Archive | September, 2013

Mbeki, Guebuza hold talks on Illicit financial flows in Africa

23 Sep

Maputo, 19 September 2013 (ECA) – Former President of South Africa Thabo Mbeki met with Armando Guebuza, President of the Republic of Mozambique to discuss illicit financial flows in Africa. Mr Mbeki who is Chair of the ten member High Level Panel on Illicit Financial Flows said illegal transactions out of Africa were the single economic issue hampering Africa’s development.

It is estimated that Africa looses over USD$50billion a year in illicit financial, exceeding the official development assistance to the continent, which stood at US$46.1 billion in 2012. The illicit financial flows find their way to developed countries mostly through multi-national companies and subsequently draining the continent of the much needed resources.

Illicit financial flows constitute, among others, undocumented commercial transactions and criminal activities characterized by over pricing, tax evasion, false declarations, mispricing of trade exports and imports facilitated by some 60 international tax havens and secrecy jurisdictions that enable creating and operating of millions of disguised corporations, oil companies, anonymous trust accounts and fake charitable foundations. Other techniques used include money laundering, transfer pricing and corruption.

During the closed door meeting, President Guebuza was appraised on the work of the High Level Panel since its establishment and inauguration in February 2012 by the United Nations Economic Commission for Africa and the African Union to address the debilitating problem of illicit financial outflows from Africa.

The panel has held several consultations around the continent meeting with top government officials and other stakeholders. Previous meetings have taken place in Algeria, Democratic Republic of Congo, Kenya, Nigeria, Tunisia and Zambia.

During the two day consultative meeting in Maputo, Mr Mbeki is scheduled to meet with Government Ministers, top government officials, the private sector, civil society and other stakeholders to forge strategies on how to curb illegal money leaving Africa.

While illicit financial flows are a global problem, their impact on the continent is monumental thereby representing a significant threat to Africa’s governance and economic development. Current evidence shows that Africa lost over US$ 854 billion in illicit financial flows between 1970 and 2008 corresponding to a yearly average of about US$ 22 billion. In this period Mozambique is believed to have lost as much as USD25billion.

The trend has been increasing over time and especially in the last decade, with an annual average illicit financial flow of US$ 50 billion between 2000 and 2008. These estimates may well be short of reality as they exclude such other forms of illicit financial flows from smuggling and mispricing of services.Some of the effects of illicit financial outflows are the draining of foreign exchange reserves, reduced tax collection, canceling out of investment inflows and a worsening of poverty. Such outflows also undermine the rule of law, stifle trade and worsen macroeconomic conditions.

Issued by:
ECA External Communications and Media Relations Section

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IFC aid sub-Saharan African economy with $5.3b investments in 2013 fiscal year

18 Sep

IFCAccording to Ghanabusinessnews.com investment commitments by the International Finance Corporation (IFC) reached $5.3 billion in sub-Saharan Africa, with projects targeting key sectors in the region’s economy. In a detailed factsheet released early September 2013, the IFC’s activities in sub-Saharan Africa showed strong development impact through record volumes of investment and advisory services for the year ending June 2013.

In addition to its committed record of $5.3 billion new investments, the IFC also carried out advisory services projects worth $65 million in the region in its most recent fiscal year.

According to the IFC it supported infrastructure, health, agribusiness and a range of activities in conflict affected states and helped Africa’s entrepreneurs gain access to finance.

“IFC invested $3.5 billion from its own account, and mobilized $1.8 billion from other investors,” it said in a statement adding “in FY 2013, IFC’s supported projects that provided loans for 54,000 small and medium businesses, encouraged 13.7 million microfinance clients; and improved health and education for 360,000 people.”

Yolande Duhem, IFC Director for West and Central Africa, said, “By focusing on developing Africa’s private sector in key areas such as power generation, transport or agribusiness, we are playing an active role in stimulating sustainable economic growth and job creation in the region.”

According to Duhem, the IFC also believes in boosting regional markets in Africa and many of its investments aim to allow companies to grow beyond national boundaries.

– See more at: http://www.ghanabusinessnews.com/2013/09/14/ifc-aid-sub-saharan-african-economy-with-5-3b-investments-in-2013-fiscal-year/#sthash.kmJFss9X.dpuf

AFRODAD Supports the Zimbabwe Alternative Mining Indaba (ZAMI2013)

11 Sep

DSC00191The Zimbabwe Environmental Law Association (ZELA), the African Forum and Network on Debt and Development (AFRODAD), and other supporting partners are hosting this year’s Zimbabwe Alternative Mining Indaba (ZAMI) from the 10th- 11th of September 2013 at Crown Plaza in Harare.

The 2nd ZAMI follows the success of the inaugural ZAMI that was jointly organised and hosted by ZELA, the Economic Justice Network (EJN), the Zimbabwe Council of Churches (ZCC) and the Chiadzwa Community Development Trust (CCDT) from the 11th-13th of September 2012. This year’s ZAMI was preceded by the Provincial Alternative Mining Indabas in Manicaland and Midlands whose main objective was to provide a platform for communities affected by mining operations to discuss amongst themselves with policy makers, government, mining companies and civil society, the impacts of mining on livelihoods, human rights and environmental sustainability among others. This year’s ZAMI will be held under the theme “Community Rights, the key to Empowerment.”

Domestic Debt Management in Africa: The Case of Tanzania book available for download

3 Sep

The African Forum and Network on Debt and Development (AFRODAD) and the Tanzania Coalition on Debt and Development (TCDD) met Tanzania’s legislators on the 31st of August 2013 to discuss findings of a study conducted by the former on the country’s domestic public debt management. AFRODAD also took the opportunity to promote best practices of borrowing in the form of a charter of principles developed from its experience in lobbying on debt cancellation over the past 17 years.

The research report (Domestic Debt Management in Africa: The Case of Tanzania) reveals that money and capital markets in Tanzania were generally non-existent during the era when the country pursued socialist principles of economic management. However the government launched financial sector reforms aimed at supporting a stable macroeconomic framework in 1991 reversing this approach. This included the development of a national debt strategy in 2002, which was later revised in 2011. The book is available for DOWNLOAD ON THE LINK BELOW
Domestic Debt Management in Africa The Case of Tanzania

AFRODAD engages Tanzania Parliament over Domestic Public Debt Management

2 Sep

TANZANIA DOMESTIC DEBT COVER_spine

Officials from the African Forum and Network on Debt and Development (AFRODAD) and the Tanzania Coalition on Debt and Development (TCDD) met Tanzania’s legislators on the 31st of August 2013 to discuss findings of a study conducted by the former on the country’s domestic public debt management. AFRODAD also took the opportunity to promote best practices of borrowing in the form of a charter of principles developed from its experience in lobbying on debt cancellation over the past 17 years.

Commenting on the development, AFRODAD’s Executive Director Collins Magalasi said the organisation had launched studies into domestic debt management in 2012 after noting trends pointing to increased dependence on that source of finance. He said the lack of resources available to poor countries in recent years has forced some governments to turn to new ways of raising finance such as borrowing from domestic markets. AFRODAD links the increase in domestic borrowing by some countries to the drying up of concessional loans and the reduction in aid caused by the global financial crisis among other factors.

“Unfortunately policy discussions in Africa have mainly focused on external debt, mainly to debt relief under the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI). AFRODAD now believes that it’s just as important for governments to assess the sustainability of total debt (both external and domestic debt),” said Magalasi. Magalasi further bemoaned the fact that there is no internationally agreed benchmark for assessing the sustainability of domestic debt unlike in the case of external debt. “The result is that no clear guidelines exist on what poor countries should do with their domestic debt markets,” he said.

The research report (Domestic Debt Management in Africa: The Case of Tanzania) reveals that money and capital markets in Tanzania were generally non-existent during the era when the country pursued socialist principles of economic management. However the government launched financial sector reforms aimed at supporting a stable macroeconomic framework in 1991 reversing this approach. This included the development of a national debt strategy in 2002, which was later revised in 2011.

Using the provisional benchmarks suggested by Debt Relief International (DRI), Tanzania would seem not to have any domestic debt sustainability problems from the Domestic Debt/Gross Domestic Product (GDP) and Domestic Debt/ Government Revenue perspectives. However, the country’s Domestic Debt Interest Payments/ Government Revenue give a different picture. According to the DRI ratio interpretation, Tanzania can be considered to have a potentially unsustainable domestic debt burden.

“The approach of this ratio to the potentially unsustainable range should sound as a warning of the increasing domestic debt burden in the country and should thus be treated with caution,” says AFRODAD. The report also raises concern that interest payments on domestic debt have been commanding an increasing proportion of both government revenue and recurrent expenditure compared to external debt interest payments, from a cost perspective. Furthermore, the banking system is by far the dominant holder of government issued securities in Tanzania. According to this report by AFRODAD, there is excessive domination by one sector in the purchase of government securities does not augur well from a “systemic risk” point of view.

The report also notes that information on the liabilities of state owned enterprises is not included in publicly available sources of data. In principle, when government makes guarantees for non sovereign borrowings and liabilities of regional and local governments, and public/private sector enterprises it adds onto the domestic debt as contingent liabilities when they fail to pay. AFRODAD argues that the government must publish the size and attributes of contingent and other fiscal risks in line with full disclosure of fiscal information.

Notably, Tanzania has the basic legal and institutional framework to manage domestic public debt. However AFRODAD has identified some areas which merit some reforms through appropriate amendments. For instance, it asserts that domestic debt should be mentioned more explicitly in the relevant sections of the constitution, which should also clearly extend the authority of the Union’s National Assembly over that aspect of borrowing. AFRODAD also notes that the constitution does not mention the existence and the roles of the central bank, which is a key actor on domestic debt management. AFRODAD believes parliament needs to play an effective oversight role over domestic debt but they lack the capacity to play an effective role in controlling government’s loan contraction activities. AFRODAD therefore calls for Parliament to be assisted with extra research capacity to carry out budget analysis.

Additionally the report shows that other stakeholders such as civil society currently play a marginal role on the issue of domestic debt. AFRODAD implores civil society to build its capacity on this issue to enable it to play an effective watchdog role and also ensure extensive economic literacy on public debt targeted at the public. The organisation also says that legislative reforms are needed to give civil society legal and institutional recognition in the process of public loan contraction and debt management.

AFRODAD, which is a pan African civil society organisation that has lobbied for debt cancellation and addressed other debt related issues since inception, has also carried out similar studies in Kenya, Senegal, Ghana, Malawi and Zambia. It works in close partnership with likeminded local organisations such as the TCDD to encourage African governments to manage borrowed resources better. The TCDD is a coalition of CSOs that was established in Tanzania in 1998. TCDD campaigns for sustainable foreign and domestic public debt. It also campaigns for meaningful civil society involvement in the formulation, implementation and monitoring of pro-poor government policies.