AFRICA - Transparent taxation and fair taxes can turn Africa's mineral wealth into development

Nairobi (Agenzia Fides) - “It is surprising how potentially wealthy nations depend, almost at alcoholic proportions, on aid from countries in the West and most recently Asia,” said Brian Kagaro, Policy Manager of Action Aid, a pan-African association that has presented a report in Nairobi (Kenya), on the malversations in the African mining sector which is one of the wealthiest in the world. The report, entitled “Breaking the Curse: Transparent taxation and fair taxes can turn Africa's mineral wealth into development,” observes that African countries greatly depend on aid from foreign donors, although they are themselves rich in minerals and other natural resources.
The report addresses various problematic situations in seven countries (Ghana, Malawi, Democratic Republic of Congo, Sierra Leone, Tanzania, Zambia, and South Africa), where a study was performed showing how African governors lose millions of dollars in tax deals with the mining sector.
In presenting the report, Kagaro highlighted that due to the lack of technical means to extract minerals, Africa has had to open its own market tot he international mineral world.
However, they use various strategies to pay the least possible taxes to the countries concerned. “Forcing governments to grant concessions by threatening to go elsewhere and falsifying accounts depressing profit margins to evade tax are some of the measures employed by unscrupulous organizations to defraud governments,” Kagaro said.
The document affirms that the various African wars (such as in the DRC and Sierra Leone) have come primarily as a result of the illegal exploitation of natural resources from the areas in conflict.
The report also criticizes the secrecy that often enshrouds the contracts signed between local governments and the foreign dealers who hide the clauses that favor tax evasion. The report also highlights that the exploitation of the minerals often leads to environmental decline and in many cases, worsens local social crises. There is also a direct relationship between the prices of raw material and the debt of African nations. Many African nations have acquired their debt on the basis of efforts to stabilize prices or increase the cost of raw materials (which are its main, and almost only, voice in exports and in income), however these prices were constantly lowered. As a result, the African states entered on a slippery slope: without money to pay off the debt, they were forced to ask for more loans and extensions, in exchange for more concessions on the minerals and were forced to privatize their essential services and reduce national spending.
In order to resolve the situation, the study calls for transparent taxation on the pat of mining companies and the governments involved, with the participation of citizen groups working in the mining sector.
Pope Benedict XVI, in his recent trip to Africa, asked that “African nations be seen not simply as the receivers of others’ plans and solutions. African men and women themselves, working together for the good of their communities, should be the primary agents of their own development,” as a result of respect for their resources, as well. (LM) (Agenzia Fides 6/4/2009)