camp in the Parliament and Member of Parliament for CHADEMA, out of every $1 coming to Africa, $7 illicitly leaves Africa.

"This is unacceptable and henceforth must be mainstreamed into development cooperation agenda," Zitto stressed.

Europe and Africa must consider the above elements and focus on friendly laws, researches and networking, in order to foster the participation of businesses into development of developing countries.

Giving example of the countries such as Switzerland and others, tax havens facilitate illicit money transfer by maintaining policies that obstruct transparency efforts, and are hence participating in the process of impoverishing Africa.

"My country is a top recipient of foreign aid - but more than third of the population is still anguishing in poverty," he explained.

He said, transformational development cooperation is that of empowering the people to take care of their own lives. Germany must up its efforts in pushing for governance issues in Africa especially in exploitation of Africa's natural resources.

Germany must also support African countries in ending illicit money flows through capital flight done by multinational corporations and also, it must encourage its private sector, especially SMEs to invest in Africa.

In Africa, private companies from developed world perform what they label as Corporate Social Responsibility (CSR) in issues like school building or rehabilitation. Of course, requesting more school rehabilitation or more mosquito nets would result in a negative performance in their financial books, Zitto said.

At the same time, he added in his report that, some of these companies use accounting techniques to transfer most of their revenues to offshore and pay less tax in African countries or don't pay at all.

"This is charity and corruption in two different sides of the coin, he said and noted, a socially responsible corporation must pay its taxes responsibly as well."

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