By: Momodou L Jaiteh, Founder of KABA Communications.
Here comes the maiden edition of our new column “Bizness For All”. Henceforth, this page will provide information prevailing in the world of finance and business.
We will also try to provide accurate and up-to-date information prevailing in various markets of all sorts within the Gambia and beyond.
It is often arguably stated that the two most important revolutions of our modern times are found in the twin fields of business and Information, Communications Technology (ICT).
So, if you want to be in the know, get hooked now and we will get you experts to explain in simple and plain language what men and women in fine suits or neatly dressed folks always mean when they get busy at work or get together in their clubs or private corners.
It is funny thing money, as we all well know. There must be a thousand sayings on the subject – from the ever-so-simple: ‘Money can’t buy you love,’ to the cynical, ‘whoever said money can’t buy happiness doesn’t know where to shop.’ So let’s follow the money and maybe I should add, follow clean money.
Someone once remarked: “It is in fact easier to make moral statements about money than it is to make statements about what it is and how it works.” Money is said to be around for about thousands of years.
The column kicks off with the following press release from Trust Africa, a pan African body based in Dakar, Senegal:
“The Africa We Want Post COVID-19: Optimizing Domestic Resource Mobilization from the Extractive Sector for Africa’s Transformation”
The 2020 edition of the 8th Pan African Conference on Illicit Financial Flows (IFFs) and Taxation (PAC 2020), will be hosted by Trust Africa and organized in collaboration with 16 co-conveners namely Tax Justice Network Africa (TJNA), African Union (AU), United Nations Economic Commission on Africa (UNECA), Global Alliance for Tax Justice (GATJ), African Tax Administration Forum (ATAF), OXFAM, Action Aid, Integrated Social Development Centre (ISODEC), Ghana Integrity Initiative (GII), African Minerals Development Center (AMDC), Publish What You Pay (PWYP), StopTheBleeding (STB) Consortium, Pan African Lawyers’ Union (PALU), Zimbabwe Coalition on Debt and Development (ZIMCODD), Youth for Tax Justice Network (YTJN) and African Forum and Network on Debt and Development (AFRODAD).
Due to the Covid-19 global health pandemic, this year’s edition of PAC will be a combination of in-country physical events (where possible) as well as virtual breakaway and plenary sessions held under the theme: “The Africa We Want Post COVID-19: Optimizing Domestic Resource Mobilization from the Extractive Sector for Africa’s Transformation.”
The Covid-19 pandemic has spotlighted the critical need for African countries to maximize domestic resource mobilization as a source of development finance. Most African countries have been exposed as awfully falling short on investment in public health, sanitary infrastructure as well as disaster management and social support systems. The global nature of the pandemic means that overseas development assistance has dwindled as traditional donors are reprioritizing resources to meet their own pressing domestic needs.
Covid-19 has had a devastating impact on African economies with estimates from United Nations Economic Commission for Africa (UNECA) indicating thata one-month full lockdown across Africa would cost the continent around $65,7 billion per month, equivalent to 2,5 per cent of its annual GDP.1 Further, the International Monetary Fund (IMF), in its June 2020 update, projected a contraction of the world’s economy by 4,9 per cent, and of 3,2 per cent for Sub-Saharan Africa in 2020. In the mining sector, the impact has been varied across the continent. For instance, in South Africa and Zimbabwe, platinum miners recorded bumper revenues against the backdrop favorable market prices for palladium, rhodium, nickel and gold2. However, in the same vein, some resource dependent countries have seen a massive drop in revenues due to reduced demand and falling prices of commodities on the global market. For instance, in the Democratic Republic of Congo (DRC), some processing houses in mining sites reported production losses of 75%.3
The sudden downturn in commodity prices experienced by several African countries under Covid-19 is yet another reminder and call to action for African countries to attend to governance deficiencies and plug leakages in the natural resources sector. This has always been necessary to ensure optimum capture of resource rents during boom times and the productive investment of these resources so as to build more resilient economies capable of enduring shocks as occasioned by the Covid-19 crisis.
The fiscal squeeze from the falling commodity prices has already put pressure on African governments to once again borrow from the World Bank, IMF and private creditors risking a new wave of unsustainable indebtedness. Thus, efforts to plug revenue leakages are critical to preventing a new debt crisis on the continent and can minimize the adverse economic impact of Covid-19 to African economies.
Even, the special case of rallying gold prices brings to the fore the need for mining legislation and policies in African countries to ensure that they benefit from windfall prices and that benefits are inclusive and extend to artisan and small miners as well.4
The Covid-19 pandemic has exposed the urgency for African countries to optimize public revenues from its well-endowed natural resources sector and to reimagine public policy and deploy resource rents in a manner that addresses vulnerabilities so harshly made visible by Covid-19. In this regard, the Africa Mining Vision (AMV) and the report of the High-Level Panel (HLP) on Illicit Financial Flows are more relevant than ever. How can the continent leverage on these crucial frameworks to optimize domestic resource mobilization and leverage on the extractive sector to drive inclusive and sustainable growth?
While the discussion of the impact of Covid-19 on the extractive sector has focused on taxation and illicit financial flows, other critical factors like the fourth industrial revolution and climate change must not be discounted. Automation and climate change, fundamentally, are critical forces that call for extractive sector policy fiscal policy shifts. For example, as automation substitutes labour, payroll tax that is easy to administer is likely to suffer a huge knock while fees for intangibles are likely to spiral, creating loopholes for transfer mispricing. Climate change is also redesigning the demand patterns for commodities, with the future of fossil fuels (oil, gas and coal) hanging in the balance and clean energy minerals (cobalt, lithium and nickel) facing a huge demand.
To provide a forum to discuss these issues, the conference will bring together members of parliament, policymakers, researchers, academia, government representatives, media, international development partners, and civil society representatives from across the continent.
Africa is blessed with enormous natural resources endowments, inclusive of rich minerals, oil and gas deposits. If managed well, this natural resource wealth could be a major driver of growth and social economic transformation on the continent.
Yet, notwithstanding this great natural resource wealth, Africa ranks as the poorest continent in the world, characterized by debilitating poverty and remains perennially stuck at the bottom of the Human Development Index.5 This paradox of poverty in the middle of so much natural resource wealth is explained by the fact that Africa fails to get a good return from the exploitation of its natural resource’s wealth. In fact, one of the greatest contradictions of our time is that often-increased foreign direct investments (FDI) into the natural resources sector is accompanied by rising poverty, inequality and social fragmentation. Indeed, Africa’s production of precious metals was focused to rise by 78% between 2010 – 2017, yet, no such astronomical growth in socio-economic development outcomes has been witnessed anywhere on the continent.6
The net outflow of development finance in the form of IFFs and tax evasion and or avoidance has meant that there are fewer resources available for lifting sections of Africa’s poorest out of poverty. If this hemorrhage is arrested, Africa’s capital stock GDP per capita would expand significantly. In the present situation, Africa has lost the multiplier effect for growth and job creation as well as infrastructure development. As a consequence, growth rates on the continent are averaging 5%, which is far lower than the double-digit growth that lifted Asian countries from poverty. Thus, IFFs represent unjust accumulation by elites at the expense of the continent’s poor. Even though many countries across the continent have experienced episodes of economic growth since 2000, the number of people living in poverty on the continent is increasing as population growth in Africa is outpacing the number of people lifted from poverty.
Five years into the Sustainable Development Goals (SDGs), the majority of African countries are off track largely owing to resource leakages. Indeed, on the current trajectory, Africa will not meet the SDGs target of eliminating extreme poverty by 2030. In fact, when the multidimensional lens to poverty is used, the picture for sub-Saharan Africa is extremely worrying, with almost two in every three people (64.3%) living in multidimensional poverty. While other regions of the world are experiencing rapid poverty reduction, the decline is much