Africa offers exciting investment possibilities for US companies. But to generate shared prosperity and guarantee a stable business environment, investment must be responsible.
The historic first US-Africa Leaders Summit in Washington D.C on August 4-6, 2014, will focus on “Investing in the next generation.” As the summit approaches, the Africa Progress Panel calls for fairer and more ethical investment and business practices, particularly by US-listed companies in Africa.
Africa is among the front-runners in economic growth in the world. It also has abundant natural resources and a large, youthful workforce, making it a region with tremendous investment opportunities. But many Africans remain stuck in poverty. Investments in natural resources and agriculture have so far done little to boost government revenues, reduce poverty and inequality, and create jobs.
In the oil, gas and mining sectors, in particular, multinationals make use of shell companies in offshore tax havens to evade taxes. Kofi Annan, chair of the Africa Progress Panel, says these practices “weaken disclosure standards and undermine the efforts of reformers in Africa to promote transparency”. He adds that such practices “facilitate tax evasion and, in some countries, corruption, draining Africa of revenues that should be deployed against poverty and vulnerability”.
Irresponsible investment and business practices include the plunder of Africa’s fisheries and forestry resources. Instead of boosting government revenues and generating jobs, fisheries and forestry resources are being squandered through corrupt practices and unscrupulous investment activities.
“Natural resource plunder is organized theft disguised as commerce,” says Mr. Annan. “Commercial trawlers that operate under flags of convenience, and unload in ports that do not record their catch, are unethical.”Mr. Annan adds that these criminal activities compound the problem of tax evasion and shell companies.
This year’s Africa Progress Report, Grain, Fish, Money: Financing Africa’s Green and Blue Revolutions, challenges the international community to combat the plunder of natural resources by strengthening multilateral rules. Illegal, unregulated and unreported fishing has reached epidemic proportions in Africa’s coastal waters. West Africa is conservatively estimated to lose US$1.3 billion annually. Beyond the financial cost, this plunder destroys fishing communities, which lose critical opportunities to fish, process and trade. Another US$17 billion is lost through illicit logging activities.
By supporting transparent investments and paying fair taxes, US multinationals can help fight poverty and hunger, and increase the government revenues that pay for education and health infrastructure in Africa. The Africa Progress Panel believes that the best way to secure a stable environment for investments is for US investors to negotiate contracts with governments in a transparent manner consistent with international standards.
With two-thirds of Africans depending on farming, boosting agriculture is an effective way to reduce poverty and inequality. “We have to significantly boost our agriculture and fisheries, which together provide livelihoods for roughly two-thirds of all Africans,” Mr. Annan says.
“We have a rising and energetic youth population,” Mr Annan adds. “Our dynamic entrepreneurs are using technology to transform people’s lives. We have enough resources to feed not just ourselves but other regions, too. It is time for Africa’s leaders – and responsible investment partners – to unlock this huge potential.”