Why Can’t We Plug The Leaks That Allow Money To Filter Out?

A journalist friend of mine recently drew my attention to presentations made at a conference hosted by the Financial Transparency Coalition held last week in Dar-es-Salaam, Tanzania. Mr. Zitto Kabwe, a member of parliament in Tanzania’s parliament and the chairman of the Parliamentary Public Accounts Committee, made a key presentation highlighting the role of parliaments in curbing illicit money transfers. His presentation, as any good presentation is meant to do, initially started with startling numbers that would capture one’s attention. Quoting an African Development Bank report, between 1980 and 2009 African economies lost between $597 billion and $1.4 trillion in resource transfers out of the continent. He proceeded to highlight that $597 billion left Africa illicitly in the form of bribes, kickbacks, theft, tax evasion and avoidance while only $80 billion flowed into Africa in the form of foreign direct investment and aid.

The thrust of Mr. Kabwe’s presentation was that multinationals are creating value in Africa but extracting that value through nefarious schemes such as transfer pricing and use of tax havens, particularly Mauritius, to move profits out of the source countries. Mr. Kabwe also draws attention to the fact that of the top 10 taxpayers in Tanzania, 7 use tax havens, begging the question: what then could be the problem if they are still making it to the top 10 list of tax payers? He also cited in his presentation that the three largest mobile companies are all listed in tax havens and names Airtel as being registered in the tax haven of Holland (I wasn’t aware Holland was a tax haven), Tigo registered in the tax haven of Luxembourg and leaves a question mark next to the name of Vodacom, perhaps suggesting he couldn’t find where this multinational was incorporated.

It would have been great if the honorable MP had taken time to note that it is the parent companies that are registered overseas and that the local companies, which are subsidiaries, are very likely to be locally incorporated which is why they are paying taxes locally to the point where they feature as top tax payers. But that is not the point of today’s piece. One cannot sensationalize the fact that multinationals are coming into your African country, making money, using all manner of tax avoidance schemes to get money out of the country and then state in the same breath that African countries have sent out billions in the form of kickbacks, bribes and theft from government coffers.

Multinational companies are organizations that have shareholders who have invested their capital with a view to getting a maximum return therefrom. They are not charitable organizations that are looking to give away money to whoever crosses their path. They are responsible institutions that are keen to employ locals, improve the lives of the communities and (hopefully) preserve the environments in which they operate. Knowing full well that a lot of government funds find their way into very deep unofficial pockets rather than used in the development of infrastructure, health and education as they are supposed be, it is not in any company’s interest to throw money over an unaccountable cliff. Especially where that money will simply be invested in personal assets of government officials in the very jurisdictions that these companies are registered anyway. Come to think of it, perhaps these multinational culprits are doing our African economies a favor by taking the money to other jurisdictions that will use the funds to improve the lot of their citizens by providing good infrastructure, health and education. At least someone gets to benefit, right?

Mr. Kabwe’s sense of drama doesn’t end with the numbers. His presentation makes a tongue in cheek allegation that even the government of Tanzania is guilty of tax avoidance and cites a Tanzanian government owned company “Tangold” as having been registered in the tax haven of Mauritius in 2006. I did a quick google search of Tangold and only came up with a high quality pastry company in Australia with that name. I did a further google search of Tanzanian gold mining companies and came up with a whole list of companies, none of which claimed to have any ties to the government of Tanzania. This company, which the government registered in Mauritius, is so below the radar that even the internet can’t find it. I did come away with the knowledge that curious allegations of sinister public and private sector motives are not only aggressively done by Kenyan MPs. They have soul brothers across the border.

Look, as long as our African governments continue to be massively inefficient in their management of public expenditure and increasingly corrupt in the use of tax payer revenue, well meaning companies will continue to find all manner of legal accounting loopholes to avoid financing personal accounts of corrupt officials. Our African members of parliament and people representatives are better suited to asking themselves what in heaven’s name is wrong with our governments. Why can’t we plug the leaks that allow money to filter out of our economies into personal overseas accounts? Or is our collective native Negro DNA utterly and completely incapable of resisting the urge to dip our fingers into the cookie jar? Perhaps anthropologists will find the solution to this quandary as it certainly has beaten everyone else. In Kenya, we dare not even say that it has become institutionalized over the years since independence if the less than 3-year-old judiciary shenanigans are anything to go by. This thing called corruption is characterized as a genome in our biological make up. We can’t get rid of it any easier than we can bleach our skins white. I say let the money stay offshore, at least we know $597 billion of it is put to some good use.

Twitter: @carolmusyoka