Emmanuel Nnadozie, professor of economics and author, has scholarly works are in the area of economics and development in Africa. These include African Economic Development.. He is currently chief cconomist and director of the Economic Development and NEPAD Division of the United Nations Economic Commission for Africa, ECA. As such, he edits the annual publication African Economic Outlook. He leads and manages the development agenda of the ECA and serves as the spokesperson for the ECA on economic development in Africa. He serves as adviser to the executive secretary of the ECA on Africa’s Development, representing the commission on intergovernmental and continental bodies and meetings and advises African governments on development issues. He coordinates the UN System-wide support to Africa’s development and supports the UN relations with the African Union, AU, Commission, the NEPAD Agency among others. Nnadozie formulates and implements substantive work and programmes in the areas of: macroeconomic analysis, growth and employment, development finance, investment, industrial development, Millennium Development Goals, MDGs, poverty eradication, Least Developed Countries, LDCs and coordination of the UN system support to the African Union and its NEPAD programme. Nnadozie, who was one of the authors of a recently published book on illicit funds transfer, speaks with Maureen Chigbo on the issue and other economic challenges facing Africa recently in Marrakech, Morocco. Excerpts:
Realnews: Could you elaborate more on this illicit money transfer that is wrecking the economy of African Countries?
Nnadozie: Africa is a continent that requires a lot of finance to be able to finance the development of the continent and create the conditions to improve employment opportunities for young people because Africa is the youngest continent. And therefore Africa has a strong interest in retaining any revenues it can create on the continent. But unfortunately, a large proportion of the revenues that could be utilized to finance development in the continent leave the continent illegally and illicitly. In fact, the estimate is that about $50 billion leaves the continent each year in terms of illicit financial flows. A larger proportion of it, contrary to what people think, is because of the activities of corporations or multinational companies which, through their transfer pricing mechanism, tax evasion and all kinds of commercial activities that they do that are related to trade, really siphon money away money and sometimes they put it in tax havens. Well, there are activities of individuals and governments of the countries who remove money and also criminal activities that are linked to drug trafficking, human trafficking etc.
Realnews: Could talk more on the multinationals you mentioned. Are oil companies part of this illicit money transfer?
Nnadozie: Of course, the multinationals, all of them are involved in it in the sense that if you watch the news today, you will see that both Apple and Starbucks have run into trouble with the British government because the British government found that, for many years, they were not paying taxes at all. It may not be illegal what they have done. But it is really an issue to wonder how a company that is making hundreds of billions of dollars profit every year would, in a country in Africa, declare that it has been making losses or transfer some of the cost outside and therefore declare that he will not pay any tax because of losses. But it continues to stay in business. Normally, if you are declaring losses for several years, you should go out of business. So, if Great Britain with all its resources, is not able to know how much taxes Apple or Starbucks is making, then you can imagine what is happening in some of the African countries where this companies are able to use their subsidiaries elsewhere or in some tax jurisdiction where they are exempted from paying taxes and shift their profits to there by transferring some of the pricing that they do or using some kind of complicated mechanism with the service of accountants to actually avoid providing this money that is important for development of countries.
Realnews: Could the illicit money transfers be part of the revenue from crude oil theft which is a major problem in Nigeria?
Nnadozie: Of course, that’s a major problem for countries like Nigeria although different countries have different problems. For Nigeria, one of the major one is related to the oil industry. That is really where the source of it is. Number one is that Nigerians do not know how much oil is shipped out every day or every time the thing goes out. We are fully aware that the Customs in Nigeria does not even have access to know how much oil is shipped out so they can act quickly to put some kind of customs duty on it. That’s a major part, not knowing how much crude oil is being shipped out. The second part is the oil theft as well. I understand that this is an illegal activity and you don’t expect those who steal crude oil to come and pay taxes on it and therefore provide revenue for the government. Lack of transparency in the oil industry as a whole makes it very difficult. Sometimes, companies can import equipment at high prices than they are supposed to be in the international market. That means that they can write ii off or simply use that to manipulate profit and not pay higher taxes on that.
Realnews: Is UNECA doing anything to help African countries to development enough manpower to check this illicit transfer and in the case of Nigeria to have the capacity to determine how much oil is produced and shipped outside?
Nnadozie: Yes, ECA is doing something already and it intends to do even more in the future. One of the things we want to do is to first of all understand. It is a complex issue, to understand it better. So, we have established a high level panel on illicit financial flows. And this is headed by the former president of South Africa and a number of other dignitaries who are panel members. We have commissioned studies on about nine countries in the continent to get real understanding on the nature, the magnitude and the development consequences of these illicit financial flows. And from these studies and consultations, we will be able to find out specifically what challenges are facing countries and come out with ways of explicitly dealing with them. You know, because of the complex nature of this matter, it may not be useful for African countries to start to talk about solutions first without understanding the problem. So we want to know which problem we are trying to solve and how best to do that. But we know that capacity is a problem everywhere and what we are doing now is to provide technical assistance to countries once we realize that the beginning of issues especially once it concerns minerals is contract negotiation; being able to negotiate with multinationals fair contracts so that they can get as much revenue as possible. There are countries that have practically given away their natural resources for free and getting little sums of money. But Botswana has been able to establish very good contracts using expertise. And so, we are going to be able to provide that kind of expertise. Once we have finished the studies and consultations, we should be in a position to intensify our support to African countries.
Realnews: Which are these countries?
Nnadozie: We have Nigeria, Tunisia, Algeria, Zambia, Liberia, Kenya and South Africa. We have completed the work in Kenya, Liberia and Algeria. And this past week we were in Nigeria. Sometime in June the experts were in Zambia.
Realnews: What is the outcome of the studies you have completed?
Nnadozie: I don’t want to preempt what the thing will be. What I can tell you is that interesting things are coming up and different countries face different problems. For instance, in Nigeria, we are finding out that the oil industry is the major source of the problem. In Liberia and Kenya, it is a different matter altogether. Eventually, our report will come out and you will see the differences we are seeing.
Realnews: Speaking of the oil industry in Nigeria, Are you aware of the Petroleum Industry Bill, PIB, which the government has been trying to pass and the opposition against it by the international oil companies, IOC ?
Nnadozie: Well, it will not be surprising that the oil companies will mount opposition to anything that will bring more transparency into their activities. I am aware of the PIB. But I cannot comment on it now until we have time to look at it very carefully so as not to preempt what it is going to do. But it is very important that a good legislation be passed so that this would once and for all deal with the issue at hand. What I have also to say is that it is one thing to pass a law. But it is a different thing altogether to implement that law and make sure it is followed to the letter. We have to make sure that we put mechanisms in place and institutions to make sure that these laws are implemented. Because we do find out that in some countries they do have the laws but they are not being implemented because sometimes people are compromised and sometimes people are not benefitting from the existing status quo and therefore they are not going to do something about it.
— Sep. 2, 2013 @ 01:00 GMT