Africa sees $58 billion leave the continent each year

The amount of money calculated to go into sub-Saharan Africa each year is less than the money that is sent outward. A new report published by Health Poverty Action and a dozen other partners, shows that $192 billion in total is lost due to tax havens, multinational profits and illegal logging. Which much of the conversation about the region focuses on the aid money sent in, the report seeks to re-frame what is discussed to include all of the money that goes not only in, but out of Africa.

“We are not trying to suggest that all of the inflows are good and that the outflows are bad,” said Natalie Sharples, Senior Policy Advisor for Health Poverty Action, to Humanosphere. ” The purpose of this is mostly to highlight the discrepancy between the figures.”

One of the most significant contributors are illicit financial flows. That is mostly money that is not taxed because it is held in off-shore accounts in friendly countries. These tax havens deprive an estimated $35.3 billion in money from remaining in the region. That is more than the $29.4 billion in aid given each year.  Ending tax avoidance would essentially double the amount of aid money in Africa by simply preventing it from leaving in the first place.

Sharples hopes that this report can inform both policy makers and the general public. The key takeaway is that aid is only a small piece of the larger development puzzle. Accounting for all of the money that goes in and out of Africa is crucial to understanding what steps should be taken to support the continent’s growth. It also shatters some of the common perceptions about aid and Africa.

“One of the main problems is the way that aid is presented,” said Sharples

“It gives this often misleading perception that Africa is this problem we have to solve. Often it is us that are causing the problems in Africa.”

The report in a way counters the years long push for specific aid spending targets in European countries. The NGOs participating in the report are UK-based, which puts a more specific focus on the country especially in light of its upcoming elections. Since the global financial crisis 6 years ago, foreign aid budgets have come under threat. Global aid spending was up last year only because of increases by the UK and the emergence of new donors in response to the crisis in and around Syria. Worrying about aid spending may neglect the ways that countries are having a negative impact on Africa.

Capture

“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. As the general election approaches all party leaders must step up, and outline how they intend to take real responsibility and stop this plundering of Africa,” said Martin Drewry, Director of Health Poverty Action.

A campaign led by Oxfam GB used the UK’s hosting of the G8 summit as an opportunity to push on the problem of tax havens. The group said that a total of $150 billion is lost in revenue each year due to tax havens. That money alone is enough to “end extreme poverty twice over,” according to the campaign. The pressure caused noise, but the overall practice of wealthy people using tax havens continues.

“The UK and Europe cannot stand by and watch more people fall victim to the bite of austerity whilst billions is lost from the public purse on their watch. Unless the EU agrees a tax havens black list and clear sanctions, we’ll get little more than hot air from leaders,” said Emma Seery, Oxfam’s Head of Development Finance and Public Services, in May 2013.

In addition to tax havens, the new report singles out debt, multinational profits, international reserves, illegal fishing and logging, brain drain and climate change as other significant financial outflows.  All is not necessarily bad. The brain drain figure, which is only able to account for health workers, totals $6 billion. Meanwhile, the money received through remittances (aka money sent home by the people who left) totals $18.9 billion, more than triple what is sent out. This is in line with research that shows remittances easily offset money lost through worker migration.

“These figures expose the gross misconceptions about aid and ‘charity.’  Common understanding is the UK ‘helps’ Africa through aid, but in reality this serves as a smokescreen for the billions taken out.  Let’s use more accurate language.  It’s sustained looting,” said Drewry.

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About Author

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.