Bad governance is often cited by the West as the reason why the African continent has refused to develop decades after Independence, despite its huge abundance of resources, and in truth, they are right, at least partially. Think about the fact that billions of dollars meant for the provision of basic social infrastructures are looted by so-called African leaders, sent to private off-shore accounts, and used whenever needed to build houses and hotels outside their respective countries as well as to fund elections. But there is something that is not really talked about that is also a major cause of the developmental status of the African continent and that is the existence of Western multinational corporations. These companies were established in Africa under the guise of helping the continent to develop but the shocking truth is they are an extension of Western colonialism. With their help, the West continues to plunder the resources of the continent and ripping hundreds of billions of dollars off the continent. The question is how come these Western companies can comfortably loot the continent and yet nobody is doing anything about it? Is Africa so weak that, it has allowed not only foreign governments but also foreign companies to exploit it?

The traditional thinking is that the African continent is so poor and cannot take care of it and so it’s up to the good people of the West to help the continent. So, they try to help by pouring billions of dollars into Africa through foreign aid and other private-sector flows, and according to them, they do not receive anything in return from the continent. But that kind of thinking is false. It’s actually the reverse. The African continent has been a net creditor to the rest of the world for decades while its people suffer under the so called aid given by the good West. It’s reported that in 2014 Africa received the sum of 133.7 billion dollars in aid but do you know how much left the continent that same year? A whopping 191.9 billion dollars in the form of debt repayments, multinational company profits and illicit financial flows. That’s what, a net loss of 85 billion dollars. Imagine that.

Now, talking about illicit financial flows, the general idea is that corrupt African leaders are responsible for looting major public funds in their countries and keeping them in private offshore accounts. But, that idea has been challenged by a recent report. According to estimates by Global Financial Integrity, corrupt activities such as bribery and embezzlement of public fund constitute only about 3% of illicit outflows. Criminal activities such as drug trafficking and smuggling make up 30% to 35% but guess what takes the major part? Foreign MNCs. These guys take a whopping 60% to 65% of illicit outflows according to the report. So can you see that money stolen by corrupt governments is insignificant compared to the money looted by Western companies? From the report, it has been reported that the most common way illicit money is moved across borders is through international trade.

The scale of this movement is shocking as revealed in a new report by the UN Economic Commission for Africa. The report, compiled by a high-level panel probing the illicit financial flows from Africa and chaired by Thabo Mbeki, the former President of South Africa, says that illicit transfer of funds from the developing world to the developed countries could amount to a staggering $1.5 trillion every year. The panel points an accusing finger at the global multinationals that use a variety of means to siphon off vast amounts that the developing world, including Africa, desperately needs. It terms this horrendous practice as ‘economic sabotage’ and adds that these illegal transfers undermine trade and deal lethal blows to the socio-economic fabric of poor communities in Africa. This wholesale vacuuming of Africa’s resources extracts a terrible toll on life expectancy, women and child mortality and social development by taking away resources that could otherwise have been spent on vital social services such as health care.

According to the report, over a 39-year period from 1970 to 2008, Africa has lost an estimated $854 billion. This means an average of $22 billion per annum – an amount that could have easily made a huge difference in the lives of the continent’s poorer communities. In fact, and despite all the pious statements about social responsibility made by multinationals, the panel says the trend is getting worse. Between 2000 and 2008, the average illicit flows amounted to $50bn per year, which is also the estimate for the current year. Fast forward to 2010, it was revealed that Africa was cheated out of US$11 billion through just one of the tricks used by multinational companies to reduce tax bills. This amount is equivalent to six times the amount needed to plug the healthcare funding gap in Ebola affected countries of Sierra Leone, Liberia, Guinea and Guinea Bissau. Shocking right? The report also says that “just one third of the loss associated with illicit financial flows would have been enough to fully cover the continent’s external debt which reached $279bn in 2008”, and that for every $1 received in aid, $10 is lost in illicit transfers.

Winnie Byanyima, the Executive Director of Oxfam International’ confirms this looting of Africa’s fund by foreign corporations when she said that “Africa is hemorrhaging billions of dollars because multinational companies are cheating African governments out of vital revenues by not paying their fair share in taxes. If this tax revenue were invested in education and healthcare, societies and economies would further flourish across the continent.” In 2010 alone, these multinational companies avoided paying taxes on $40 billion of income through a practice called trade mispricing. It’s a situation where a company artificially sets the prices for goods or services sold between its subsidiaries to avoid taxation. But, trade mispricing is just one of the ways multinational companies avoid paying their fair share of taxes. According to UNCTAD, developing countries as a whole lose an estimated US$100billion a year through another set of tax avoidance schemes involving tax havens.
These companies also lobby hard for tax breaks as a reward for basing or retaining their business in African countries. Tax breaks for example provided to the six largest foreign mining companies in Sierra Leone add up to 59 per cent of the total budget of the country or eight times the country’s health budget. So, if you add in mix illicit and illegal transfers involving theft, bribery and other forms of corruption by government officials, drug trading, racketeering, counterfeiting, contraband and terrorist financing to the amounts looted by these foreign mncs, you can imagine how much is coming out of Africa yearly.
Now aside from the issue of these foreign companies looting African funds, there is also the issue of land grabbing by them. Due to the economic downturn after the 2008 crisis, foreign mncs decided that the new sector for them to invest in is African farmlands. African goveememts and communities leased the lands to these Western companies after promises by the latter to produce food, electricity, and jobs for the community. However, these promises are not fulfilled. In fact, these communities end up being worse off after they enter into business transactions with multi-national corporations than they were before their involvement. This is true not only because the promises of jobs and economic opportunities did not come to fruition, but also because much of the land that companies decided to invest in is not actually cultivated. In some cases, corporations purchase land without an understanding of how to properly farm it. Instead of using methods that would have high yields and be sustainable, they use methods that wear the land out quickly, leaving it unusable to the community. When the land is cultivated, it is often used to develop biofuel technology that drives up the prices of food crops. The indigenous people must watch as corn is grown to feed into engines rather than their hungry stomachs.

So, despite how inhumane, corrupt and wicked their actions are, how come these foreign mncs are still comfortably looting the African continent? Alarms have been raised, yes but why has no tangible action been taken against them?

The exploitation of Africa resources by foreign mncs actually has its roots in colonialism and picked up when the World Bank and IMF demanded that in exchange for financial help, African countries must implement the reforms in the structural adjustment program. Part of the reforms included easing regulations to attract investment from foreign businesses which means allowing foreign MNCs room to establish their companies in the continent. But then their entrance into the continent has done more harm than good. Instead of enjoying the investments from foreign companies which was the reason why they established in the first place, Africa opened its economy to self-interested multinational corporations who have looked more than they have given.
The reason why Africa is vulnerable to this exploitation by Western companies is due to its underdeveloped governance and economic structures. A UN Conference on Trade and Development in 2020 reported that high volumes of intra-company trading, the secrecy cloaking foreign investment activities, and loopholes in treaties leave countries in Africa vulnerable to tax avoidance. In essence, the governments of Africa lack the human, financial, and technical resources to stem this outflow of wealth.
So, you can see that yes, African politicians are corrupt but these foreign MNCs are more corrupt, and if Africa is to change its state of development, one of the things that must be done since the continent does not have the resources to control them is to kick them out. They have to leave just like France’s military troops. They have not done anything to help the development of the continent. Instead, apart from looting money, they are also responsible for pollution in Africa, contamination of the seas, and destruction of arable land. What good are they then? They should be kicked out.

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