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2017-05-31 |

Africa subsidises the rest of the world by $40 billion a year, new research

Africa The world is extracting wealth from Africa (Photo: CC0)

Many people in Africa remain trapped in poverty, while the continent is subsidising the rest of the world by over $40 billion per year, new research shows. According to the Honest Accounts 2017 report, published by a coalition of British and African organisations, much more wealth is leaving Africa than is entering it. The report found that African countries received $161.6 billion in 2015 – mainly in loans, personal remittances and aid in the form of grants. Yet $203 billion was taken from Africa, either directly – mainly through corporations repatriating profits and by illegally moving money out of the continent – or by costs imposed through climate change. This is creating an annual net financial deficit of over $40 billion. “The African continent is rich, but the rest of the world profits from its wealth through unjust debt payments, multinational company profits and hiding proceeds from tax avoidance and corruption,” said Tim Jones from the Jubilee Debt Campaign.

The research, which covers the 47 countries classified as ‘sub-Saharan Africa’ by the World Bank, calculates the movement of financial resources into and out of Africa and some key costs imposed on Africa by the rest of the world. According to the most recent figures available in 2015, African countries received around $19 billion in aid but over three times that much ($68 billion) was taken out in capital flight, mainly by multinational companies deliberately misreporting the value of their imports or exports to reduce tax. An estimated $29 billion a year is being stolen from Africa in illegal logging, fishing and the trade in wildlife/plants. “Money is leaving Africa partly because Africa’s wealth of natural resources is simply owned and exploited by foreign, private corporations,” the authors write. African governments received $32.8 billion in loans in 2015 but paid $18 billion in debt interest and principal payments, with the overall level of debt rising rapidly. Other costs include the ‘brain drain’ effect, the cost to Africa as a result of the migration of health workers for example, and costs associated with climate change, a problem largely caused by Europe, America and other developed countries.

“Africa is not poor,” says the report in an effort to break with the powerful narrative in Western societies. “Whilst many people in African countries live in poverty, the continent has considerable wealth. A key problem is that the rest of the world, particularly Western countries, are extracting far more than they send back. Meanwhile, they are pushing economic models that fuel poverty and inequality, often in alliance with African elites.” According to Aisha Dodwell, a campaigner with Global Justice Now, the research shows that what African countries really need is for the rest of the world to stop systematically looting them. “While the form of colonial plunder may have changed over time, its basic nature remains unchanged.” The report contains a series of recommendations as to how the system extracting wealth from Africa could be dismantled. These measures include promoting economic policies that lead to equitable development, preventing companies with subsidiaries based in tax havens from operating in African countries, transforming aid into a process that genuinely benefits Africa, and compensating African countries for the impact of climate change that they did not cause. “The bleeding of Africa must stop!,” said Bernard Adaba, policy analyst with ISODEC in Ghana. (ab)

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