News
Thursday, June 3, 1999
Africa's beggar states own billions overseas
ADDIS ABABA, Wednesday
Begging bowl in hand, African leaders shuttle between their countries and
foreign capitals in search of financial support, which often end up in
overseas bank accounts.
The capital held by Africans overseas is equivalent to 39 per cent of gross
domestic product (GDP) compared with six per cent for Asia, according to the
Ethiopia-based UN Economic Commission for Africa (ECA).
Analysts say if all the capital kept by Africans overseas was repatriated,
the continent would move halfway towards meeting its external resource
requirements.
Between 1982 and 1991, capital flight from the severely indebted, low-income
countries in sub- Saharan Africa was about 22 billion US dollars, equivalent
to about half the external resources required for steer development,
according to the ECA.
In relation to GDP, capital flight was estimated to be as high as 133 per
cent for Nigeria, 102 per cent for Sudan and 58 per cent for Kenya.
This constitutes a menace to, and flight diversion of resources from
Africa's development. Nigeria is believed to have $50 billion alone outside
the country, most of it, hot money, according to one UN official, himself a
Nigerian.
Of the 18 countries the ECA carried a survey in 1991, Nigeria topped the
list with a capital flight/debt ratio of 94.5 per cent, followed by Rwanda
with 94.3 per cent and Kenya with 74.4 per cent and Sudan, 60.5 per cent.
A significant part of this amount, according to the ECA, originates from
illicit diversion of public funds rather than from business incomes.
Africa finance and economic development ministers, who attended an ECA
conference on: The Challenges of Financing Development in Africa, held in
Addis Ababa on May 6-8, are also worried about brain drain.
More than 30,000 Africans with PhDs now live outside the continent. An
educated and skilled workforce is necessary to harness the technologies of
the 21st century.
At the end of the conference, the ministers resolved to take the necessary
steps to stem and reverse capital flight, including preventing
macroeconomics policy lapses or policy inconsistencies, which are likely to
trigger, or contribute to capital flight.
During the 1990s, one central African country president was believed to have
had enough money to pay off his country's four billion dollar foreign debt.
When asked, he declined. The reason: he was sure he would not get back his
money. But for many years, he was in and out of Europe and the US begging.
"Capital flight is related to being in power and having access to domestic
and foreign money and it is an issue that goes beyond the straight-jacket
economics that is often used to explain its magnitude," noted a paper on
capital flight by an ECA consultant.
The donor community is equally worried.
"There is increasing aid fatigue in my country and it is hard to convince my
taxpayers to invest in Africa while Africans themselves don't seem to have
confidence in their own economies. This is shown by the capital flight
figures," Mr Eveline Herfekens, Dutch Minister for Development Cooperation
told the conference.
The Netherlands is the single largest donor to almost every multilateral
trust fund.
On their part, the ministers resolved, in a statement at the end of the
conference, to strengthen measures to fight corruption using "political,
administrative, diplomatic, legal and economic policy instruments targeting
the bribing agents resident overseas in partner states and recipients of
corruptly obtained funds in Africa."
In some cases, capital flight is a result of trade faking such as
under-invoicing of exports and over- invoicing of imports and vice-versa.
"There is no way you can ask a creditor to cut your debt when there is a lot
of capital flight illegally," said Mr Eloho Otobo, senior policy analyst
with the ECA. He said bringing the illicit capital flight requires some
commitment on the part of the developed countries.
The ministers noted that without the cooperation of the developed countries,
much of the continent's wealth will remain stashed in Swiss and other
European banks while the poor of Africa will continue to be subjected to
austerity measures to meet external debt obligations to the same countries.
The African finance and economic ministers called for the introduction of
changes in the banking regulations of developed countries, where resources
obtained illegally are invested to stem the flow of resources out of Africa.

(IPS)
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