Africa is to blame for losing $60 billion to donors

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  • 5 years ago
  • Posted: July 17, 2014 at 1:42 pm

Two days ago, Judith Cavanagh wrote a blog post in Think Africa Press titled, Who Aids Whom? Exposing the True Story of Africa’s $192 Billion LossesA day later the Guardian carried the same story under the title Aid to Africa: donations from west mask ‘$60bn looting’ of continentwhereas Trust.org entitled the same story as The lies you have been told about Africa.

In a broader sense, the story highlights how Africa loses close to $60 billion to countries that directly fund the continent’s development projects in loans and grants. Judith, being Head of Policy and Campaigns at Health Poverty Action that also took part in the research has this to say, “research…reveals that whilst the continent receives $30 billion in aid a year, this figure pales in comparison to the $192 billion leaving the continent via illicit financial flows, the repatriation of multinational company profits, debt repayments, loss of skilled workers, illegal logging and fishing, and the costs imposed as a result of climate change.”

She goes further to say, “when these losses are compared to overall financial inflows – including not just aid but foreign investment and remittances ? Africa is left with a $58 billion a year net loss. ”

To put those figures in perspective, The Guardian has published, in its article linked to above, two comparative graphs showing total cash outflows from the continent vs total cash inflows to the continent as follows:

cash outlfows

Courtesy of The Guardian

When added together, the figures in the image above totals to $192.3 billion. This is in sharp contrast to the $133.7 billion Africa receives as loans, investments, and grants as shown in the figure below.

inflows

Courtesy of The Guardian

 

On the surface value, it seems clear that Africa suffers a loss of $58.6 billion in net loss to the donor countries.

It is not the first time that such data has been revealed. In December 2012, Dev Kar and Sarah Freitas provided insight on Illicit Financial Flows from Developing Countries: 2001-2010noting that “The developing world lost US$859 billion in illicit outflows in 2010, an increase of 11% over 2009. The capital outflows stem from crime, corruption, tax evasion, and other illicit activity. The report finds that illicit financial flows. From 2001 to 2010, developing countries lost US$5.86 trillion to illicit outflows.” The figures provided by Global Integrity are 14 times more than those being mentioned by Judith and co in the recent concluded research.

Also read: The wage bill is only 0.5% of the problem

The recent research that was conducted by Health Poverty Action, Jubilee Debt Campaign, and World Development Movement, among others has elicited mixed reaction from commenters, most of whom are condemning the rich developed countries for fleecing the poor Africans. One such commenter wrote:

This is not news to many Africans. Africans harbor no illusion that it is Africa that is hoodwinked to donate massive aid to the so-called Western democracies than the other way. If the West cannot plunder by stealth in daylight, it deploys economic hit men, overthrows governments, incubates strife, and adopts any number of means to perpetuate the robbery. (Read “Confessions of an Economic Hitman” for a good picture). The Western democracies are all in it because they know what is happening, but each western country patiently bids its time to share in the loot when its turn comes up. (America spying on the Germans is a no news to many. Germans are dismayed only because it happened to them. They can hardly be repulsed at the unsavory practice of spying itself, the brunt of which practice ensures the depredation of continents such as Africa.)

 

The Congo has forever been plagued by strike precisely because it encompasses the richest square miles of earth anywhere. God forbid the Congo overcomes its strife and builds a stable effective government.

 

NGO’s themselves are the smokescreen, the Trojan Horses. Well meaning, bright eyed, do-gooder young college graduates commit themselves every year to “help” Africa, wholly oblivious to the fact that they are a part of the smokescreen. Alas, how does the French economy survive without West Africa?

Are we right to blame the smart donors for fleecing dumb African? I do not think so – Africa is to blame for any losses she suffers at the hands of the donors.

 

Well yes, in a number of countries especially in North, West and Central Africa the donor countries could be said to be using force to loot the resources in those countries. The commenter I have quoted above as mentioned DRC but again, the method of force used by these donor countries still is in taking advantage of African stupidity (gullibility?). But to a large extent, the fleecing of African resources is by taking advantage of the African Systems that don’t work.

African Stupidity

Foremost, Africans should be aware, if not already aware, that no one gives you money for free. Donors such as World Bank and IMF actually come knocking at African doors begging to give loans – and grants. I wonder whether those who accept the loans and grants ever ask themselves, “what is in for IMF and World Bank?”

An article written against IMF gave 10 reasons to oppose the institution as:

  1. The IMF has created an immoral system of modern day colonialism that SAPs the poor
  2. The IMF serves wealthy countries and Wall Street
  3. The IMF is imposing a fundamentally flawed development model
  4. The IMF is a secretive institution with no accountability
  5. IMF policies promote corporate welfare
  6. The IMF hurts workers
  7. The IMF’s policies hurt women the most
  8. IMF Policies hurt the environment
  9. The IMF bails out rich bankers, creating a moral hazard and greater instability in the global economy
  10. IMF bailouts deepen, rather then solve, economic crisis

Simply put, the IMF exists to solve economic crisis and for it to remain relevant, there must be economic crisis to solve! When as Africans we agree to listen to IMF and World Bank and agree to do business with them under their own terms and conditions, then we agree to be fried dry.

We are not just talking about countries and institutions willing to “donate” funds to us that impose terms and conditions on us. Even the multinationals who knock at our doors to invest in sustainable projects are never required to disclose their finances and other businesses records. The nature and extent of work these multinationals intend to do on our soils are never scrutinized. The same companies, just as IMF, do not disclose the profits made in an open and transparent manner.

Don’t call me names for calling Africans stupid. When you and I can be divided, very easily, along ethnic lines by the West, then we kill each other using weapons supplied by the West (creating a viable weaponry industry for the West), so that the West can exploit our resources for the production of, among other things, the weapons they sell to us to kill each other with, aren’t we stupid?

Aren’t we stupid when we can’t add value to our resources? We have the Agricultural and mineral resources that we sell, not as finished products, but as raw materials to the West who add value and sell back to us the finished products. By selling to us the finished product e.g. as a car or a smartphone, the West both recoup the investment in the raw materials that we sold to them, and make at least a 30% net profit margin if it’s Samsung or 65% profit margin if it’s Apple selling to us the finished product. That means we end up paying for both the raw material and the value add service the West did on our raw materials.

Stupid corruption

Corruption is every where, but the corruption by the West is a bit intelligent. Their corruption is intelligent in the sense that their overall economies do not suffer from the under table deals made. Well, sometimes they do suffer e.g. the recent economic recession that the world is recovering from thanks to the under the table deals at Wall Street, US.

But Africa’s corruption is very stupid. You must have had of the old joke, “A roads minister from Nigeria visited his counterpart in Germany. The German minister took him to his balcony and pointed at a road and told the Nigerian minister, ‘you see that road, I pocketed 10%’. Two years later, the German visited his friend in Nigeria and the Nigerian returned the favor. ‘You see that road?’ The German strained his yes but could not see anything. ‘Which road?’ he asked. ‘I am brighter than you brother, I pocketed 100%’, the Nigerian answered’.”

A multinational will want to invest or carry out a project in Africa, but since a sitting President and his cabinet have been given a few million shillings or a brand new Range, the multinational will be allowed to do business without supervision. What the multinational will do is to ensure that they recoup back the amounts paid as bribes by over pricing their products and services.

Having worked with one such multinational, I know how the story goes. The company I worked for deals with process aids for the sugar industry and they sell them for as less as $1.8 per Kg. But the same products are being sold at $6 per Kg to the Africans. When I asked my the then boss why he set up the products’ unit price by more than 300% for the Africans, he said that he has to recoup back the numerous commissions he has to pay top management in order to get business in Africa. Did you know that to produce one tonne of sugar in Kenya costs a sugar mill $900 yet the world average is $400 per tonne? If you knew, now you know why! Reason is simple; most of the utility equipment and chemicals used to produce the sugar come from the West – from companies similar to the one I used to work for – companies that must put a markup for the bribes they have to pay top industry managers.

In other words, Kenya pays a good amount to the West to compensate for the commission the sugar industry managers take in as bribes. Assuming that the extra $500 dollars spent to produce a tonne of sugar goes to settle these commissions, then given that we produce 600,000 tonnes of sugar annually, then the illicit outflow from the Kenya’s sugar industry alone to the West comes to about $300 million dollars, or Kshs 25.5 billion per year.

The post is  already too long but I’m not through – be on the lookout for part 2.

What is your opinion on the topic?
Odipo Riaga
Managing Editor at KachTech Analytics Ltd
Film Director, Tech and Business Blogger, Chess Player, and Photographer. God is Science.
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