Annan: Stop looting of Africa's resources- UPDATED

Tax avoidance, secret mining deals and financial transfers are depriving Africa of the benefits of its resources boom, ex-UN chief Kofi Annan says

Annan: Stop looting of Africa's resources- UPDATED

World Bulletin/News Desk

The Democratic Republic of Congo lost at least $1.36 billion in potential revenues between 2010 and 2012 due to cut-price sales of mining assets to offshore companies, according to a panel led by former U.N. secretary general Kofi Annan.

Firms that shift profits to lower tax jurisdictions cost Africa $38bn (£25bn) a year, says a report produced by a panel he heads.

"Africa loses twice as much money through these loopholes as it gets from donors," Mr Annan told the BBC.

It was like taking food off the tables of the poor, he said.

Congo, among the most mineral-rich countries in Africa, has long been under fire for opaque resource deals, many involving offshore shell companies, and last year the International Monetary Fund halted planned loans.

"No country better illustrates the high costs associated with opaque concession trading than the Democratic Republic of the Congo," the Africa Progress Panel said in a report released on Friday at the World Economic Forum Africa.

"Total losses from the five deals reviewed were equivalent to more than double the combined annual budget for health and education in 2012."

The annual report, on challenges associated with natural resources in Africa, said there was no inference of illegality on the part of political leaders or the companies involved.

"However, the potential scale of the overall losses merits further investigation in order to clarify the circumstances surrounding the transactions, and to determine whether or not the assets in question were knowingly undervalued," it said.

The panel's investigators said copper and cobalt assets were sold by state miner Gecamines in complex deals involving offshore companies and miners including Glencore, now Glencore Xstrata, and ENRC.

Both ENRC and Glencore have denied any wrongdoing.

"We estimate the losses from the five deals at $1.36 billion. Assets were sold on average at one-sixth of their commercial value," the report said.

It did not say how the commercial value was estimated.

The role of shell companies and non-mining investors acting as intermediaries in Congo's mining sector has long contributed to accusations of corruption and a reputation for poor transparency.

Congo's mining minister disputed the report's findings.

"How many times have we spoken about these assets, of ENRC, of Glencore, of the Virgin Islands? I've answered these questions many times," Martin Kabwelulu said.

"In any case, I know that the Congo has lost nothing, these assets were ceded in total transparency."

"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," Mr Annan told the BBC's Newsday programme.

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

Mr Annan said African governments needed to insist that local companies became involved in mining deals and manage them in "such a way that it also creates employment".

Africa's "lift-off" held back by illicit finance drain

Meanwhile, Africa's economic development is being held back by a "hemorrhage" of illicit financial flows, which may be getting worse, the African Development Bank said on Friday, calling for reforms to stem the losses.

A draft report to be presented at the AfDB's annual meeting in Morocco later this month shows net resource outflows from Africa totalling up to $1.4 trillion over the 30-year period to 2009, far exceeding inflows to the continent.

Illicit financial flows were "the main driving force" behind $1.2-1.3 trillion of the three-decade net drain, it said.

This is about four times Africa's current external debt and almost equivalent to its current GDP.

"The trend is continuing, it could even be increasing," AfDB Chief Economist Mthuli Ncube said in a phone interview. Figures for the period since 2009 were not yet fully available.

"We need to block the leakage ... It is holding back Africa's lift-off," he added.

The report, by the AfDB and the Washington-based advocacy group Global Financial Integrity and made available to Reuters, called for anti-corruption agencies and laws, and mechanisms to combat money-laundering, to be reinforced and for government budget processes to be made more transparent.

The illicit outflows between 1980 and 2009 were often linked to the extraction of oil and minerals and covered criminal activities like money-laundering, tax evasion and transfers from corruption, kickbacks and contraband, the report said.

But they also included what the report called "mispricing of trade" - for example, opaque business deals negotiated with local authorities which flout or ignore existing legislation.

The study on illicit transfers comes as the world's least developed continent experiences an economic growth surge, outpacing global averages. The World Bank and IMF see Sub-Saharan Africa's GDP accelerating to over 5 percent in coming years, driven by investment and high commodity prices.

"This is the poorest region in the world and that is why we are shining a torch on this ... Africa needs these resources more than any other region," Ncube said, adding, "There is a lot to lose if nothing is done."

 

Last Mod: 10 Mayıs 2013, 17:46
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