World Economy

The Hidden Billions Behind Africa’s Inequality, Poverty

The Hidden Billions Behind Africa’s Inequality, Poverty The Hidden Billions Behind Africa’s Inequality, Poverty

Reports this year of illicit moneys from African countries stashed in a Swiss bank – indicating that corruption lies behind much of the income inequality that affects the continent – have grabbed international news headlines.

Secret bank accounts in the HSBC’s Swiss private banking arm unearthed this year by the International Consortium of Investigative Journalists (ICIJ) were said to hold over $100 billion, some of which came from Africa, including some of the poorest nations on the continent, IPS reported.

When these funds leave the region, they deny the very nations that need them most.

For example, at least 57 clients of the Swiss HSBC bank associated with Uganda were reported to be worth at least $159 million. The World Bank has estimated that Uganda loses more than $174.5 million in corruption annually.

It is not a crime for Africans to have a Swiss bank account. But questions are now being raised by local tax offices as to whether the proper taxes were paid on the stashed amounts.

  Tax Obligations

In South Africa, the head of the Revenue Service, Vlok Symington, said his office was analyzing the information. “Early indications are that some of these account holders may have utilised their HSBC accounts to evade local and/or international tax obligations,” Symington was reported as saying by the South Africa Sunday Times.

“Income inequality begins with our political leaders and corrupt wealthy business people who, more often than not, illicitly own the resources of the continent,” Claris Madhuku, director of the Platform for Youth Development, a democracy lobby group in Zimbabwe, told IPS.

Diamonds, for example, which have made many traders wealthy, are often mined by the poorest of the poor, treated almost as slaves in war-torn African countries, despite the Kimberley Process Certification Scheme, which was established in 2003 to prevent the flow of these diamonds.

“It’s a case of greed and corruption,” thundered Zimbabwean independent political analyst, Ernst Mudzengi. “Africa has parasitic politicians who are primarily concerned with self-centered political power and economic gain as ordinary Africans remain at the periphery in poverty,” Mudzengi told IPS.

  Anti-Corruptions Laws

Development experts here attribute income inequalities to the continent’s lax anti-corruptions laws.

“It’s shocking how huge banks such as HSBC have created a system for enormously profiteering at the expense of impoverished ordinary people, worse by assisting numerous millionaires from Africa in particular to evade tax payment, disadvantaging the already poor,” Zenzele Manzini, an independent economist based in Mbabane, the capital of Swaziland, told IPS.

“Very often, government directors, ministers and their secretaries are the ones globetrotting on government businesses, awarding themselves huge allowances and the lower government workers remain stuck at the periphery with no extra benefits besides the meager salaries they get monthly,” a top Zimbabwean government official in the Ministry of Labor, said.

Writing for Financial Transparency Coalition, a global alliance of civil society organizations and governments working to address inequalities in the financial system, Koen Roovers, the coalition’s European Union (EU) Lead Advocate, asked the deeper question: “How do we prevent this in the first place?”

Rich states have promised help to poor countries to build the capacity they need, but these commitments have yet to be honored.

  Worst Levels of Poverty

Without clearly defined measures to curb income inequalities, economists say the African continent may be headed for the worst levels of poverty set to hit even harder at the already poor.

“Africa may keep facing perpetual poverty amid rising income inequalities because governments here have no institutions and expertise to identify and halt money laundering by corrupt wealthy individuals and politicians evading tax,” Zimbabwean independent economist, Kingston Nyakurukwa said.