First News
Volume:7, Number:47
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Business & Finance 2

An Uneven Trade Off

Is the world plundering Africa's wealth as aid and loans to the continent are outweighed by financial flows to tax havens and costs of climate change mitigation?

| Tanweer Hassan |

It may sound odd, but the fact remains that more wealth leaves Africa every year than enters it. According to research that challenges “misleading” perceptions of foreign aid, the unfavorable gap for the continent amounts to more than USD40 billion. Analysis by a coalition of UK and African equality and development campaigners including Global Justice Now, published on May 23, claims the rest of the world is profiting more than most African citizens from the continent’s wealth.

received USD162 billion in 2015, mainly in loans, aid and personal remittances. But in the same year, USD203 billion was taken from the continent, either directly through multinationals repatriating profits and illegally moving money into tax havens, or by costs imposed by the rest of the world through climate change adaptation and mitigation. This led to an annual financial deficit of USD41.3 billion from the 47 African countries where many people remain trapped in poverty, according to the report, Honest Accounts 2017. The campaigners said illicit financial flows, defined as the illegal movement of cash between countries, account for USD68 billion a year, three times as much as the USD19 billion Africa receives in aid.

receives in aid. African governments received USD32 billion in loans in 2015, but paid more than half of that – USD18 billion in debt interest, with the level of debt rising rapidly. The prevailing narrative, where rich country governments say their foreign aid is An Uneven Trade Off Is the world plundering Africa's wealth as aid and loans to the continent are outweighed by financial flows to tax havens and costs of climate change mitigation? helping Africa, is “a distraction and misleading”, the campaigners said. The report points out that Africa has considerable riches. South Africa’s potential mineral wealth is estimated to be around USD2.5 trillion, while the mineral reserves of the Democratic Republic of the Congo are thought to be worth USD24 trillion. However, the continent’s natural resources are owned and exploited by foreign, and private corporations, said the report. However, Maya Forstater, a visit ing fellow for the Centre for Global Development, a development think tank, said the report did not provide a meaningful look at the issues. She argued that there are 1.2 billion people in Africa, but this report seems to view these people and their institutions as an inert bucket into which money is poured or stolen away, rather than as part of dynamic and growing economies. The USD41bn headline (??) they come up with needs to be put into context that the overall GDP of Africa is some USD7.7 trillion, she explained. Economies do not grow by stockpiling inflows and preventing outflows but by enabling people to invest and learn, adapt technologies and access markets, she added. Forstater also questioned some of the report’s methodology.

The coalition of campaigners, including Jubilee Debt Campaign, Health Poverty Action, and Uganda Debt Network, said those claiming to help Africa “need to rethink their role”, and singled out the British government as bearing special responsibility because of its position as the head of a network of overseas tax havens. The report makes a series of recommendations, including preventing companies with subsidiaries based in tax havens from operations in African countries, transforming aid into a process that genuinely benefits the continent, and reconfiguring aid from a system of voluntary donations to one of repatriation for damage caused.

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