Another bus attack in central Mozambique - one dead, one injured
SADC Member States. Map: www.sadc.int
The southern African region is losing 30 billion US dollars a year in illicit trade outflows and unjust debt payments, according to a report from Action on Southern Africa (ACTSA), the successor organisation to the British Anti-Apartheid Movement.
The report, entitled “The Money Drain”, says its research indicates that members of the Southern African Development Community (SADC) are losing at least 8.8 billion dollars a year from trade-related illicit outflows.
This is largely a matter of over-invoicing. The report notes that “After falsely declaring the price, quantity or quality of a good or service on an invoice submitted to customs, criminals can use intermediaries in secrecy jurisdictions to capture and divert illicit profits to offshore accounts”.
The report notes that rates of tax collection tend to be much lower in SADC members than in developed countries, and in part this is because “Trade misinvoicing enables funds to be secretly and quickly shifted between countries, thereby by-passing relevant taxes”. This illicit behaviour “seriously undermines domestic resource mobilisation”.
Even more serious is the debt issue. The report says SADC members are losing at least 21.1 billion dollars a year in foreign debt repayments. Some of these debts are “illegal, odious or illegitimate”.
As one example, the report cites Mozambique’s “hidden debts” – the case of the two billion dollars lent by the banks Credit Suisse and VTB of Russia to the three fraudulent, security-related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management). The government guarantees for these loans were illegal, because they violated the ceiling on such guarantees in the 2013 and 2014 budget laws, and they also violated a clause in the Mozambican constitution which gives the country’s parliament, the Assembly of the Republic, sole power to authorise such debts.
Illegal, odious and illegitimate debts should be cancelled, ACTSA argues. It also invokes the concept of “climate debt” – that is, the rich countries who have ravaged the planetary environment, owe a debt to the poor counties who are bearing the brunt of the current climate crisis.
As examples of the climate emergency, the report cites cyclones Idai and Kenneth which hit Mozambique in March and April this year. It argues that the developed world owes financial compensation to Mozambique and other victims of climate-related natural disasters.
The author of the report, Sunit Bagree, ACTSA’s Senior Campaigns Officer, says “It’s a scandal that rich countries barely seem to care that Southern Africa is haemorrhaging money. A broken international economic system is, fundamentally, why trade misinvoicing and unjust debt are depriving SADC governments of massive funds that they could use to realise economic and social rights for the many people living in poverty in the region”.
“SADC governments can certainly do more”, he added, “for example by employing innovative tools to detect potential misinvoicing of trade transactions and organising comprehensive public debt audits. But they must also call out powerful international countries for failing to live up to their responsibilities and turning their collective backs on vulnerable people in Southern Africa”.
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