Every year, tax avoidance costs the continent of Africa lost revenues of $63bn a year. This is more than Africa receives in overseas development aid – and enough to deliver the UN Millennium Goals of universal primary education, universal healthcare, and upgrade Africa’s entire road network. Instead, banks are helping to spirit this money into offshore tax havens. Barclays Bank is the largest retail bank in Africa, and today ActionAid is launching a campaign to tell Barclays to clean up its act on tax havens.
Why is Africa so Poor?
Africa suffers extreme poverty, and by some measures things are getting worse. Between 1990 and 2011, the number of new born babies dying rose from 1 million to 1.1million a year, and the number of hungry people rose from 175 million to 239 million.
Much of this poverty and destitution is as a result of the myth of development. Western creditor nations (mostly ex-colonial) extended credit to African nations in the name of ‘development’, after the Second World War. In reality, it was merely to keep a surplus of petro-dollars making more money from the interest on loan payments, than in savings accounts during a time of high inflations (which would wipe the value). Later, when the interest rates became unpayable – the creditor nations offered ‘bridging loans’ often to despots, with extraordinary interest rates and conditions attached. These loans were called ‘Structural Adjustment Programmes’ and administered through the IMF. This became know as the Debt Trap – and once you understand the Debt Trap, you immediately see the concept of ‘development’ as a myth. The West is not helping to develop Africa, Africa is helping to develop the West.
This comment from Martin Griffiths in International Relations: The Key Concepts summarises the issue perfectly:
“Between 1982 and 1990 $927bn was advanced to debtor states, but $1,345bn were remitted in debt service alone. The debtor states began the 1990’s 60% more in debt than they were in 1982. Sub-Saharan Africa’s debt more than doubled in this period. When the issue of debt forgiveness is raised, Western banks have argued that it would create what economists call ‘moral hazard’ – failing to honour debts would simply encourage poor states to keep borrowing in the expectation that they would never have to repay their debts. On the other hand, some commentators argue that moral hazard should cut both ways. Over borrowing is over lending, and creditors should pay their fair share of the costs of mistakes made in the 70’s.
By 1997 Third World Debt totalled over $2.2trn. The same year $250bn was repaid in interest and loan principal. The debt trap represents a continuing humanitarian disaster for some 700 million of the world poorest people. During the last decade, the world’s most heavily indebted continent, Africa, has experienced falling life expectancies, falling incomes, falling investment levels and rising infant and maternal mortality rates” (Griffiths, 2008)
Things have only gotten worse since. For all ‘developing’ countries, total external debt owed in 2011 was $4.9 trillion and over the course of that one year they paid $620 billion servicing these debts. In the same year, the total foreign aid supplied to the ‘developing world’ through the Development Assistance Committee of the OECD was just $133.5 billion. This means that in 2011 alone, for every £1 the creditor nations gave the ‘developing world’ in foreign aid, the debtor nations that make up the so called ‘developing world gave almost £5 back in debt repayments. The whole premise of International Development is called into question when the nations involved are giving with one hand while taking five times as much with the other.
Barclays in Africa
Not only are our corporations and governments asset stripping Africa through Structural Adjustment Programmes, but our Banks are assisting those corporations in avoiding tax obligations on this activity.
Barclays has 147 subsidiaries in Africa (4 times as many as the next largest UK operator in the region) and operates in 17 African countries. Its Africa Strategy declares the ambition to make “more of Africa’s people, our customers and clients” while being a “force for good in the communities we serve and the lives we touch”.
While providing lip service to such noble aspirations, Barclays markets itself in a quite different way to African and International businesses. The Offshore Corporation Division of Barclays’ International Wealth and Investment is promoting a ‘proposition’ to link companies and investors in Africa with Barclays’ operations in tax havens.
Barclays’ Mauritius operation goes even further, explicitly marketing itself as the ‘pioneer of offshore’ – and advising clients to channel any investment into Africa via tax friendly Mauritius.
Barclays is the biggest player in the $63bn a year tax avoidance game in Africa. Money that could and should be directed towards public spending on transport networks, education, healthcare, housing, utilities networks and all the things which would let Africa raise the quality of life of its citizens – is instead being siphoned out to fund excess profits for individuals and corporations, mostly outside of Africa.
Enough is Enough
The UK government celebrated its generosity at spending 0.7% of GDP on International Development each year.
UK Banks such as Barclays describe themselves as a ‘force for good’ in the region.
The UK public is led to believe that Africa has somehow naturally lagged behind the West in development, and that through our government, corporations and annual outburst of Comic Relief, we are helping develop the African continent. The opposite is true. Africa has been eviscerated – first by colonialism, then by the Debt Trap, and now by tax evasion. Africa pays for the West, not the other way round. It’s time to stop pretending. We need to back initiatives such as the Jubilee Debt Campaign, and ActionAid, who are taking aim at the true causes of poverty and underdevelopment in Africa.
Don’t Get Angry, Get Involved!
You can lend your support to the ActionAid campaign here – so do it!
Campaign to end the Debt Trap, with the Jubilee Debt Campaign
Scriptonite Daily is a citizen funded news site. If we want to make an alternative media, then we need to build it. Your donations make the difference.
Become a regular subscriber here