Shadow system erodes Africa’s growth

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South Africa is one of five African countries where economic growth is eroded by huge illicit financial outflows, according to the Africa Progress Report released in Johannesburg stated.

The data from Global Financial Integrity, a non-profit research and advocacy organisation, estimated that illicit outflows from the continent over the past 39 years could be as high as $1.8 trillion (R14 trillion) – almost double the total amount of aid and assistance provided in the period. The estimate for 2008 alone is $37 billion to $53bn.

South Africa, with illicit outflows of $24.9bn, was among the five countries most affected, the report said. Nigeria had the highest outflows, $89.5bn; followed by Egypt, $70.5bn; Algeria, $25.7bn; and Morocco $25bn.
“This massive flow of illicit money is facilitated by a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing and money-laundering techniques.”

The report said the outflow drained hard currency reserves, boosted inflation, reduced tax collection, cancelled investment and undermined free trade.

The 2010 report was launched by Africa Progress Panel chair Kofi Annan, the former UN secretary-general. The launch on Africa Day came five years after the panel was set up and 10 years after world leaders signed up to the millennium development goals (MDGs). The report took stock of progress since 2005 and pointed out that “Africans beyond elite circles are not benefiting sufficiently from development”.

Annan said Africa had become a “new economic frontier” and he highlighted the opportunities in partnerships with the global south.

The report said: “On current trajectories, many African countries will not meet their MDGs.” A move to improve the management of relationships and assets was among the measures prescribed to achieve better results.

The report also called for “mutually beneficial partnerships” and said engagement with China, the Far and Middle East, south Asia and Latin America “is already having a substantial development impact on Africa”. But it stressed: “African leaders need to realise that the benefits of increasing economic ties are not automatic but only accrue to those that take adequate and proactive steps to exploit them through targeted policies.”

And it spoke of “legitimate concerns” about the role of “southern actors like China”. It said trade and investment in Africa was not necessarily converted into growth and poverty reduction and it warned of the danger that finance provided to African countries could create unsustainable levels of debt – in other words, countries would not be able to afford the interest.

Annan said: “There is no lack of resources, no deficiency of knowledge and no shortage of plans.” He called on leaders both in Africa and internationally to exercise political will to achieve greater gains and stressed the need for Africa’s partners to “realise the financing ambitions outlined in the Copenhagen Accord”.

The accord, agreed last year, was intended to help the continent achieve the MDGs “in the presence of anticipated climate change”.

Further more…

African leaders urged to spread the wealth

Africa’s growing wealth needs to be spread beyond the confines of powerful elites and goverments must come clean about opaque mining and oil deals, a leading think-tank says.

In its annual report, the Africa Progress Panel, chaired by former United Nations Secretary-General Kofi Annan, identified poor governance and creaking transport and power infrastructure as the main impediments to the continent of a billion people.
“Only leadership and governance can close the gap between a rich continent and a poor people,” Annan told a news conference in South Africa’s commercial capital.

The report highlighted Africa’s increasing ties with emerging giants such as China, which has overtaken the United States as the region’s top trading partner, saying they were having a “significant impact” on the continent.

However, it criticised governments and external investors for striking deals, especially in the minerals sector, that too seldom benefited the people from under whose feet the precious metals and ores are being dug.
“Africa is rich and its stock is rising. The value of its land and stocks of minerals is going up,” Annan said.
“There is no lack of resources, no deficiency of knowledge and no shortage of plans. Africa’s progress rests above all else on the mobilisation of political will, both on the continent and internationally,” he said.

Before the economic slump of 2009, sub-Saharan economies enjoyed pacy growth of 5 % a year — comfortably above population expansion rates — and most have managed to bounce back well with this year’s recovery in world commodity prices.

In April, the International Monetary Fund projected regional expansion of an average 4.7% for 2010.

But in many countries the gap between rich and poor was getting bigger, the report said.
“This is both unjust and potentially dangerous,” it said.

In South Africa, the continent’s biggest economy, income inequality has got worse since the end of apartheid in 1994, and there are protests by blacks living in squalid townships around major cities almost daily.

Pic: Former UN secretary- general- Kofi Anan

Source: www.af.reuters.com