Kofi Annan, the former UN secretary-general, is urging David Cameron to use Britain’s chairmanship of the G8 to end some of the “unconscionable” practices of companies exploiting Africa’s vast reserves of natural resources.
The prime minister has promised to put trade, transparency and tax at the top of the G8’s agenda when he hosts the leaders of the world’s major nations in Belfast next month.
Annan said he would be sending him a copy of the annual Africa Progress Report, which shows how the economic benefits of extracting natural resources such as oil and iron ore often fail to flow through to the local population.
“Africa loses twice as much in illicit financial outflows as it receives in international aid,” said Annan, in his foreword to the 120-page report. “It is unconscionable that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximize their profits, while millions of Africans go without adequate nutrition, health and education.”
While a number of resource-rich African states such as Equatorial Guinea and Angola have achieved impressive economic growth rates in recent years, widening inequality has often meant that development indicators, such as infant mortality, have failed to keep pace. Average GDP per head in Equatorial Guinea, at $21,715 (£14,015), now exceeds the $17,776 of Poland, for example; but life expectancy is just 51, against 76 in Poland.
The Africa Progress Panel, which is chaired by Annan, and includes Sir Bob Geldof and the chief executive of the Prudential, Tidjane Thiam, is calling on G8 countries – and their fellow G20 members, including China and Brazil – to enforce corporate transparency so that citizens in developing countries can see exactly who owns the companies involved in mining deals. They would also like to see a crackdown on the international tax rules that allow multinationals to shift profits from one country to another with impunity.
Rosie Sharpe, of campaign group Global Witness, said: “It is hugely significant that such a prominent and respected figure as Kofi Annan has come out publicly to criticise the lack of transparency in natural resource deals and highlight the importance of increased financial transparency and better governance for African development. What’s needed is for the names of the real, ‘beneficial’ owners of companies and trusts to be put in the public domain.”
As an example of the way in which the full benefits of exploiting natural resources can disappear offshore, the report analyses five mining deals in the Democratic Republic of Congo signed by the state-owned company Gécamines between 2010 and 2012. Mineral rights were initially sold to a series of offshore companies – whose end-ownership is unclear – in the British Virgin Islands, and then rapidly sold on at hugely inflated prices, in some cases generating a profit of more than 400%.
The loss on these five deals alone was $1.36bn, the Panel estimates – dwarfing the $698m spent each year on health and education in the DRC, a country where 17 children in every 100 do not reach their fifth birthday.
“I think it’s very important for the G8 to accept that transparency and accountability is extremely important, not just for them in terms of tax, but for Africa it has an impact on the lives of women and children,” Annan said.
Credit: Guardian UK