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VICE: POST-COLONIAL COLONIALISM: The West Extorts Way More Money from Africa Than It Gives in Aid June 16, 2017

Posted by OromianEconomist in Uncategorized.
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Many decades after the official end of the western empires in Africa, the continent is still being sucked dry by a cartel made up of small local elites, multi-national companies and foreign governments. The money given to Africa to help its so-called “development” is referred to as “aid”, when in fact it should be seen as a form of reparations for a history of colonisation and ongoing domination that has left the African people almost as far from economic and social justice as they were when the European empires packed up and left in the years following the end of the Second World War.

POST-COLONIAL COLONIALISM
The West Extorts Way More Money from Africa Than It Gives in Aid

By OSCAR RICKETT, VICE, Jun 15 2017



We should be putting our western guilt to good use and pressuring government to regulate “investment” in the continent.


The world’s second-largest continent, Africa, is still defined in the western media in just two principle ways.

The more “woke” understanding of Africa is the idea of “Africa Rising”, which is defined by images of young people on bustling streets speaking on mobile phones. “Africa Rising” stories tend to focus on smart entrepreneurs doing something tech-related in massive urban centres like Lagos, Nairobi or Cape Town. They promote an image of the continent that is considered modern and future-focused. These stories are often, as the Kenyan journalist Parselelo Kantai once put it to me, “insidious little fictions manufactured by global corporate finance”.

The other main narrative is the more familiar one: hapless Africa, the tragic continent that can only continue to survive with the help of aid money provided to it by outsiders. This is the narrative of Live Aid and Bono, the story told to us immediately after news reports of famine and unrest in places that, we are made to believe, just can’t get by without western charity.

Given these two themes, it would seem unlikely that more money is taken out of the 47 countries that form what is commonly called “Sub-Saharan Africa” than is put back in. Yet, British and African campaign groups, including Global Justice Now, released a report this month which found that, in 2015, much more money was taken out of Africa in the form of illegal extraction of natural resources, tax avoidance and spiralling interest on debt repayments than was “given” to the continent in the form of aid and grants.

The report, entitled Honest Accounts 2017 , finds that the countries of Africa are “collectively net creditors to the rest of the world, to the tune of $41.3 billion [£32.2 billion] in 2015”.

Rather than Africa being a hapless continent dependent on the rest of the world, it is the exploited continent whose natural resources are enriching a local and global elite at the expense of the vast majority of its citizens, and whose governments can do little about the illegal syphoning of revenue into tax havens.

According to War on Want, 101 (mostly British) companies listed on the London Stock Exchange control an identified $1.05 trillion (£820 billion) worth of resources in Africa in just five commodities: oil, gold, diamonds, coal and platinum. Twenty-five of those companies are incorporated in tax havens.

While African countries receive around $19 billion (£14 billion) in aid in the form of grants, $68 billion (£53 billion) is taken out in capital flight. The main culprits are multinational corporations and corrupt officials with their large infrastructure of lawyers, bankers, accountants and financial advisors skilled in tax dodging.

The main device used is transfer pricing. By overpricing imports and under-pricing exports on customs documents, companies and individuals can move money to tax havens. This means that multi-national companies deliberately misreport the value of their imports or exports in order to reduce the tax they have to pay on them. Furthermore, these same companies repatriate $32 billion (£25 billion) in profits made in Africa to their home countries every year. Money made on the continent of Africa, then, is returned to enrich those outside of Africa.



The report goes on to say that African governments paid out $18 billion (£14 billion) in debt interest and principal payments in 2015. Though they received $32.8 billion (£25.6 billion) in loans, the overall level of debt is rising rapidly, and loans often lock African governments into even more debt: private lenders, the report notes, “are encouraged to act irresponsibly because when debt crises arise, the IMF, World Bank and other institutions lend more money, which enables the high interest to private lenders to be paid, whilst the debt keeps growing”. Ghana is losing 30 percent of its government revenue to debt repayments. Private lenders benefit, while ordinary Africans suffer.

Illegal logging, fishing and the trade in wildlife and plants are also hurting Africa, with an estimated $29 billion (£22.6 billion) a year being stolen from the continent through these practices. Climate change is hitting the continent particularly badly; though of course the extractive and industrial practices that led to climate change were a phenomenon of non-African countries.

As Bernard Adaba, policy analyst with ISODEC in Ghana, says: “‘Development’ is a lost cause in Africa while we are haemorrhaging billions every year to extractive industries, western tax havens and illegal logging and fishing. Some serious structural changes need to be made to promote economic policies that enable African countries to best serve the needs of their people rather than simply being cash cows for western corporations and governments.”

Many decades after the official end of the western empires in Africa, the continent is still being sucked dry by a cartel made up of small local elites, multi-national companies and foreign governments. The money given to Africa to help its so-called “development” is referred to as “aid”, when in fact it should be seen as a form of reparations for a history of colonisation and ongoing domination that has left the African people almost as far from economic and social justice as they were when the European empires packed up and left in the years following the end of the Second World War.

Recognising the troubling role western governments and companies play in the impoverishment of Africa could serve as a beginning to reverse this process. The Honest Accounts report proposes a number of steps that can be taken to help reverse the flow of money out of Africa, including putting less faith in the extractives industry, enabling transparent and responsible lending and regulating the investment that corporations bring in to African countries.

Tax havens are a key issue, one that was recognised in Labour’s election manifesto, which said that the “current global tax system is deeply unjust”. Jeremy Corbyn’s party promises to “act decisively on tax havens”, which play a key role in allowing vast sums of money to be taken out of Africa. The UK enablesthis wealth extraction to take place and sits at the head of a vast network of tax havens.

Finally, there is the need for more public recognition of what is going on. This is not about stoking up western guilt; it is about identifying the causes behind rising inequality in Africa and elsewhere, and about correcting a lazy media narrative that patronises and insults Africans while keeping everyone in a state of ignorance. The truth is this: Africa is still being plundered. It is time western governments and the western media stopped pretending otherwise.

 


 

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Tyranny, Debt & Underdevelopment: Ethiopian Rail Corporation’s Debt: How Big Is It? January 31, 2017

Posted by OromianEconomist in Illicit financial outflows from Ethiopia.
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Odaa OromooOromianEconomist
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The Ethiopian Reporter (ER) newspaper has been presenting shocking facts about extents of corporate bankruptcies. These have escalated particularly since #OromoProtests started in November 2015. Such reports are becoming commonplace so much that we do not even pay much attention to them. We have been reading about a series of scandals related to Sugar Corporation, METC (the Military Engineering Complex), and lately that of the Ethiopian Railway Transport Corporation (ERC).
In this piece, I will briefly comment on the latest scandal, related to ERC’s murky finance. The ER stated quoted ERC management report and presented troubling accounts of the corporation’s escalating debt, currently standing at birr 102.5 billion or USD 4.6 billion. Let’s put this figure in a context – how big is it relative to the size of the Ethiopian economy?
  • Birr 1,031 or USD 46, if expressed as debt per person (dividing the figure by population of Ethiopia)
  • 7.4% of GDP (expressing it as a ratio to Ethiopia’s national income)
  • About 50% of the income generated in the whole of Ethiopia’s industrial sector
  • 180% of the whole of Ethiopia’s manufacturing sector (nearly twice the size of total income generated in the manufacturing sector, including small scale handcrafts)
By any stretch of imagination, ERC’s debt is a colossal figure. It is not something that Ethiopians would take as yet another financial scandal regading some corporate entity. At the end of the day, it is Ethiopians who would foot this bill. After all the money does not simply melt away, it must have been pocketed by some group who have been busy siphoning off public money. It is not without reason that the authorities have been so much addicted to mega projects. Such big projects have been convenient mechanisms for embezzlement.
We all recall circumstances through which the Addis Rail was started. A very large construction project was completed, completely revamping the Addis Road Networks. Though expensive, this was necessary. The ring road and the rest were completed. However, Addis residents barely started driving on the new and fresh looking roads when the government came up with some crazy idea – yet another mega project, a gigantic city rail network!
Ironically the rail infrastructure was put in place by digging up the newly build asphalt roads. It was madness. A logical next step would have been a tram rail system, which requires only a minor modification – burying the rails in the asphalt road so that the roads would be shared by trams and other vehicles. That option was not acceptable to the authorities because it was not big enough to generate perpetual business opportunities for their cronies.
Now we witness a rather ridiculous situation. By coincidence, the day the Addis Rail started operating, I was back home. The next day, as I was driving in Addis, I witnessed something sounding a comedy show – only one coach rail was moving up on that ugly structure. Well, in that case, if it is only a single coach that moves on it, then what is the point putting up that amorphous structure? I hear the number of coaches moving on those rail networks has been two, three, or four at most.
The bottom line is this. That kind of system can be supported only by a vibrant economy – a healthy economy that generates decent income for citizens! In a normally functioning and genuinely rapidly growing economy, business opportunities expand in all corners of a large city like Addis Ababa. This induces movements of people, commuting between their places of work and residences as well as between premises to do business. In the process income is generated and their capacity to pay for fares get enhanced. If all these things are in place, the public transport sector such as the ERC can balance its books, including meeting its domestic as well as foreign debt obligations.
The situation in Ethiopia is quite different, in fact rather perverse. To begin with, the Ethiopian Economy is growing rapidly only on paper and in official government statistics. The fact on the ground tells the exact opposite. There isn’t much vibrant business opportunity. People wish to travel but that wish remains only a desire – government policy has curtailed their capacity to pay fares at a rate that would make ERC profitable. So, ERC operates at much smaller rate than its full capacity, perhaps 10% to 20%. If circumstances would not change, ERC will never ever able to pay its debt. The principal and interest will accumulate and debt would escalate, as it already has, leaving behind a level of debt whose size will become larger and larger over the years as a share of GDP, industry and manufacturing. The debt per citizen will most certainly become even larger.
It should be noted here I confined my analysis only to the case of ERC. If I closely examine the implications of other financial scandals, it is possible to reveal how alarming each case is. In a nutshell the whole of the Ethiopian economy is in a dire state, whose severity is much more grave than most Ethiopians and the donor community may realize. The sooner the on-going madness is put to stop the better.