Experts Urge African Nations to Be Tough On Multinationals

Since the turn of the century, Africa has been at great risk of losing most of its valuable financial capital to aanced nations, and

the giant multinationals appear to be at the center of the story with their clever little schemes including transfer pricing and tax havens. Now, experts are aising to go tough on these companies before things start to go downhill.

Experts indicate some 39 poor African countries are in danger due to massive capital flight and that they are worsening by day. At a high level seminar jointly organized by the United Nations Economic Commission for Africa (UNECA) and African Economic Research Consortium (AERC,) held on Wednesday and Thursday, a number of experts urged African nations to wake up and smell the coffee.

Leacuteonce Ndikumana, professor at the university of Massachusetts, is convinced that it is time to apply tougher measures against multinationals that are masterminding capital flights across the continent, mainly through transfer pricing and tax havens.

According to Ndikumana, between the years of 1970 and 2010, 39 African nations lost USD 1.3 trillion dollars to capital flight. Carlos Lopes, UN under-secretary general and executive secretary of ECA, on his part, says Africa has USD 31 billion funding deficits for infrastructure. And, Lopes went on to say, “The biggest tragedy is the fact that African countries are denied of resources necessary to meet their development needs.” Based on AERC’s estimate, Lopes projects that if the funds leaving Africa illicitly were to remain in the continent, the capital stock would have expanded by over 60 percent and per capita GDP by over 15 percent than the current average.

Professor Lemma Woldesenbet, executive director of the AERC, told reporters that multinational companies operating in the continent are the ones behind the massive capital outflow aggravating the illicit money leaving Africa every year. Multinational companies are manipulating resources and one of the ways they were able to do that was using a scheme dubbed transfer pricing. What they do, according to the professor, is overstate their debts on their other accounts to a level where it will be more than their equity so as to facilitate capital flight across the continent.

Though most of the researched data and figures referred to by experts seem a bit outdated, it was more than enough to exert pressure on governments to step up and put preventive measures in place. Ndikumana believes that it is up to the African heads of state to sit down and discuss with their western counterparts to curb the situation before it gets out of hand.

Ndikumana indicated that even at times when Africa is swarmed with foreign debts, thanks to capital flight, it stands as a net creditor to the rest of the world. Capital flight did not become a chronic problem until later in the 2000s, a time when economic growth across the continent started to gain acclamation. However, that economic growth and comparative stability is heavily scrutinized by scholars like Ndikumana. He questions how Africa, after being stable and steadily growing, stands to lose more capital each year.

Source : The Reporter

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