HUGE OUTFLOWS OF WEALTH FROM AFRICA: CAUSES, CHANNELS AND CONSEQUENCES  

"As a matter of urgency, Africa must begin to, consciously and deliberately, start the urgent and inevitable journey of divesting itself of the age-long imperialistic atavism of the West and which the West, in its bid to continue to hold on to it, has, even in this modern era, initiated some of the most heart-rending and horrific crimes against humanity" 

 Africa- a Blessed Continent

The second-largest mineral industry in the world is in Africa, which implies large quantities of resources It is also the second largest continent, with 30.37 million square kilometres of land and a population of 1.4 billion. As acknowledged by the Economist Intelligence Unit, in its 2022 Report, Africa is home to vast and abundant reserves of natural resources, ranging from black gold to large reserves of cobalt, found all across the mineral-rich lands of the Congo.

Africa is home to nearly all valuable minerals that are essential to generating wealth, producing commodities, and advancing technology. Several African nations have prospered because of their mineral resources, some more so than others. In summary, Africa is home to approximately 30% of the world’s entire mineral reserves. While some countries rely on oil, some are rich in diamonds, and others in gold, copper, cobalt, coal, iron ore, uranium, and others. As of 2005 in the estimate provided by Wikipedia,-and the picture has not changed-Africa accounts for significant proportions of the world’s strategic minerals especially Diamond, Gold and Platinum as shown in the following Table:

Mineral                                     Percentage of world Production

Diamond                                                  73%

Gold                                                         89%

Platinum                                                  92%

Uranium                                                  16%

Little wonder that, Irwin Arieff, on May 18, 2015, penned the provocative, trillion naira question in the piece, “If Africa Is So Rich, Why Is It So Poor?” –while reviewing the book by Tom Burgis, titled: “The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa’s Wealth.” Irwin Arieff’s response to his own question is that “They call it the Curse of Riches” noting how: Although the African continent is blessed with gold, diamonds, oil, coltan, bauxite, uranium, iron ore and other valuable resources, its inhabitants have long numbered among the world’s poorest. While a few sub-Saharan African nations are doing relatively well, most are mired in poverty. That a continent’s abundant natural resources can in so many cases have so little effect on its people’s quality of life over so many years is one of the great mysteries surrounding the grouping of 49 nations located south of the Sahara desert. Then, he proceeded to aver that: Everyone seems to have a pet explanation for this tragic phenomenon, citing pervasive corruption, dysfunctional democratic institutions and justice systems, greedy multinational corporations, shady local and international elites, incompetent or ineffective international aid agencies, resource wars waged by domestic militias as well as outside armies and the vestiges of colonialism — or the advent of a new type of colonialism driven by players like China and Israel. Although both the author of the book under review as well as the book reviewer are evidently anti-China in their thrusts, their essential submission provides useful insight into the mechanism of wealth transfer from Africa and the Global South in general, to the rich nations.

The reviewed book is cited as noting how many people loudly lament the steady injection into the resource-rich but poor nations of fruitless foreign aid and economic assistance. To be specific, the aid flow into Africa, Burgis notes, is tiny compared with the value of the exploited resources flowing in the other direction. In the author’s words: Outsiders often think of Africa as a great drain of philanthropy, a continent that guzzles aid to no avail and contributes little to the global economy in return. But look more closely at the resource industry, and the relationship between Africa and the rest of the world looks rather different,” he says. “In 2010, fuel and mineral exports from Africa were worth $333 billion, more than seven times the value of the aid that went in the opposite direction (and that is before you factor in the vast sums spirited out of the continent through corruption and tax fiddles).

What can be perceived as emerging from the foregoing is a hiatus between the natural endowment of Africa on one hand and on the other hand, the living realities of its people.

A Disquieting Paradox

On August 16, 2023, Forbes Magazine (India) did a feature on: “Top 10 poorest countries in the world by GDP per capita [2023]”, opening with the instructive observation, that:  Despite abundant global wealth, some countries continue to suffer in extreme poverty; thus effectively capturing the paradoxical reality of Africa. The continent's wealth in gold, oil, uranium, and diamonds contrasts starkly with the widespread poverty experienced by its citizens. In order to make the statistic grapple with and reflect more directly the situation on ground on a comparative basis across countries, we bring along with GDP the purchasing power parity (PPP) factor which considers the local costs and inflation rates to give a more accurate picture of the standard of living in different countries. Purchasing Power Parity (PPP) is an economic theory comparing currency values based on a basket of goods, equalizing their buying power and exchange rates between different countries. The end product as an index of the relative richness of countries compiled by the International Monetary Fund as of Year 2023 is displayed in the accompanying Table which exposes African countries maintaining an undisputed monopoly of the league of the poorest on planet earth.

                     Top 10 Poorest Countries in the World by GDP per Capita PPP

Putting Africa’s situation in global context, the world's poorest country in Asia is Yemen, with a GDP per capita of $2,136; as of 2022, India's GDP per capita (PPP) stood at $9.07 thousand; Ireland is the richest country in the world by GDP per capita ranking in 2023, with the highest GDP per capita PPP of $145,196. Meanwhile, one-half of the African continent lives below the poverty line. Perhaps exaggerating, the National Bureau of Economic Research (NBER) titled its Working Paper No. 9865, issued in January 2004 and authored by Elsa Artadi and Xavier Sala-i-Martin, as: “The Economic Tragedy of the XXth Century: Growth in Africa”  with emphasis on “the deteriorating economic status of the African continent”. Yet, here is a continent with abundant blessings of natural resources and now, increasingly, human resources as well. Financial Times investigative journalist, Tom Burgis’ book, The Looting Machine, is now popularly cited concerning his probes into the paradox of “the continent that is at once the world’s poorest and, arguably, its richest.” His probes reveal a common thread which is that the wholesale expropriation of resources during colonial times has barely slowed through the post-independence era, albeit with new beneficiaries. You got it: neocolonialism on my mind. In this modern-day set-up, transnational corporations play a facilitating role as Burgis points out: The multinational companies hold enormous economic and political power in post-independence African countries, In this way, there is a pretty straight line from colonial exploitation to modern exploitation.

Having seen and lamented the ugly paradox of Africa being a richly endowed continent by nature while its citizens remain among the most poverty-stricken, the next logical step is to isolate the causes and channels of the experienced malaise.

Causes and Methods of Africa’s Impoverishment

On the surface, there is the temptation to interpret the causes of Africa’s poverty in diverse ways. For example, Liberia and Chad indeed encounter obstacles like limited resources, weak financial sectors, and unfavourable tax regimes, which hinder foreign investments and growth. Even larger nations like the Democratic Republic of the Congo and Mozambique struggle with poverty due to internal conflicts, political instability, and inadequate infrastructure, hampering their economic progress. Indeed, at a pseudo-academic level, the argument is made that poor countries are poor because their economies fail to grow fast enough. Among other cited causes are low levels of education, poor water quality and weak health systems. More recently, there is the rationalization that globalization leads to an increase in income inequality around the globe because globalization encourages prosperous nations to outsource production to locations which provide either cheap labour or cheap raw materials or both. However, when we dig deeper, we see that the more durable explanations lie elsewhere.

In a highly insightful 2017 piece entitled: “Aid in Reverse: how poor countries develop rich countries”, Jason Hickel provides a forceful inroad to the understanding of the mechanism and result of the relationship between the rich countries on one hand and their poor counterparts especially in Africa on the other, by drawing attention to the so-called Aid. He reported how new research shows that developing countries send trillions of dollars more to the west than the other way around; his words: the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction. Citing a specific year as illustration: In 2012, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is roughly the GDP of the United States. In essence, Aid is effectively flowing in reverse: rich countries are not developing poor countries, rather, the poor countries are developing the rich ones. One cannot but remember Walter Rodney’s How Europe Underdeveloped Africa, at this point.

Strictly on economic theory grounds, developing countries can benefit from free trade by increasing their amount of or access to economic resources. In this vein, we acknowledge that trade has generated unprecedented prosperity, helping to lift some 1 billion people out of poverty in recent decades. In effect, trade has multiple benefits such as faster productivity growth, especially for sectors and countries engaged in global value chains (GVCs). At the same time, however, not all countries have benefited equally. Going down memory lane, history shows unambiguously that starting especially with the scramble for Africa and the subsequent 1884 Berlin Conference, the effective crippling of the African continent began in earnest. Recall that the Berlin Conference spanned almost four months of deliberations, from 15 November 1884 to 26 February 1885; by the end of the Conference, the European powers had neatly divided Africa up amongst themselves, drawing the boundaries of Africa much as we know them today. As the Britannica put it eloquently, the partition of Africa below the Sahara took place at two levels: (1) on paper—in deals made among colonial powers who were seeking colonies partly for the sake of the colonies themselves and partly as pawns in the power play of European nations struggling for world dominance; and (2) in the field—in battles of conquest against African states and tribes and in military confrontations among the rival powers themselves. This process produced, over and above the ravages of colonialism, a big basket of problems that was to plague African nations long after they achieved independence. Boundary lines between colonies were often drawn arbitrarily, with little or no attention to ethnic unity, regional economic ties, tribal migratory patterns, or even natural boundaries. It notes grimly that: By the turn of the 20th century, the map of Africa looked like a huge jigsaw puzzle, with most of the boundary lines having been drawn in a sort of game of give-and-take played in the foreign offices of the leading European powers. Thus, the division of Africa, the last continent to be so carved up, was essentially a product of the new imperialism, vividly highlighting its essential features.

As a tool of domination, the colonizers imposed their cultural values, religions, and laws, and made policies that do not favour the indigenous peoples. Sampie Terreblanche, in a Paper read at the uBuntu Conference at the Law Faculty of the University of Pretoria, 2 – 4 August 2011 titled, “The Exploitation Of Africa And Africans By The Western World Since 1500: A Bird’s Eye View” summed up the socio-economic assault on Africa as follows: The 500 years of European slavery and colonialism seriously harmed the African economy, damaged the African societal structures and undermined the psychological self-assurance of Africans.  Besides, the colonialists seized land and controlled the access to resources and trade.

With the exception of Ethiopia and Liberia, all the states that make up present-day Africa were parcelled out among the colonial powers within a few years after the meeting. Lines of longitude and latitude, rivers and mountain ranges were pressed into service as borders separating the colonies. Money was another important tool of colonial rule. Many colonial subjects were forced to work for wages and pay taxes; of course, they needed money to pay the taxes and they could only get money by working. As faithfully recorded in the World History Project edited by Trevor Getz, powerful companies had most of the money. The chocolate companies Nestle and Cadbury are one example. They set the price of chocolate in West Africa. They paid their workers as little as possible given that the companies wanted more profits for themselves and they did not pay much in taxes. However, the colonial administration made money by taxing locals. Locals had to pay heavy taxes on products that came from outside the empire. The empires wanted colonies to buy their products and that was how the foundation of dependency and exploitation was laid and subsequently perpetrated.

As successor to naked colonialism, neocolonialism reformed the mode of exploiting Africa by the formally departed colonial powers, thus enacting what has been articulated so aptly by Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala, through the Aljzeera Media Network on May 6,  2021, to the effect that: “Rich countries drained $152 trillion from the global South since 1960”; indeed, they are worth citing at length, in their words: Imperial powers finally withdrew most of their flags and armies from the South in the mid-20th century. But over the following decades, economists and historians associated with “dependency theory” argued that the underlying patterns of colonial appropriation remained in place and continued to define the global economy. Imperialism never ended, they argued – it just changed form . . .  Recent research shows that rich countries continue to rely on a large net appropriation from the global South, including tens of billions of tonnes of raw materials and hundreds of billions of hours of human labour per year – embodied not only in primary commodities but also in high-tech industrial goods like smartphones, laptops, computer chips and cars, which over the past few decades have come to be overwhelmingly manufactured in the South. This flow of net appropriation occurs because prices are systematically lower in the South than in the North. For instance, wages paid to Southern workers are on average one-fifth the level of Northern wages. This means that for every unit of embodied labour and resources that the South imports from the North, they have to export many more units to pay for it. . . a “hidden transfer of value” from the South, which sustains high levels of income and consumption in the North. The drain takes place subtly and almost invisibly, without the overt violence of colonial occupation and therefore without provoking protest and moral outrage.

To complement the foregoing nefarious dealings, rich countries have a monopoly on decision-making in the World Bank and IMF, they hold most of the bargaining power in the World Trade Organization, they use their power as creditors to dictate economic policy in debtor nations, and they control 97 per cent of the world’s patents. Countries of the global North and their corporations leverage this power to cheapen the prices of labour and resources in the global South, which allows them to achieve a net appropriation through trade. Now, there are estimates that $29bn a year is being stolen from Africa just through illegal logging, fishing and trade in wildlife. Besides, it is estimated that $36bn is owed to Africa as a result of the damage that climate change will cause to their societies and economies as they are unable to use fossil fuels to develop in the way that Europe did during their industrialization heydays.

Furthermore, the large wealth outflows consist partly of payments on debt. Way back in 2017, Jason Hickel in Solo had reported, how: Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines. But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4 trillion through unrecorded capital flight since 1980. Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually, the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.

In documenting the wealth of Africa stolen by the imperialist nations, cultural artefacts must be included. On this, Nosmot Gbadamosi, through the platform of Aljazeera Media Network on October 12, 2021, under the theme,” Stealing Africa: How Britain looted the continent’s art”, showed that, during war and colonisation, Western nations participated in the theft of thousands of pieces of African art. This is the story of the role Britain’s anti-slavery mission played in looting African artefacts and of the campaign to get them returned . . . The arrows and spears the Chibok townsmen had used against the British were then collected and sent to London where they are held in storage today. But curator labels available online about the background of the items at the British Museum – which holds around 73,000 African objects – make no mention of how the spears got there, nor of the town’s resistance against “punitive” colonisation.

This revealing report underscores the relevance of the argument made by the notable Nigerian historian, Max Siollun, while recounting Chibok’s capture in his book, What Britain Did to Nigeria, noted that: It is very dangerous to rely on the victor’s account as the sole account of history, there is a proverb about this … the tale of the hunt will always be the hunter’s tale until the lion learns how to tell its story.

Thanks to CNN with its reference to the growth of offshore banking in the late 20th century and how this has created new opportunities for resource tycoons to cover their tracks, a practice laid bare in the Panama Papers. On this, Israeli businessman Dan Gertler was an early pioneer. After forging a close friendship with DR Congo President Joseph Kabila, he was granted a near monopoly on exporting the nation’s diamonds and quickly became a billionaire. Gertler routed the cash through an elaborate network of offshore accounts in tax havens, keeping the details of controversial deals secret. Again, Tom Burgis has availed us of further evidence, reporting how the era of global finance has opened African markets to a new generation of mysterious traders. His words: In the case of African resource deals, offshore funds have been shown to conceal questionable transactions In the 1980s, bribes were literally cars full of cash and you handed the key to the official you were trying to bribe. Bribery now is much more sophisticated, and has become harder to define as bribery if it’s (through) offshore transactions or people being given equity shares in offshore companies…You have to crack open a lot of offshore secrecy to see the conflict of interest that lies at the heart of them.

Whereas the very opening paragraphs of this essay already point to the consequences of the wealth leakage from Africa, it remains pertinent to say one or two words on the issue before closing the discussion.

Consequences

We have long known that the industrial rise of rich countries depended on extraction from the global South during the colonial era. Europe’s industrial revolution relied in large part on cotton and sugar, which were grown on land stolen from indigenous Americans, with forced labour from enslaved Africans. Extraction from Asia and Africa was used to pay for infrastructure, public buildings, and welfare states in Europe – all the markers of modern development. The costs to the South, meanwhile, were catastrophic: genocide, dispossession, famine and mass impoverishment; the case of the Democratic Republic of Congo (DRC) is widely cited in illustrating the plight of resource-rich African countries. As one analyst put it, the combination of staggering wealth, rampant violence, and abject poverty in DR Congo is no coincidence, but part of a pattern causing devastation across Africa. In this unique equation of poverty in Africa, the collusive and corrupt role of the indigenous elite should be highlighted- as Tom Burgis illustrated with the case of Angola, a country which earns almost half of its GDP from oil, as an example of government as “a service for the elite.” A 2011 IMF audit revealed that $32 billion disappeared from the country’s official accounts between 2007 and 2010, a quarter of the state’s income. Like their counterparts across most parts of the continent, the Angolan elite rejects accountability and does not tolerate any challenge from the public.

Possible Responses

For obvious reasons, even if it registers as a digression, casual historical reference made to Chibok earlier is likely to be newsworthy to the reader, hence this footnote. In his October 2021 publication, cited earlier, Nosmot Gbadamosi-quoting from a report, drew attention to the following historical relevance of Chibok, noting: Nowadays, the sleepy town of Chibok in northern Nigeria is notorious for the kidnapping of 276 children by Boko Haram. But go back 115 years and this tiny farming community perched atop a hill fought one of the greatest resistance to British colonisation. . . . In November 1906, around 170 British soldiers launched what that country’s parliament called a “punitive expedition” against the town for carrying out annual raids along British trade routes in Borno state. In defence, during an 11-day siege, Chibok townsmen shot poisoned arrows at the soldiers from hideouts in the hills. The fiercely independent “small Chibbuk tribe of savages”, as they were described in a report presented to Britain’s parliament in December 1907, had been “the most determined lot of fighters” ever encountered in what is now modern-day Nigeria. It took British forces another three months to annex Chibok, and only after they discovered their natural water source and “starved them out”, the report said.

Fast forwarding to contemporary times, where we are witnesses to the ugly scenario in which African countries have adopted the market orthodoxy that lead them to unquestioningly reduce the role of the state in the economy following IMF and World Bank dictates with their enforced paradigm of embracing global economic competition – in which unfortunately but inevitably, they are overwhelmingly the losers. In this vein, the recommendation advanced by the trio, Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala, is endorsed here-which is the imperative of democratizing the institutions of global economic governance so that poor countries have a fairer say in setting the terms of trade and finance. Another step would be to ensure that poor countries have the right to use tariffs, subsidies and other industrial policies to build sovereign economic capacity. We could also take steps toward a global living wage system and an international framework for environmental regulations, which would put a floor on labour and resource prices. All of this would enable the South to capture a fairer share of income from international trade and free its countries to mobilize their resources around ending poverty and meeting human needs. But achieving these goals will not be easy; it will require an organized front among social movements toward a fairer world, against those who profit so prodigiously from the status quo.

Narrowing our gaze more specifically to Africa, the militant but logical voice of Jude Ndukwe in the August 6, 2023 edition of The Sun, echoes as he argued in his piece, “Africa rising: The new wave against neo-colonialism, imperialism”, that: As a matter of urgency, Africa must begin to, consciously and deliberately, start the urgent and inevitable journey of divesting itself of the age-long imperialistic atavism of the West and which the West, in its bid to continue to hold on to it, has, even in this modern era, initiated some of the most heart-rending and horrific crimes against humanity. They have executed some of the most barbarous missions reminiscent of an era which Africa struggles to forgive and forget. I come in peace, please.