Mine operators swindle African countries – report

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Tanzania’s mining revenues are touted as a key way to reduce reliance on foreign aid and pull people out of poverty, but experts argue companies are swindling the government out of at least $248 million (R2.6 billion) a year.

The east African nation came out worst in a list of nations across the continent examined by the watchdog group Global Financial Integrity (GFI), with nearly $19bn in illicit flows over the past decade, the equivalent to over 7 percent of its total government revenue.

“There’s a narrative in the development community that there’s something wrong with developing countries, because we keep pumping money in, and they’re not developing as quickly as we’d like them to,” GFI economist Brian LeBlanc said last week.

“The reality is that we’re draining money out, and we’re doing it at an increasing rate.”

The GFI’s examination of trade mis-invoicing reveals stark figures. Mis-invoicing occurs when businesses deliberately lie about the value of the goods they are importing or exporting. There are a lot of illegal reasons to do this, including tax evasion and money laundering.

GFI said trade mis-invoicing was a $424bn a year problem globally, and made up about 80 percent of all the money that flowed out of developing countries illegally.

Numbers like this, when compared with aid, mean there is far more money draining out of Africa than going in.

Much attention has been given to transfer pricing, when multinational companies employ accounting tricks to shift profits into countries where they will pay less tax.

Trade mis-invoicing is different. It involves tangible goods that are shipped across borders, and the activity is therefore a lot easier to spot.

The researchers simply looked at the value of goods sent to or received from developed countries – where customs officials tend to be more rigorous – and compared it with the values declared in developing countries.

In Tanzania, the report discovered that, rather than undervaluing imports, corporations were overvaluing them. In the case of fuel imports, overvaluing allows companies that are exempt from paying fuel taxes – such as mining firms – to reduce on paper the profits they will be taxed on, with GFI calculating as much as $248m a year in revenue was lost.

In total, at least $8bn was illegally drained out of the Tanzanian economy over just 10 years, LeBlanc said.

“These critical resources could have helped to create more jobs, to fund greater access to social services to improve the lives of average Tanzanians, and to improve infrastructure that is vital to additional economic development,” he said.

But it was not all money going out. The report identified nearly $11bn in export over-invoicing, which may be a sign of money laundering and payments for illicit goods.

The port of Dar es Salaam is a major hub for the illegal export of wildlife products like rhino horn and ivory, as well as drugs and gold.

Stronger and more specific laws could help tackle the problem, the report added.

It suggested that customs officials should have access to up-to-date pricing data, to allow them to flag questionable exports and imports.

“For years and years this problem has been known by the World Bank and International Monetary Fund, but it’s been viewed as an intrinsic problem with African countries, not looking at the other side of the equation – the financial system, which is largely created by Western nations,” LeBlanc said. “It’s a much larger problem.” – Sapa-AFP


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