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Africa Rising: Africa is locked into a form of growth which is all about making the rich even more rich and the poor even more poor August 7, 2015

Posted by OromianEconomist in Free development vs authoritarian model, Poverty, Youth Unemployment.
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???????????Africa is still struggling with poverty

Africa wealth report 2015: rich get richer even as poverty and inequality deepen

Campaign group criticises development strategies as research shows the number of millionaires in Africa has more than doubled since 2000
 By  and, Guardian Global development, 31st July 2015
Africa is now home to more than 160,000 people with personal fortunes worth in excess of $1m (£642,000), a twofold increase in the number of wealthy individuals since the turn of the century that highlights the problem of deepening inequality as some of the world’s poorest nations register strong economic growth. The combined wealth holdings of high-net-worth individuals – those with net assets of $1m or more – in Africa totalled $660bn at the end of 2014, according to a report by New World Wealth, a South African market research firm. Meanwhile, the number of poor people in Africa – defined as those living on less than $1.25 a day – increased from 411.3 million in 2010 to 415.8 millon in 2011,World Bank data shows. By 2024, the number of African millionaires is expected to rise 45%, to approximately 234,000, according to the report. During the past 14 years, the number of high-net-worth individuals in Africa has grown by 145%. The rate for the Middle East over the same period was 136%, while in Latin America it was 278%. The global average was 73%. The report said that by the end of 2014, the number of people worldwide worth more than $1m had reached 13 million with a combined worth of $66tn, although the number of millionaires can vary depending on what assets are included anddifferent methods have produced different figures. New World Wealth, for example, do not include primary residences when assessing wealth or net assets. The World Bank has forecast an average of 5.5% economic growth for sub-Saharan Africa over the next year, though it warned that “extreme poverty remains high across the region”. Nick Dearden, director of the advocacy group Global Justice Now, said the report shows deepening inequality across the continent. “It’s no wonder that rich individuals in Africa are getting richer, because we’re seeing a form of ‘development’ … which hugely benefits the wealthy but makes the lives of the poor even harder. Aid money, trade agreements and corporate ‘investment’ pushed by Britain are locking countries into a form of growth which is all about making the rich even more rich and the poor even more poor.” Mauritius has the wealthiest individuals in Africa, with average per-capita wealth of $21,470, according to the report. The rankings show that people in theDemocratic Republic of the Congo are the poorest, at $230 a person.

To put Africa’s wealth into context: the global average wealth per capita is $27,600, with top-ranking countries such as Switzerland and Australia boasting per-capita wealth of more than $200,000. “Over the last year there’s been very strong growth in places like Mozambique, Zambia and Tanzania. Going forward, we expect Mozambique to continue to be the fastest growing market for high-net-worth individuals in percentage growth terms. So I’d say that Mozambique stands out in this report,” said Andrew Amoils, head of research at New World Wealth. Angola, where per-capita wealth rose from $620 a person in 2000 to $3,920 in 2014, recorded the highest growth over the 14-year period analysed.

In Zimbabwe, the worst performing country, wealth per capita dropped from $630 a person in 2000 to $550 a person in 2014. Zimbabweans have until September to turn in theirZimbabwean dollars before the currency is discarded. The southern African country was one of the wealthiest countries in sub-Saharan Africa on a wealth-per-capita basis, said the report’s authors, but the country is now bottom of the rankings. They also note that while other low-ranked countries on the list such as Libya and Tunisia have been affected by uprisings and political instability, Zimbabweremains under the same leadership. The study identifies erosion of ownership rights in Zimbabwe, ongoing political intimidation, election fixing and investor confusion arising from the banning of the independent media in the early 2000s as key reasons for the country’s poor performance. South Africa is home to the highest number of millionaires on the continent at 46,800 in 2014. Egypt comes in second with more than 20,000, followed by Nigeria in third place.

Amoils said African economies benefit from rich citizens: “A lot of [high-net-worth individuals] keep their wealth locally, so normally, for most African countries, it’s between 50% and 70% local wealth. There’s lots of advantages because a lot of [these individuals] are business owners and a lot of them start businesses even if they are in corporate environments..” Dearden said: “From Nigeria to Mozambique you can see poverty rising at the same time as rapid growth. What does this mean? The growth is being gobbled up by the super-rich and transnational capital. And that means ordinary people, by comparison, find their lives even more impoverished. “It could be different: with decent government spending on public services, progressive taxation, regulation to control capital and regional trading relationships to wean countries off dependency on western markets.”

Sector breakdown of African individuals worth $1m or more

  • Angola: 41% in oil and gas, 13% in financial services, 12% in real estate and construction, 8% in basic materials, 6% in transport.
  • Ghana: 24% in financial services, 16% in real estate and construction, 13% in fast-moving consumer goods, 10% in basic materials, 7% in retail.
  • Kenya: 19% in real estate and construction, 18% in financial services, 10% in manufacturing.
  • South Africa: 20% in financial services, 16% in real estate and construction, 14% in basic materials, 8% retail.
  • Nigeria: 24% oil & gas, 16% basic materials, 13% transport, 10% financial services.
  • Zambia: 22% in basic materials, 16% real estate and construction, 12% financial services, 9% transport.
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War on Want: Africa: a continent of wealth, a continent of poverty Afrikaa: Ardii qabeetti ardii iyyeetti June 24, 2015

Posted by OromianEconomist in Africa, African Poor, Colonizing Structure, Corruption in Africa, Free development vs authoritarian model, Poverty.
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???????????A shocking investigative journey into the way the resource trade wreaks havoc on Africa, ‘The Looting Machine’ explores the dark underbelly of the global economy.

Africa: a continent of wealth, a continent of poverty

There has been much talk of an African renaissance in recent years. Thabo Mbeki, South Africa’s second post-apartheid president, has spoken of a ‘rebirth that must encompass all Africans’. So as African politicians and mining companies convene in London this week for ‘Mining on Top’ – Africa’s annual mining summit – where are the voices of civil society? Their absence speaks volumes.

Africa is blessed with a rich bounty of natural resources. The continent holds around 30% of the world’s known mineral reserves. These include cobalt, uranium, diamonds and gold, as well as significant oil and gas reserves. Given this natural wealth it comes as no surprise that, with the tripling of global mineral and oil prices in the past decade, mining has exploded on the African continent. Over the period 2000 to 2008 resource extraction contributed more than 30% of Africa’s GDP while the annual flow of foreign direct investment into Africa increased from $9 billion to $62 billion (most of this into extractive industries). However, despite being so richly endowed, and despite the mining boom of the past decade, Africa has drawn little benefit from this mineral wealth and remains one of the poorest continents on the globe, with almost 50% of the population living on less than $1.25 per day.

So, why is it that a continent with such vast potential wealth can remain so poor? It is in large part down to ‘illicit financial flows’: the illegal movement of money or capital from one country to another. The exploitation of mineral resources has all too often led to corruption and a large proportion of the continent’s resources and revenues benefiting local and foreign elites rather than the general population. Trade mispricing (and in particular transfer pricing and trade misinvoicing) is the most common way of transferring illicit funds abroad. Through trade mispricing, companies seek to maximize profits artificially through maximizing expenses in high-tax jurisdictions and maximizing revenue and income in low-tax jurisdictions. This enables corporations to minimize tax payments illegally and transfer the funds abroad.

Such illicit flows undermine social development and stymy inclusive economic growth. Instead of investing resource revenues into improving infrastructure, health and education, political elites, often in collusion with mining companies, have siphoned off proceeds from the continent’s mineral and oil wealth – lining their own pockets to the detriment of ordinary Africans.

Zambia presents as a wealthy country – the largest producer of copper in Africa and the 7th-largest globally. Yet Zambia is one of the poorest countries in the world, with 74% of the population living on less than $1.25 a day and 43% of the population being undernourished. This is in part due to a haemorrhaging of wealth, mainly to transnational mining companies. According to the Zambian Deputy Finance Minister, in 2012 the country was losing $2 billion a year from tax avoidance – around 10% of Zambia’s GDP. The mining industry was the largest culprit and the bulk of the loss was attributed to transfer pricing – where parts of the same company trade with each other at prices that they determine on their own – and to the over-reporting of costs and under-reporting of production. The situation is compounded by overly generous tax incentives provided to companies by the Zambian government.

The Zambian example is not an isolated case. Such corporate practices in the mining sector are common right across the continent. In South Africa, illegal capital flight through trade-misinvoicing (a means to evade tax) is rife in the ores and metals sector. Over the period 1995 to 2006 trade misinvoicing alone amounted to $167 million. And when it comes to fuel-exporting countries, over the period 1970 to 2008 states were losing on average $10 billion per year because of misinvoicing – the sum accounting for nearly half of all illicit financial flows from Africa during this time. Moreover, statistical data generated through the Kimberly Process Certification Scheme, which was introduced in 2003, revealed that diamond production was nearly twice as large as estimated, indicating massive smuggling, under-reporting and tax evasion in the sector. The list goes on.

So, what is to be done? At the heart of any solution must be transparency. Countries need to be more open in their dealings with mining companies, put in place and enforce fairer tax regimes and anti-corruption rules, and pursue economic policies that promote diversified economies and reduce dependence on revenues from mineral wealth. International mining capital would also, of course, have to play by the rules or be held to account for its indiscretions. Such measures would go some way to ensuring that the continent’s wealth benefits ordinary people and puts Africa onto a path to greater prosperity.

Mining routinely disrupts and destroys people’s livelihoods while damaging their health and the environment. It is local communities right across the continent that are most affected by the extractives industry. ‘Mining on Top’ should be the perfect opportunity to bring these communities into the very discussions that will affect their lives. Shamefully, they’ve not been invited. So while the mining elite discuss how best to exploit a continent, ordinary Africans continue to lose out.

The ‘Mining on Top’ Africa – London Summit takes place on 24-26 June at the Park Plaza Riverbank Hotel, 200 Westminster Bridge, SE1 7UT. On Thursday 25 June, War on Want will join London Mining Network and Gaia Foundation in protest at the failure of organizers to include civil-society representatives at the summit.

http://newint.org/blog/2015/06/24/africa-a-continent-of-wealth/