By Sipho Mthathi
JOHANNESBURG, Jun 12 2015 (IPS)

Africa is known as the ‘paradox of plenty’. How can a continent so rich in natural resources be so poor?

Economic growth is predicted to increase by 4.5 percent across the continent this year, despite falling oil prices and the Ebola crisis. South Africa’s economy, the second biggest in Africa is expected to continue to grow by 3.5 percent this year; Nigeria will grow by an enviable 5.5 percent.

Sipho Mthathi, Executive Director of Oxfam South Africa

However, millions across Africa are struggling.  Economic inequality is on the rise, and public coffers are insufficient due to an increasing demand for public services like health, education and housing.

Recently, Thomas Pogge and other distinguished academics have written about the cost of progress. Surprisingly, history provides us with examples of countries where, if there is a balance between economic growth and public spending, it is possible to address inequality.

There is no time to waste in looking for ways to address this widening gap across Africa.

It is urgent that, collectively, African nations look at the billions of dollars flowing out of the continent every year, most of which can be attributed to corporate tax dodging.

In January, the report of the High Level Panel on Illicit Financial Flows (IFFs) from Africa, chaired by former South African President Thabo Mbeki, contended that IFFs from Africa increased from about 20 billion dollars in 2001 to 60 billion in 2010 in the merchandise sector alone.

According to Global Financial Integrity’s 2014 report on IFFs from developing countries, South Africa alone may have lost more than 122 billion dollars between 2003 and 2012 in IFFs.

This is a lost opportunity for money that could have been reinvested in advancing Africa’s development and increased access to public goods for her Africa’s people.“It is urgent that, collectively, African nations look at the billions of dollars flowing out of the continent every year, most of which can be attributed to corporate tax dodging”

But this is only the half of the story. Multinational companies are gaining at the expense of African people through other ‘legal’ forms of corporate tax dodging, and through negotiated tax breaks. This is happening because of a lack of fair global tax rules, and behind-closed-door deals between corporations and governments, rushing to seal deals under pressure.

Africa’s astounding growth is affecting human development. And these losses in tax revenue come at a time when the role of official development assistance to Africa is declining.

Fair and progressive tax systems should be providing financing for well-functioning government programmes to enable governments to uphold citizens’ rights to basic services (such as healthcare and education), and cement trust between citizens and governments.

Establishing an effective tax system is critical if Africa is going to mobilise the resources it needs to tackle poverty and inequality.  Africa is home to six out of ten of the world’s most unequal countries – South Africa, Lesotho, Namibia, Botswana, Zambia, and Central Africa Republic.  Some estimates on Africa’s financing needs include 40-$60 billion dollars per year to finance the post-2015 development agenda.

This is not just Africa’s problem. Around the world, many lower-income countries have been subject to harmful tax practices, including transfer pricing, whereby a transfer price may be manipulated to shift profits from one jurisdiction to another, usually from a higher-tax to a lower-tax jurisdiction.

After revelations of how multinational enterprises (MNEs) such as Starbucks, Google and Apple deliberately structured themselves to minimise their tax bills, the Organisation for Economic Cooperation and Development (OECD) launched an effort to reform this base erosion and profit shifting (BEPS) practice. This reform is expected to wind up by the end of 2015.

However, since the launch of the BEPS Action Plan, developed countries have not had a real voice or influence in the process.  Just four African countries, including South Africa as a G20 member country, have been invited to participate as observers.  These countries are bringing attention to the many mining corporations which are offered lucrative tax incentives which must be addressed in the BEPS plan.

The African Tax Administration Forum (ATAF) is a regional tax body that has been invited by the OECD/G20 to participate in the BEPS reform process.  This should provide further scope to influence the BEPS process with an African perspective.

At the same time, the South Africa Revenue Services (SARS) is going after billions lost through wasteful incentives and trade mispricing. SARS has recovered 5.8 billion rand (460 million dollars) over the three-year period 2011-2014, 55 percent (3.4 billion rand or 274 million dollars) of which is attributed to the mining industry.

South Africa’s membership in the G20 (and its role as co-Chair of the G20 Development Working Group) provides an enormous opportunity to insist on broad inclusion of all nations in the BEPS reform process.

At a recent conference convened by ATAF, South African Finance Minister Nhlanhla Nene called for “Africa to protect its own tax base, and advance domestic resource mobilisation through a common voice, a common concern and a common action plan.”

It is time that all African finance ministers wake up to the possibility that tax revenues for financing essential services for their citizens, or investment in small-holder agriculture or infrastructure, could come from the recovery of billions of dollars lost from corporate tax dodging and unfair tax competition.

Tax breaks provided to six large foreign mining companies in Sierra Leone, for example, are equivalent to 59 percent of the total budget of the country – or eight times the country’s health budget.

It is time for a global inter-governmental body on international tax cooperation to allow for a more inclusive and coordinated approach to ongoing tax reform, beyond BEPS.

All countries should be able to participate in tax negotiations on an equal footing, which guarantees one country, one vote, and where representatives will have the political mandate to speak on behalf of their governments.  Simply relying on the BEPS process to re-write tax rules will not be enough to end international tax dodging.

Through the BEPS reform process and this new tax body, there would be real potential for an African taxation renaissance.

Edited by Phil Harris

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
ROME, Oct 6 2014 (IPS)

If ever there was a need to prove that we are faced with a total lack of global governance, the U.N. Climate Summit, extraordinarily called by U.N. Secretary-General Ban Ki-moon on Sep. 23, makes a very good case.

The convocation of the climate summit – albeit just for one day – appeared to indicate that it had finally dawned on political leaders that there is a problem, in fact an urgent problem, about the impact that climate change is having on our planet.

And yet, the array of leaders gathered together in New York, although full of general platitudes, gave another impressive display of failure to come up with a concrete answer. While acknowledging the problem, many leaders found a way to duck their responsibility, indicating domestic constraints.

Roberto Savio. Credit: IPS

Thus U.S. President Barack Obama made it clear that the U.S. Congress would not be ready to ratify an international climate treaty. Of course, this line of reasoning applies to the U.S. approach in general – Congress does not accept binding the United States to any international treaty because of its exceptional destiny, which cannot be brought under scrutiny or control by those who are not U.S. citizens.

Furthermore, the United States has become a dysfunctional country, where the judicial, legislative and executive powers cannot cooperate, even on crucial issues.“The array of leaders gathered together in New York [for the Sep. 23 Climate Summit], although full of general platitudes, gave another impressive display of failure to come up with a concrete answer. While acknowledging the problem, many leaders found a way to duck their responsibility”

Anant Geete, India’s new Ministry of Heavy Industries and Public Enterprises, stated that growth in his country has priority over anything else, and therefore India will continue on its path towards industrialisation and energy fully based on coal, while other renewable energies will be brought in progressively, even if this will eventually make India the world’s biggest polluter.

The European Union could not make any commitment, because a new Commission was due to take over the following month (i.e. October) and the person earmarked for the post of Commissioner for Climate Action and Energy was Spanish Conservative Miguel Arias Canete,  who was a major shareholder in two Spanish oil companies – Petrolifera Ducal and Petrologis Canarias – until he sold his shares to garner support for his nomination

No problem, say his critics, Canete’s wife, son and brother-in-law did not follow suit and remain shareholders or even occupy positions on the boards of the companies.

In line with this same political sensibility, the new and more conservative European Commission has brought in a well-known City lobbyist, Lord Jonathan Hill, to the portfolio of Financial Services.

Such a system of political compromises is like bringing Count Dracula in to run a blood bank – hardly a system that is likely to appeal to blood donors!

What is sad is that there was no lack of background papers for the U.N. Climate Summit.

Beside one prepared by the Intergovernmental Council on Climate Change, bringing together 3.200 scientists from all over the world, there was, for example, a report prepared by the Spanish Ministry of Agriculture (clearly not part of a leftist government), based on a detailed study of Spanish coastal areas which found that by 2050 the level of the Mediterranean Sea will increase by a minimum of 30 centimetres (if climate control measures are taken now) up to a maximum of 60 centimetres (if no action is taken).

That means that the coastline will recede by between 20 to 40 metres, with an obvious impact on tourism, ports and costal settlements. One hundred years ago, only 12 percent of the coast was used, rising to 20 percent in 1950, 35 percent in 1988 and 75 percent in 2006. In Spain, 15 million people now live in area which will be affected by the climate change.

Obviously, France, Greece , Italy, Tunisia and all other Mediterranean countries  will share that same destiny.

Another more global study conducted by Climate Central, a U.S. research group, based on more detailed sea-level data than has previously been available, reports that about 1 person in every 40 in the world lives in an area which will be susceptible to flooding in the next 100 years – about 177 million people.

Even if immediate measures were taken for climate control, 1.9 percent of the population of coastal countries would be affected. At worst, the figure would be 3.1 percent. To give a concrete example, four percent of the Chinese population, 50 million people, would be affected. Eight of the 10 large countries most at risk are in Asia.

The voice of Abdulla Yameen, President of the Maldives, who reminded leaders at the Climate Summit that small island countries – which would be the first to suffer from any rise in sea levels – have formed a federation to defend their right to exist, went largely unheeded.

An entire new generation has been born since the debate over climate change started but there are no signs that the situation is improving.

In the decade up to 2012, global emissions of CO₂ rose by an average of 2.7 percent. In 2013, emissions were the highest in the last 30 years. And yet, the energy sector is mounting a strong campaign to deny that there is any climate change.

If anything, say the deniers of climate change, what is happening is part of a normal historical cycle, not the result of human activity. All data demonstrating the contrary are being ignored, and the upshot of this campaign is that many people believe that debate on the issue is still open.

Perhaps what happened a few days ago between Google and the American Legislative Exchange Council (ALEC) is symptomatic of this “normal historical cycle”?

On Sep. 22, Google chairman Eric Schmidt announced that the high-tech company was withdrawing from ALEC, saying: “Everyone understands climate change is occurring and the people who oppose it are really hurting our children and our grandchildren and making the world a much worse place. And so we should not be aligned with such people – they’re  just, they’re just literally lying.”

ALEC is a conservative organisation that has urged repeal of state renewable power standards and other pro-renewable policies. It drafts proposals for regulations that it submits to politicians, asking them to make just the effort of passing them into law.

Reacting to Google’s decision, Lisa B. Nelson, CEO of ALEC, said: “It is unfortunate to learn Google has ended its membership in the American Legislative Exchange Council as a result of public pressure from left-leaning individuals and organizations who intentionally confuse free market policy perspectives for climate change denial.”

So, if you are worried about climate change, you are left-wing and against the market!.

The fact is that executives from many large corporations are well ahead of political leaders. They can take decisions unencumbered by political constraint , and they have found out that working in the direction of climate controls makes sense not only in terms of public relations but also economically.

For example, forty major companies, including l’Oreal and Nestlè, issued a declaration on Sep. 23 pledging to help cut tropical deforestation in half by 2020, and stop it entirely by 2030. Some of these companies work with palm oil, profitable production which is at the expense of tropical forests, especially in Indonesia.

In fact, it was only corporations that made any concrete pledges at the New York Summit.

Apple CEO Timothy Cook said that his company was committing itself to focusing on the emissions of its main suppliers, which account for around 70 percent of the greenhouse gases that come from production and use of the company’s products.

Cook rejected the idea that society must choose between economic growth and environment protection, giving as an example a huge solar farm that his company built in North Carolina to help power a data centre there. ”People told us this couldn’t happen, it could not be done, but we did it. It is great for the environment, and by the way it is also good for economics.”

Not to be outdone, Cargill, the huge U.S. commodity processor, pledged to go even further with an existing no-deforestation commitment on palm oil and extend it to cover all its agricultural products. And, together with other companies processing Indonesian palm oil, Cargill called on the Indonesian government to get tougher on deforestation.

In the meantime, it is not that voices worldwide have been silent on the issue. Safeguarding the environment has long been a rallying banner for a large part of civil society worldwide, and a major cause for concern among the younger generations.

The hundreds of thousands of people who took to the streets throughout the world ahead of the New York Summit in solidarity with the need to do something about climate were no mere figment of the media’s imagination. So why were they clearly invisible to the planet’s decision-makers?

The next important date for the climate on their agenda is the U.N. Climate Change Conference (COP21) to be held in Paris in 2015. Will our political leaders again waste the chance to do something concrete – will they continue to stand by and watch as time runs out for the planet, and for humankind?

(Edited by Phil Harris)

Excerpt:

An aerial view of the Luwowo coltan mine, near Rubaya in the northeastern province of North Kivu, DRC. Credit: MONUSCO Photos/ CC-BY-SA-2.0

By Carey L. Biron
WASHINGTON, Jun 3 2014 (IPS)

For the first time, nearly 1,300 U.S. companies have filed reports on whether the products they manufacture or sell are made with minerals that have bankrolled conflict in the Great Lakes region of central Africa.

Monday was the deadline for the filings, the first concrete results of a provision passed in 2010 by the U.S. Congress aimed at helping to end the long-running civil war in the Democratic Republic of the Congo (DRC).

Yet the law’s regulatory details have since been the target of sustained legal attacks from companies and lobby groups that have warned that fulfilling the reporting requirements would be onerous and even unconstitutional.

“In general we’re very disappointed with how vague many of the reports are, lacking much description on processes.” -- Carly Oboth, policy advisor at Global Witness
By Tuesday, however, it appeared that most companies expected to file a report on the so-called conflict minerals in their supply chains had done so. Those reports are now publicly available through the Securities and Exchange Commission (SEC), the federal regulator tasked with implementing the rule, formally known as Section 1502.

“This is a historic day. Five years ago this issue wasn’t on anyone’s radar, and now consumers can look under the hood of what’s in a product,” Sasha Lezhnev, a senior policy analyst at the Enough Project, a Washington-based watchdog group, told IPS.

“I think many people knew what companies like Apple, Intel or HP had been doing, as they have been pretty proactive on this issue. But no one has known what companies like Walmart or GM [General Motors] have been doing.”

In 2009, the U.N. Security Council formally recognised that revenues from minerals extraction were strengthening multiple armed groups operating in eastern DRC. The electronics industry has been one of the most significant users of these minerals, which include tin, tantalum, tungsten and gold.

Since then, Lezhnev reports, 95 mines in the DRC have been validated as “conflict free”, while two-thirds of the tin, tantalum and tungsten mines in the country’s east have been demilitarised. Gold remains a significant problem, however, and the Enough Project and others are calling for more concerted action in tightening sourcing decisions, particularly from the jewellery industry.

Box-checking?

Under the SEC guidelines, companies listed on U.S. stock exchanges must now file annual reports describing their efforts to discern whether their products use conflict minerals and, if so, their plans for stopping this practice. Several thousand U.S. companies have been identified as potentially – and likely unwittingly – selling products containing conflict minerals.

The consulting firm Booz Allen Hamilton has stated that it has been involved in the manufacture of circuit boards, electrical assemblies and surveillance recorders containing conflict minerals. Many of these products, the company noted, were manufactured for the U.S. government.

Yet most companies have reported incomplete results. Microsoft, for instance, states that it “cannot exclude the possibility” that its products contain conflict minerals, but also that it hasn’t yet been able to obtain full sourcing information from its “extensive and complex” supply chain.

Advocacy groups are also concerned that most companies aren’t providing information on what follow-up actions they took after surveying their suppliers, if any.

“In general we’re very disappointed with how vague many of the reports are, lacking much description on processes,” Carly Oboth, a policy advisor at Global Witness, a watchdog group that has supported the conflict minerals regulations, told IPS.

“We’re concerned with how companies have come to their conflict minerals status decision, as many are claiming that they’re ‘conflict indeterminable’ or ‘conflict free’ but not showing how they arrived at that conclusion. This isn’t supposed to be a box-checking exercise, but rather about showing that you’re not sourcing from a conflict zone.”

Global Witness says the majority of the reports that have been filed thus far have been “inadequate”.

Conflict-free competition

For many companies faced with auditing their supply chains, a key chokepoint has been the metal smelters that turn raw resources into workable products. An industry-led initiative, the Conflict-Free Smelter Programme, has been particularly prominent, having so far certified around 40 percent of the world’s smelters, according to the Enough Project’s Lezhnev.

Yet Global Witness’s Oboth says many companies have simply ascertained whether their suppliers have this certification, and then gone no farther.

“Instead, what we want them to do – and what the [SEC] rule requires – is to follow up with the smelters,” she says. “Intel, for instance, has made site visits to smelters to check on their conflict minerals policy, to see how they’re actually identifying risk.”

Indeed, Intel, the microprocessor manufacturer, has in many regards been the most proactive company on the issue. In January, it unveiled the world’s first “conflict-free” product, and ahead of the recent filing deadline was the only company to offer a fully audited report on its supply chains.

Following an April court ruling that altered the original SEC rule, companies are no longer required to state whether or not a product is “conflict free” (though the court may rehear this case in coming months). Yet Intel, echoing advocacy groups and regulators, says such designations are important.

“One of our takeaways is around transparency. Although not required to disclose the status of our products, we believe this transparency shows our commitment on this issue to our customers and stakeholders,” Intel told IPS in a statement.

“We encourage other companies to also share their product conclusions as we all work towards validating our products as DRC conflict free. Product conclusions provide a useful and transparent method to communicate the progress of our due diligence efforts.”

Already the presence of a single conflict-free product on the market has spurred competition, and a similar dynamic is expected to result from Monday’s public filings.

“We’re already seeing other companies racing to make the next conflict-free product, and we’re encouraging consumers to urge the largest aerospace and automotive companies to take part,” Lezhnev stated.

“Intel’s step is a good one, but there are companies out there that are far bigger. For instance, when is Boeing or GE going to make the next conflict-free product?”

(END)