Does $40 billion leave Africa each year? It’s complicated

A new headline-grabbing report shows that despite all of the aid money, remittances sent home from expats and loans sent to Africa, $40 billion more is actually leaving the continent in the form of debt payments, tax avoidance and resource extraction. But some question the figures, and argue that the report doesn’t tell the whole story.

“There’s such a powerful narrative in Western societies that Africa is poor and that it needs our help,” Aisha Dodwell, a campaigner with Global Justice Now, said in a statement. “This 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.”

Global Justice Now’s Nick Dearden makes a passionate argument in an OpEd for Al Jazeera, arguing that wealthy nations are robbing African countries of their wealth and covering it up with foreign aid. The report tries to put pressure on policymakers who support foreign aid while overlooking activities that cause harm.

But some are not buying the argument. The numbers used to arrive at the $40 billion figure do not add up, they say. Many of the amounts that make up the “outflows” column are based on estimates because tracking illicit financial outflows, for example, is difficult. As a result, the $202.9 billion that leaves Africa according to the report is likely incorrect.

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“Illicit financial flows is a major issue, but the numbers are not reliable and they lead us to look at the wrong areas,” Maya Forstater, a visiting fellow at the think tank the Center for Global Development, told Humanosphere.

She agrees with some of the overarching points the report tries to make. Foreign aid is not the answer to the problems facing the continent. However, she worries that the framing of the report tries to flip the notion from countries providing foreign aid are good to the same countries are bad for exploiting the continent. Using headline-grabbing numbers to make an advocacy point helps start a conversation, but should not drive policy.

“This approach of aggregating more and more is going against the flow of more serious advocacy organization show recognize that illicit financial flows are on the agenda and now it needs to be more about the country-level impacts,” Forstater said.

There are also mixed messages that come from the report. It counts foreign direct investment as an inflow, but multinational company profits as an outflow. That sends the wrong message, Forstater said. If countries want to encourage companies to invest in African countries, it has to expect that the same companies will take home a profit. The use of tax havens to legally move profits is an issue that needs to be fixed, but that money should not be treated the same way as taxed profits.

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An estimated $68 billion is lost in tax dodging – more than three times the amount sent in foreign aid each year. Dealing with that problem, illegal logging, illegal fishing, climate change mitigation costs and other issues raised in the report is a crucial part of enabling development. Forstater advocated for addressing the problems at the local and national levels. Policy changes have to recognize that there are not uniform challenges across the continent.

Some of the groups supporting the report make a similar argument.

“’Development’ is a lost cause in Africa while we are hemorrhaging billions every year to extractive industries, western tax havens and illegal logging and fishing,” said Bernard Adaba, policy analyst with ISODEC in Ghana in a statement. “Some serious structural changes need to be made to promote economic policies that enable African countries to best serve the needs of their people rather than simply being cash cows for Western corporations and governments. The bleeding of Africa must stop!”

By reducing the issue to numbers adding up how much goes in and out, the report misses the proverbial forest for the trees, Forstater said.

“Fundamentally trying to look at an economy as a bucket and measuring what goes into the top and slow down what leaks out of the bucket misses the point that development is what happens inside the bucket,” she said.

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Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]humanosphere.org.