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BANKING
Capital Flight
Nana Mensah
Published: 04-JUN-04

In terms of trade, Africa's total share of world trade still stands below three percent of the global money game. This continent remains unmapped on the business atlas, in spite of increased efforts to upgrade it. Africa virtually has neither trade tag nor identity.

This begs the questions: who is doing business on the continent - Africans or non-Africans? Where are Africans spending their monies and on what?

Investments on the continent are controlled, owned and operated by foreign multinationals. In 2001, while many governments were appealing for foreign direct investment, some key people presided over a capital flight worth hundreds of billions of US dollars in secret accounts offshore.

In like manner, several millions of US dollars were spent by wealthy Africans on the lavish acquisition of assets, with no return on their money. There is no specific formula for capturing broad non-taxable capital flight - often close to the size of a country's GDP - which adds to the deplorable economic situation on the continent. When it comes to individuals misusing public funds, Africa has the distinction of including the world's most corrupt nations, according to Transparency International.

The exodus of most African leaders' money to foreign accounts is no secret, says Prof. Armah of the Institute Of Economic Affairs. "We simply don't consider investment," says a lecturer at the University of Ghana in Legon. Many companies owned by Africans are yet to cross the threshold of Small and Medium Scale Enterprises (SMEs). Where are the investments? he asks.

Multinationals in Africa

There are only a handful of African multinationals, apart from those few mining companies that are up to international standards, because multinationals do not exist. "African companies are not competitive on their own ground," says a member of the Ghana National Chamber of Commerce, who believes that more Africans must begin to exert their influence on all fronts, including the economy.

In every aspect of life, the African seems to be shrinking and becoming a slave of Western-oriented technology, manufacturing and trade. Coca Cola, Unilever, Irani Brothers, just to mention a few, are all owned by foreign nationals, yet these dominate in the day-to-day needs of the African home. Although they are only a small part of the population, the wealth of most African nations is controlled by a selected few Westerners, with Middle East nationals also mopping up what they can find. South Africa is catching up with the Multi-choice (M-Net) fizz, and this approach must be encouraged.

Suffice it to say that Africans are still gambling on custody of basic undeveloped title-less properties, such as lands, and leasing them to wilful foreign developers. But in terms of real investment, and entrepreneurship, Africans are found only as employees and not as owners.

Africans are good at using foreign products, to the extent that some locally produced goods are exported only to be re-imported! So the question of tracing where Africans put their monies remains a puzzle. Prof. Adjei Bekoe, Board member of the Unilever Board of Trustees, attributes the situation to two factors. First, he believes that the poverty level of the average African makes him or her a victim who lives from hand to mouth with little left that can be saved. "This explains the virtually non-existent culture of savings," he said. "However, a lack of trust in the economy, which is characterised by high inflationary pressures and the devaluation of currencies, counts against investing in the national economy."

Prof. Bekoe sums up the situation by saying "We are putting our money in the wrong place." This is because many people have decided to invest, for example, in building structures that do not yield fiscal returns. He says that some of these developers take as long as ten years to develop lands and building structures. Is this the type of securities Africans - particularly those in Ghana - are going in for?

Long-term investment lacking

Currently, Chevron/Texaco, a US-owned oil holding, is developing a $500 million natural gas project that will run from Ghana to Nigeria. The project involves Nigeria, Ghana, Togo, and Benin. Among these equity holders, Chevron/Texaco owns over 70 per cent of the equity, with less than 30 per cent divided up among the four nations. No local bid to execute the project has been received. Bad taste and ego warp the individual African's sense of investing now to reap later. We are paying for this short-sightedness.