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'Secret Deals' Plundering Africa's Booming Nations: Report

Africa Progress Panel urges swift action to curb international tax evasion and corruption

Jacob Chamberlain, staff writer

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Many African nations have been plundered by secretive deals, tax avoidance, and financial transfers with international corporations, leaving little to no benefits for the countries' struggling masses despite recent economic growth, the Africa Progress Panel warned in new report. The report comes ahead of next month's G8 meeting in the UK, slated to tackle issues such as global tax avoidance and transparency.

"Africa loses twice as much money through these loopholes as it gets from donors," Kofi Annan, former Secretary-General of the United Nations and Chair of the Africa Progress Panel, told the BBC, adding that such practices equate to directly taking food out of the hands of the poor.

The Africa Progress Report, released annually by a panel of figures—including Graca Machel, the wife of South African ex-President Nelson Mandela—this year urges Western nations to rein in their corporations' shady practices that have run amok in Africa for years and for African governments to create systems of financial transparency.

Annan stated:

Tax avoidance and evasion are global issues that affect us all. The impact for G8 governments is a loss of revenue. But in Africa, it has direct impact on the lives of mothers and children. Throughout the world, millions of citizens now need their leaders to step up to the mark and lead.

"We are not getting the revenues we deserve often because of either corrupt practices, transfer pricing, tax evasion and all sorts of activities that deprive us of our due," Annan told the BBC's Newsday program.

"Transparency is a powerful tool," he said, adding that the report urges African leaders to put "accountability center stage".

Some African nations have seen a recent boom in economic growth, due largely in part to mineral and energy extraction, Annan argues in a recent op-ed in the New York Times. However, as Annan and the panel's report remind us, this growth has only benefited the nations' elite and, to a greater extent, international corporations. All the while income gaps have grown ever wider.

Instead, Annan writes, "There is an unprecedented opportunity to convert the region’s vast resource wealth into investments that could lift millions out of poverty, create jobs, and bring hope to future generations."

The Guardian reports:

The panel was concerned by the lack of transparency in African state companies, particularly in Angola and Equatorial Guinea, which have experienced high rates of growth but where poverty remains rampant. In Angola's case, oil revenues have generated $3bn-6bn a year in government revenues, yet the country's under-five mortality rate is the eighth highest in the world – 161 per 1,000 live births.

The Guardian continues:

As an example of Africa losing out, the report cites five mining deals between 2010 and 2012 that cost the Democratic Republic of the Congo more than $1.3bn (almost £1bn) in revenues through the undervaluation of assets and sale to foreign investors.

Under the deals, DRC sold copper and cobalt assets to offshore companies linked to an offshore-registered holding company called Fleurette. Glencore and the Eurasian Natural Resources Corporation – both listed on the London Stock Exchange – subsequently bought assets acquired by the offshore concession holders.

According to the report, assets valued at $1.63bn were sold to offshore companies for $275m. The offshore companies reaped high profits from the sale of concession rights – the average rate of return across the five deals was 512%, rising to 980% in one.

The sum represents twice the annual health and education budgets of a country with one of the worst child mortality rates and 7 million children out of school, said the report.


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