Aid to Africa: donations from west mask ‘$60bn looting’ of continent, Mark Anderson, theguardian.com, Tuesday 15 July 2014 11.57 BST

UK and wealthy states revel in their generosity while allowing their companies to plunder Africa’s resources, say NGOs.

Western countries are using aid to Africa as a smokescreen to hide the “sustained looting” of the continent as it loses nearly $60bn a year through tax evasion, climate change mitigation, and the flight of profits earned by foreign multinational companies, a group of NGOs has claimed.

Although sub-Saharan Africa receives $134bn each year in loans, foreign investment and development aid, research released on Tuesday by a group of UK and Africa-based NGOs suggests that $192bn leaves the region, leaving a $58bn shortfall.

The report says that while western countries send about $30bn in development aid to Africa every year, more than six times that amount leaves the continent, “mainly to the same countries providing that aid”.

The perception that such aid is helping African countries “has facilitated a perverse reality in which the UK and other wealthy governments celebrate their generosity whilst simultaneously assisting their companies to drain Africa’s resources”, the report claims. It points out that foreign multinational companies siphon $46bn out of sub-Saharan Africa each year, while $35bn is moved from Africa into tax havens around the world annually.

The study, which also notes that African governments spend $21bn a year on debt repayments, calls for the aid system to be overhauled and made more open.

It says aid sent in the form of loans serves only to contribute to the continent’s debt crisis, and recommends that donors should use transparent contracts to ensure development assistance grants can be properly scrutinised by the recipient country’s parliament.

“The common understanding is that the UK ‘helps’ Africa through aid, but in reality this serves as a smokescreen for the billions taken out,” said Martin Drewry, director of Health Poverty Action, one of the NGOs behind the report. “Let’s use more accurate language. It’s sustained looting – the opposite of generous giving – and we should recognise that the City of London is at the heart of the global financial system that facilitates this.”

Research by Global Financial Integrity shows Africa’s illicit outflows were nearly 50% higher than the average for the global south from 2002-11. The UK-based NGO ActionAid issued a report last year (pdf) that claimed half of large corporate investment in the global south transited through a tax haven.

Supporting regulatory reforms would empower African governments “to control the operations of investing foreign companies”, the report says, adding: “Countries must support efforts under way in the United Nations to draw up a binding international agreement on transnational corporations to protect human rights.”

But NGOs must also change, according to Drewry: “We need to move beyond our focus on aid levels and communicate the bigger truth – exposing the real relationship between rich and poor, and holding leaders to account.”

The report was authored by 13 UK and Africa-based NGOs, including: Health Poverty Action, Jubilee Debt Campaign, World Development Movement, African Forum and Network on Debt and Development, Friends of the Earth Africa, Tax Justice Network, People’s Health Movement Kenya, Zimbabwe and UK, War on Want, Community Working Group on Health Zimbabwe, Medact, Healthworkers4All, Friends of the Earth South Africa, JA!Justiça Ambiental/Friends of the Earth Mozambique.

Sarah-Jayne Clifton, director of Jubilee Debt Campaign, said: “Tackling inequality between Africa and the rest of the world means tackling the root causes of its debt dependency, its loss of government revenue by tax dodging, and the other ways the continent is being plundered. Here in the UK we can start with our role as a major global financial centre and network of tax havens, complicit in siphoning money out of Africa.”

A UK government spokesman said: “The UK put tax and transparency at the heart of our G8 presidency last year and we are actively working with the Organisation for Economic Co-operation and Development to ensure companies are paying the tax they should and helping developing countries collect the tax they are owed.”

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‘Africapitalism’ promises new model of African self-empowerment, Afua Hirsch, west Africa correspondent, theguardian.com, Wednesday 26 June 2013 12.30 BST

Continent’s investors increasingly drawn to development model based on using private-sector investment to stimulate growth.

For investors seeking profits, Africa is impossible to ignore. Sub-Saharan Africa has six of the world’s 10 fastest-growing economies over the past decade; glossy conferences, heads of state, and private funds all tout the huge returns possible for investing money on the continent.

But now key figures in the private sector are advocating new models of “philanthropic investment”. “Africapitalism”, as one African billionaire has called it – also known as “venture philanthropy” and “philanthro-capitalism” – combines unashamedly for-profit investment and free-market capitalism with the objective of stimulating economic development. Some proponents say that, properly handled, the model could overtake aid as the main way of alleviating poverty.

“Africapitalism is the philosophy that the African private sector has the power to transform the continent through long-term investments, creating both economic prosperity and social wealth,” said Tony Elumelu, the Nigerian billionaire who founded the United Bank for Africa and is now CEO of Heirs Holdings.

“It is also a call to action for us Africans to take responsibility for our own development – and for non-Africans to evolve their thinking about how best to channel their efforts and investments in the region.”

Elumelu, who coined the phrase “Africapitalism” in 2010, is one of a growing number of philanthropists and investors using their personal wealth and business expansion to generate jobs and, they say, widespread economic benefits for African countries.

“We have noticed an increase in wealthy Africans coming forward about their giving,” said Mary Glanville, managing director of the London-based Institute for Philanthropy. “We have seen at first-hand the benefits of supporting, not subverting, local infrastructures that will aid local development.”

The institute cites the example of the Indigo Trust, which is investing in a “co-creation hub” in Nigeria to provide business support for social technology ventures. “It is a proactive provision of support activities – including advice, training, [and] mentorship – alongside which there is access to funding through Indigo’s network of local and international partners,” said Glanville.

In May, the One Thousand and One Voices investment movement was launched. A $300m fund (£195m) offering “patient capital”, the initiative is designed to avoid what it sees as the “dependency” created by philanthropy for economic development, but also the short-termism of other private equity ventures, driven simply by quick returns.

“Our objectives are akin to the objectives of philanthropy – lifting millions of people out of poverty,” said chief executive Hendrik Jordaan. “Philanthropy does have a role to play, for example in relieving pain and suffering where a free-market society may not have a solution, but the tool that we believe should be used for economic development is private-sector investment.”

The One Thousand and One Voices project – founded by brewing scion John K Coors – offers what it says is a more effective means of achieving development objectives. It has attracted some of the world’s richest families, who feel that years of philanthropy have failed to achieve their aims.

“The families we are seeing are yearning for a model that can demonstrate results, and these investments – done properly – are proven to have the most positive long-term impact,” said Jordaan. “We intend for this movement to unlock not just these families’ financial capital, but their intellectual and relational capital that is so powerful, and could be harmonised and unleashed for good.”

Claims that private-sector investment can really solve Africa’s problems are not without controversy, however.

“The idea that private-sector investment is good and aid is bad, as some advocates of this theory have said, is completely ahistorical,” said Duncan Green, senior strategic adviser at Oxfam. “If you look at any other country that’s developed, it’s involved a relationship between the private sector and state.

“I think that this is really about a gut feeling that a lot of Africans are sick of hearing themselves described as victims, with which I completely sympathise. It’s true that there is a dynamic African private sector that plays an absolutely central role. But the view that aid drives out investment is not accurate – relative to the private sector, aid money is actually really small.”

The new breed of investors feel that aid flows perpetuate the inaccurate notion that Africans are dependent on outside help, whereas their approach is one of African self-empowerment. But the involvement of wealthy investors in the development debate has increasingly blurred the lines between private investment and philanthropy.

In May, fashion designer Ozwald Boateng asked African philanthropists to help raise $400m to kickstart $68bn of Africa’s infrastructure development.

Boateng, who created the Made in Africa Foundation based on a mantra of “understanding what Africa can do for itself”, also hopes to create “diaspora bonds” that would allow Africans overseas to invest in road, railway, port and power projects.

“This is unequivocally the new trend in development,” said Jordaan. “We are seeing it every day, everywhere.”

 

Are financial donor contributions to the African Development Bank’s Africa Agriculture Fast Track Fund worth the trouble? – By Chofor Che, 9 September 2013

On Thursday 5 September, the television channel Africa 25 reported that the Government of Denmark has plans to contribute DKK 10 million (approximately US $1.8 million) to the Agriculture Fast Track Fund (AFT) to spur investment in the development of African agriculture infrastructure. This fund is managed by the African Development Bank (ADB). According to a press release by the African Press Organization on behalf of the ADB, this announcement was actually made on Wednesday, August 28, 2013 in Copenhagen by Denmark’s Development Cooperation Minister, Christian Friis Bach, during the visit to the country by the President of the ADB, Donald Kaberuka.

The Danish Government’s support adds to financial contributions from AFT founding donors including USAID, which has committed $15 million, and the Government of Sweden, which has pledged $10 million. The AFT is a US $26.8-million fund created to encourage greater private investment in agriculture infrastructure projects in Sub-Saharan Africa. Despite this intention, the private sector in Africa seems to be very ignorant about this initiative.

The AFT is supposed to furnish grant funding to the private sector for the initial project development costs of a broad range of agriculture infrastructure projects ranging from the entire value chain, more precisely from production to market. The AFT is supposed to intervene in states that are members of the New Alliance for Food Security and Nutrition (the New Alliance), which aims to reinforce the links from farmers to markets to tables. The New Alliance was initiated by the President of the United States of America (USA), Barrack Obama during the G8 summit in 2012 and primarily includes six member states: Côte d’Ivoire, Ethiopia, Burkina Faso, Ghana, Tanzania and Mozambique. The New Alliance has as objective, the matching of market-oriented regulatory reforms in these six countries with $3.7 billion in commitments from the private sector in agriculture.

Just like the other similar programmes such as the Comprehensive Africa Agriculture Development Programme (CAADP) established by African Heads of State as part of the New Partnership Agreement for Africa’s Development (NEPAD) in July 2003, the AFT is a laudable initiative and would be instrumental in the alleviation of poverty in the above mentioned African states. The only concern is that these numerous initiatives have not boosted the agricultural sector on the continent. Some of the previous programmes have either been taken over completely by corrupt state officials and the money embezzled without remorse. Those in the agricultural sector especially poor farmers, who are supposed to benefit from such initiatives, have been left frustrated. Most of these finances end up in foreign bank accounts or are distributed to close family relations of these corrupt government officials.

It is imperative for the ADB and the Danish government to ensure that the AFT initiative does not remain entirely under the control of the central governments of the concerned states. There is need to ensure that the private sector in these states also have a say especially in the financial management of this initiative. It is evident that a lot of foreign assistance has been and shall be pumped into this initiative and if care is not taken, this money will be swindled as usual. If African technocrats are serious about attaining some of the Millennium Development Goals, if not all, by 2015, then it is germane for a change of policy and state practice especially in the management of finances from initiatives like the AFT. Without this change of strategy which is of utmost importance to agricultural development on the continent, the AFT will be another fruitless story for Africa’s development especially in the agricultural sector.

– See more at: http://www.africanliberty.org/content/are-financial-donor-contributions-african-development-bank%E2%80%99s-africa-agriculture-fast-track-f#sthash.jY2L3JhO.dpuf

 

Western worries about money-laundering are threatening an economic lifeline for millions of Africans Jul 20th 2013 | NAIROBI |From the print edition of the Economist

FOR Mohamed Abdulle, sending money to his family in Somalia means a trip to a high street in Stratford, East London, home to a large expatriate community. Once there he hands over cash, a telephone number and a name, usually that of his grandmother who lives in Somalia’s capital, Mogadishu, to an agent. A few minutes later Mr Abdulle, who works as a shop assistant, gets a text message letting him know the cash has arrived on the other side. This fast and reliable system, developed during decades of war in Somalia, is used by hundreds of thousands in the global diaspora, as well as by some UN offices and aid agencies to pay staff.

Perhaps not for much longer. Barclays, a big retail bank, has served notice that it will close the accounts of some 250 money-transfer businesses. The bank said the decision followed a routine legal review. Some money remitters “don’t have the proper checks in place to spot criminal activity,” the bank says, or could “unwittingly” be financing terrorists.

Barclays was among the last British banks willing to deal with agents who cheaply transfer money to poor countries. Many European banks have become nervous about such cash transfers after the American government last year forced HSBC, another big British bank, into a $1.9 billion settlement over allegedly shoddy money-laundering controls.

The impact of Barclays’ decision will be felt across east Africa. Without accounts, the transfer agents cannot operate and their businesses in Somalia’s neighbours, Kenya and Ethiopia, may be hindered, too. The agents, who need a bank account to get a licence, insist they have no problems with law enforcement or regulators. Cash going to extremists in Somalia is sent in sacks by plane, not from a London suburb a few hundred dollars at a time.

The agents are asking what extra measures banks want them to take. Abdirashid Duale, who runs Dahabshiil, the largest Somali money-transfer agency and a customer of Barclays for the past 15 years, says he is willing to comply with any transparency checks the bank requires. He estimates that $500m is sent to Somalia from Britain each year and thinks much of this money will switch to underground agents if legal operators are put out of business.

Dominic Thorncroft, who heads the British money-transfer trade association, says as many as 50 of his 170 members face closure. Under pressure from British MPs, some of whom are elected in constituencies with large migrant populations, the bank has agreed to a 30-day stay which ends in mid-August.

Meanwhile, a group of 100 academics and other notables has written to the British government asking it to avert a humanitarian crisis in the Horn of Africa. An estimated 40% of Somalia’s population depends on money sent from abroad. A recent study showed that three-quarters of recipients need the money to buy essentials, such as food and medicine.

“This will mean children being pulled out of school, people going hungry or not getting medicines they need,” said Laura Hammond, a lecturer at the University of London. The Somali Money Services Association, another British trade body, warned that the consequences of the closure of the accounts would be “worse than the drought” that ravaged Somalia two years ago and killed tens of thousands.

So far attention has focused on Somalia, where years of conflict have destroyed the banks and left no real alternatives to cheap money transfers. But the 250 firms put on notice by Barclays also include some serving Ghana and Nigeria, as well as India and Bangladesh. More sophisticated and expensive competitors such as Western Union may now benefit. A reduction in competition in the African remittance market will drive up prices.

Africans already pay more than any other migrant group to send money home. The cost of remitting to sub-Saharan Africa, typically around 12%, is three percentage points higher than the global average, according to the World Bank. If African rates could be brought in line with those of South Asia, African migrant families would save more than $4 billion a year. Instead rates are likely to rise further.

Some observers are calling for the creation of new institutions that could replace private banks. One suggestion is a “remittance bank” hosted by the UN or a multilateral agency. Another is a code of conduct worked out by remitters, banks and regulators. “This needs to be driven by government,” says Leon Isaacs of the International Association of Money Transfer Networks. “Or the banks won’t get the comfort they want.”

From the print edition: Middle East and Africa

 

World Bank Group : African Migrants Could Save US$4 Billion Annually On Remittance Fees, Finds World Bank 01/28/2013| 09:43am

African migrants pay more to send money home than other migrant groups

WASHINGTON, January 28, 2013 – Bringing remittance prices down to 5 percent from the current 12.4 percent average cost would put US$4 billion more in the pockets of Africa’s migrants and their families who rely on remittances for survival.

Africa’s overseas workers, who sent close to US$60 billion in remittances in 2012, pay more to send money home than any other migrant group. According to the World Bank’s Send Money Africa database, Sub-Saharan Africa is the most expensive region to send money to, with average remittance costs reaching 12.4 percent in 2012. The average cost of sending money to Africa is almost 12 percent- higher than global average of 8.96 percent, and almost double the cost of sending money to South Asia, which has the world’s lowest prices (6.54 percent).

The G8 and the G20 established 5 percent as the target average remittance price to reach by 2014. “High transaction costs are cutting into remittances, which are a lifeline for millions of Africans,” said Gaiv Tata, Director of the World Bank’s Africa Region and Financial Inclusion and Infrastructure Global Practice.”Remittances play a critical role in helping households address immediate needs and also invest in the future, so bringing down remittance prices will have a significant impact on poverty.” Lower cost remittances also advance financial inclusion, since they are often the first financial service used by recipients, who are then more likely to use other financial services including bank accounts.

Remittance prices are even higher between African nations. South Africa, Tanzania, and Ghana are the most expensive sending countries in Africa, with prices averaging 20.7 percent, 19.7 percent, and 19.0 percent respectively, due to several factors including limited competition in the market for cross-border payments.

“Governments should implement policies to open the remittances market up to competition,” said Massimo Cirasino, Manager of the Financial Infrastructure and Remittances Service Line at the World Bank. “Increased competition, as well as better informed consumers, can help bring down remittance prices.”

Send Money Africa also finds that banks, which are the most expensive remittance service providers, are often the only channel available to African migrants. A regulatory environment that encourages competition among remittance service providers can help bring down remittance prices. Migrant workers can also benefit from more transparent information on remittance services.

 

Developing countries to receive over $400 billion in remittances in 2012, says World Bank report, By Panorama, 20 November 2012

Remittance flows to the developing world are expected to exceed earlier estimates and total $406 billion this year, an increase of 6.5 percent over the previous year, according to a new World Bank brief on global migration and remittances.

Remittances to developing countries are projected to grow by 7.9 percent in 2013, 10.1 percent in 2014 and 10.7 percent in 2015 to reach $534 billion in 2015.

Worldwide remittances, including those to high-income countries, are expected to total $534 billion in 2012, and projected to grow to $685 billion in 2015, according to the latest issue of the Bank’s Migration and Development Brief, released today.

However, despite the growth in remittance flows overall to developing countries, the continuing global economic crisis is dampening remittance flows to some regions, with Europe and Central Asia and Sub-Saharan Africa especially affected, while South Asia and the Middle East and North Africa (MENA) are expected to fare much better than previously estimated.

The top recipients of officially recorded remittances for 2012 are India ($70 billion), China ($66 billion), the Philippines and Mexico ($24 billion each), and Nigeria ($21 billion). Other large recipients include Egypt, Pakistan, Bangladesh, Vietnam, and Lebanon.

As a percentage of GDP, the top recipients of remittances, in 2011, were Tajikistan (47 percent), Liberia (31 percent), Kyrgyz Republic (29 percent), Lesotho (27 percent), Moldova (23 percent), Nepal (22 percent), and Samoa (21 percent).

“Although migrant workers are, to a large extent, adversely affected by the slow growth in the global economy, remittance volumes have remained remarkably resilient, providing a vital lifeline to not only poor families but a steady and reliable source of foreign currency in many poor remittances recipient countries,” said Hans Timmer, Director of the Bank’s Development Prospects Group.

Read more at Developing countries to receive over $400 billion in remittances in 2012