By Lydia Nyachieo
On September 25th, Ghanaian President Nana Akufo-Addo addressed the general debate at the 74th UN General Assembly. Aside from talking about the importance of education, the transformative power of technology, and global inclusivity, he also addressed the issue of poverty. Specifically, President Addo argued that “unfairness in the economic order undermines the fight against poverty.”
Africa is often portrayed as a continent comprising of mostly ‘developing’ or ‘less developed’ countries that always seem to be attempting to catch up with the rest of the world. And although this certainly is not true everywhere in Africa — there are many African cities that are more developed in terms of infrastructure and business hubs than some in the Global North — it is true that the continent contains some of the world’s poorest countries.
Many of the factors contributing to this fact stem from colonialism, whose legacy has continued to place African nations at a disadvantage. That said, we should not accept this ‘developing-tier’ status as the norm. As President Addo explained, Africa is rich in physical and intellectual resources, resources from which it could benefit if a fairer economic world order were in place.
Illicit Financial Flows
One manifestation of the unfairness President Addo referred to is the exploitation of African resources by external corporate entities. As he said in his speech:
“We, who own these fundamental resources by birthright, have remained poor, whilst our minerals have brought vast wealth to nations and peoples outside our continent. It is worth pointing out also that not only do we not get a fair share of the wealth once extracted, our lands, our environment, our oceans, are often left devastated by the process.”
One example of such resource-rich nations is the Democratic Republic of Congo (DRC). Besides being a major producer of diamonds, gold, and copper, DRC also holds more than 60% of the world’s cobalt supply, an element used in aircraft engines and batteries, and 80% of the world’s coltan supply, a mineral used in the production of electronics like cellphones and laptops, as well as surgical instruments and implants. The DRC is one of the most resource-rich countries in the world, and yet its citizens are among the poorest.
When talking about the foreign exploitation of Africa, President Addo referenced a report by the High Level Panel on Illicit Financial Flows (IFFs) from Africa. The report estimates that Africa is losing an estimate of $50 billion dollars annually through IFFs; that is, money illegally earned, transferred, or used.
According to the report, one of the main sources of IFFs in Africa is when large corporations manipulate loopholes in international law in order to evade paying taxes or to hide wealth and stolen resources. In South Africa, for example, one company was found to have avoided paying $2 billion in taxes by claiming that the majority of its business was legally based in the United Kingdom and Switzerland when in reality, most of its business was conducted in South Africa. Multinational companies can also have tax havens in non-African countries where they hide their profits in order to avoid paying taxes.
Correcting these IFF systems will be far from easy, but one start could be for developed countries to pressure multinational companies to be more transparent about their international transactions and to hold these companies accountable for shady, unethical business practices.
Structural Adjustment Programs
Another key example of unfairness in the broader global economic order is the enforcement of Structural Adjustment Programs (SAPs) by the World Bank and the International Monetary Fund (IMF).
SAPs are economic policies that the IMF requires governments to implement in their country in order to get a loan or other financial aid from the IMF. They are aimed at stabilizing a country’s economy and promoting growth after a crisis or amid overbearing debt. SAPs often involve a mixture of neoliberal policies, such as privatizing public services, opening up a country’s economy to free trade with other countries, cutting government subsidies for agriculture producers, and reducing government spending on social services such as health and education.
The IMF and the World Bank began implementing SAPs in Africa in the mid-1970s as a response to the social and economic crises that many sub-Saharan countries faced at that time. These policies have been criticized for assuming that ‘one size fits all’. As University of New Hampshire Professor Joe Lugalla states, they are enforced “as if all countries shared common history, held the same destiny, experienced similar problems, and had the same development agenda and priorities.”
While some groups of people have benefitted from the positive effects of SAPs, particularly those with more access to the global market, many have experienced the downfalls — particularly the most economically disadvantaged. In a 2002 article in the Journal of Social Development in Africa, Joseph Kipkemboi Rono explains that the SAPs implemented in Kenya throughout the 1980s were linked to higher income inequality, inflation, devaluation of the Kenyan shilling, unemployment, lowering living standards, increasing crime rates, and welfare problems in education and health.
This in no way means that African countries have not developed at all since the 1980s; many countries have and continue to flourish. The point is that SAPs have not contributed to their growth exactly as predicted by the IMF and World Bank. In some cases, in fact, they have the opposite effect.
SAPs have been also criticized as a form of neocolonialism since they force countries in a vulnerable position to enact policies that counter some of their own interests, policies that are implemented by organizations and governments who do not experience many of its consequences. While the IMF is not owned by any country, the US alone has about 17 percent of the voting power in the IMF, while the EU states have around 30 percent combined, out of the 189 participating countries. Thus, the countries that often carry the votes to enforce SAPs in the IMF are those who rarely need IMF aid and rarely have SAPs enforced upon them. This inequity of power presents another form of unfairness in the global economic system.
Despite these external forces that make it hard for African nations to fight poverty, it can not be overlooked that one of the biggest hindrances to the economic growth and development in Africa stems from within the continent, in the form of corruption.
On the local scale, citizens of many African countries are forced to pay bribes to officials in order to gain access to basic public services. Such services include healthcare, education, getting legal documents such as passports and birth certificates, and legal protection, like when reporting a crime to the police. According to a 2019 survey done by Transparency International, about 1 in 4 African citizens are forced to pay bribes for these kinds of services, and the poor are twice as likely to have to pay bribes than the rich. The survey also found that the most corrupt institutions are the police, government officials, and members of parliament.
On the national scale, corruption occurs when those in high power embezzle public funds, which they stash in foreign banks or with family and friends. Teodorin Obiang – the Vice President of Equatorial Guinea and coincidently the president’s son – was found guilty of embezzlement in 2017 in a French court. He had been accused of draining his country’s oil wealth for personal luxuries – much of which he stashed in Europe and the United States – including 18 luxury cars, a $31.5 million Parisian mansion, a $38 million private jet, a yacht, and expensive Michael Jackson memorabilia. At the backdrop of this concentrated wealth, around 77 percent of Equatorial Guinea’s population is below the poverty line.
In order for everyday African citizens to benefit from the fairer world economic order that President Addo talked about in his speech, both large-scale and small-scale corruption within the continent needs to be uprooted. Other world governments should also be firm in disallowing laundered assets from African leaders to be held in their country.
Why It Matters
So why does all this matter? As President Akufo-Addo states:
“For us, poverty is a daily reality that we live with and feel, for far too many of our people are burdened with it, and it robs us of the dignity that should be the inherent right of every human being.”
It does not sit well with this author that a person can have luxury beyond belief in one part of the world and abject poverty in another. It does not sit well that those who would work for their livelihood, if they could, are deprived of opportunities to make a decent living. Because of corruption and some unfair socioeconomic systems, some people feel stuck in those dire circumstances, on this uneven playing field. Removing these roadblocks will help everyday citizens across the continent be in a better position to flourish.
As President Addo also said in his speech, there’s a lot of “ingenuity and innovative prowess” in Africa, and there are so many great things that people all over the continent have already achieved towards the development and advancement of their home countries. In order to bolster the potential effects of their efforts, however, the international community must start by developing a global economic order based on honesty, fairness, and international economic justice.
Photo courtesy of the International Labor Organization (Flickr).