Switzerland’s apparent reluctance to boost transparency in its sizeable commodities trading sector can only be bad for citizens in Africa’s resource-rich countries
Switzerland can play a crucial role in curbing corruption and mismanagement of Africa’s natural resources by accelerating regulation of its sizeable commodities trading sector.
The Africa Progress Panel (APP) is urging Swiss authorities to demand more transparency of its commodities traders, ahead of this week’s top-level commodities conference in Lausanne. Organised by the Financial Times and set to run from March 31st to April 2nd, the conference brings together CEOs and top managers from some of the world’s largest commodity and banking companies.
Switzerland is now the world’s most important commodity hub, accounting for about a third of the world’s trade in oil and grain, half of the global trade in coffee and sugar, and nearly two thirds of all trade in metals and minerals. But the country is falling further behind other jurisdictions, who are progressing on transparency. Arguably the world’s most secretive financial jurisdiction, Switzerland and Swiss-based trade mispricing may account for illicit financial outflows from developing countries worth as much as US$120 billion per year, according to a recent report.
In a review of its commodities sector in March 2013, the Swiss government noted the strategic importance of commodities, reputational issues, and the related challenges of corruption, human rights and environmental protection. However the progress report launched last week shows significant gaps still remain before Switzerland reaches global transparency standards. Despite extensive lobbying for reform and legally binding regulation, codes of conduct remain strictly voluntary in Switzerland.
“By failing to enforce disclosure and effectively regulate its sizeable commodities trading sector, Switzerland is unwittingly playing a role in sustaining corruption and mismanagement,” says Peter Eigen, member of the Africa Progress Panel, founder of Transparency International and Chairman of its Advisory Council, and former founding Chairman of the Extractive Industries Transparency Initiative (EITI).
The 2013 Africa Progress Report, Equity in Extractives: Stewarding Africa’s natural resources for all (link), indicated that while Africa’s natural resources have fuelled rapid economic growth, the majority of Africans have yet to benefit. In Africa’s resource-rich countries, the natural resource sector is usually the main source of illicit financial flows.
“The global commodity trade is one of the world’s largest industries, procuring from some of the world’s poorest and most unstable countries. But its contribution to human development will be tiny without more transparency. Transparency prevents corruption and boosts accountability too. Tax avoidance and evasion, unfair contracts, and secrecy around company ownership and revenue flows, remain major concerns that prevent African and other citizens from benefitting from the resources beneath their feet,” says Eigen.
The international community continues to move towards an effective global transparency standard and has made a start with the development of a credible and effective multilateral response to tax evasion and avoidance. Switzerland has already made efforts to open up its banking, but needs stronger transparency measures for its commodity traders to ensure it catches up with its peers.
 “Estimating Illicit Flows of Capital via Trade Mispricing: A Forensic Analysis of Switzerland”, January 21, 2014, Center for Global Development – http://international.cgdev.org/publication/estimating-illicit-flows-capital-trade-mispricing-forensic-analysis-data-switzerland