[afro-nets] Drain of African Resources

[Fiorenza Monticelli <fiorenza@hst.org.za>]

Drain of African Resources
--------------------------

Stopping the drain of Africa's wealth a bottom line for Africa's
health

EQUINET NEWSLETTER 62:
http://www.equinetafrica.org/

The 2005 Commission for Africa report leaves the impression of a
continent receiving a vast inflow of aid, with rising foreign
investment, sustainable debt payments and adequate remittances
from the African diaspora to fund development. Our discussion
paper tells a different story: of significant and dramatically
rising flows of resources out of Africa northwards, draining the
continent of the important resources needed to address its own
development, including in health. The paper synthesizes data
about the outflow of Africa's wealth, to reveal factors behind
the continent's ongoing underdevelopment, as the basis for pro-
posing policy measures to reverse these flows.

The statistics speak loudly of a continent being progressively
dispossessed of its wealth, and thus the resources it needs to
improve health and human development:

* A debt crisis with repayments in the 1980s and 1990s that were
4.2 times the original 1980 debt levels, and annual debt repay-
ments equivalent to three times the inflow in loans and, in most
African countries, far exceeding export earnings, leaving a net
flow deficit of by 2000 of $6.2 billion. * Unequal exchange in
trade and trade liberalisation policies that have lowered rather
than increased Africa's industrial potential and exacted an es-
timated toll in sub-Saharan Africa of $272 billion over the past
20 years.

* Flows of private African finance that have shifted from a net
inflow during the 1970s, to gradual outflows during the 1980s,
to substantial outflows during the 1990s. * Falling foreign di-
rect investment (FDI) from roughly one third of FDI to third
world countries in the 1970s to less than 5% by the 1990s, and a
shift to highly risky speculative investment in stock and cur-
rency markets - with erratic and overall negative effects on Af-
rican currencies and economies.

Africa is commonly and mistakenly represented as the (unworthy)
recipient of a vast aid inflow. Aid flows in fact dropped 40%
during the 1990s, and the phantom aid that flows back to the
source countries in technical and administrative costs was esti-
mated in one study to be $42 billion of the 2003 total official
aid of $69 billion, leaving just $27 billion in 'real' aid to
poor people.

There is also a perverse subsidy in the extent to which indus-
trialised countries exploit the global stock of non renewable
natural resources . This takes place through the extraction of
minerals and natural resources from Africa by Northern investors
with little investment in return and few royalties provided. It
also takes place through use of global goods like the earth's
clean air. Forests in the South absorbing carbon from the atmos-
phere are estimated for example to provide Northern polluters an
annual subsidy of $75 billion. A method for measuring resource
depletion used by the World Bank suggests that a country's po-
tential GDP falls by 9% for every percentage point increase in a
country's dependency on resource extraction. This implies, for
example, that Gabon's people lost $2,241 each in 2000, based on
oil company extraction of oil resources,

These outflows deplete the resources available for productive
and human development. They are felt most heavily by women and
poor communities, and undermine progress towards the achievement
of human security for the majority of African people.

They imply that the first step to effect genuine growth and to
deliver welfare and basic infrastructure is for African socie-
ties and policymakers to identify and prevent the vast and ongo-
ing outflows of the continent's existing and potential wealth.

Current global reform agendas do not address these outflows.
While they point to debt and unfair trade, they do not seek to
reverse the outflow of African wealth.

Campaigns to reverse resource flows and challenge perverse sub-
sidies are emerging from grassroots struggles and progressive
social movements, such as those in Africa that are resisting
privatisation and commodification of basic services, pressuring
for rights to generic anti-retroviral medicines and resisting
encroachments on human development through trade and macroeco-
nomic policies that intensify inequities.

These grassroots struggles can be consolidated by national gov-
ernments and regional co-operation to improve disclosure of fi-
nancial flows and apply policies within Africa to prevent the
outflows and encourage the 'stay' of domestic investment re-
sources. The paper points to some options - systemic default on
debt repayments, strategies to enforce domestic reinvestment of
pension, insurance and other institutional funds; national-scale
regulation of financial transfers from offshore tax havens;
clearer identification and renegotiation of tied or phantom aid;
and improved calculation and negotiation around of the costs of
FDI (not simply the benefits), including natural resource deple-
tion, transfer pricing and profit/dividend outflows.

EQUINET welcomes the focus on this year's World Health Day on
one area through which Africa is bleeding- its loss of human re-
sources. We would however urge that to deal with this effec-
tively in the continent, and address the inequity globally in
the resources needed for health and human development goals, we
need to deepen the debate. In 1998 EQUINET highlighted that a
critical dimension of equity is the power and ability people
have to make choices over health inputs and their capacity to
use these choices towards health. For Africa this must surely
include bringing control over the resources for health and de-
velopment back within the continent.

Please send feedback or queries on the issues raised in this
briefing to the EQUINET secretariat at TARSC,
mailto:admin@equinetafrica.org

EQUINET work on economic policy and health is available at the
EQUINET website at http://www.equinetafrica.org