[Marxism] (Fwd) Stopping the drain of Africa's wealth

Patrick Bond pbond at mail.ngo.za
Fri Apr 14 23:05:13 MDT 2006

(Feedback welcome.)


EQUINET NEWSLETTER 62 profiles new information on STOPPING THE DRAIN OF

The April 2007 EQUINET newsletter on World Health Day highlights a new
EQUINET report with Centre for Economic Justice in Southern Africa authored
by Patrick Bond on the wealth flows out of Africa that can be found at

The newsletter editorial on the report is shown below.  



EQUINET Steering Committee, April 2007

At this year's World Health Day the WHO will be launching its annual report
which focuses on human resources for health. In Africa, as we have raised in
previous editorials in this newsletter, we are experiencing a 'global
conveyor belt' of health workers flowing from rural, primary health care
level in the public sector to urban, private care; from poor to rich areas
and countries in the region and from the continent, with its high health
needs and under-resourced health services to developed, high income
countries such as USA, Canada, UK and Australia. The loss of public
investment and social resources in this outflow is significant and outweighs
any returns in remittances or aid for education.

However health workers will certainly continue to go to where they can work
in adequately resourced health services, in decent jobs and where they can
secure their own family needs. This draws attention to the much wider
question of how in Africa we secure the resources to retain and value our
health workers, and more widely to meet our population health needs. The
latest EQUINET discussion paper, written by Patrick Bond and produced
jointly by EQUINET with the Centre for Economic Justice in southern Africa
points to a South-North drain of African wealth that undermines the
resources for health and development, and that increases our dependency on
the global North, and our loss of health workers.

The 2005 Commission for Africa report leaves the impression of a continent
receiving a vast inflow of aid, with rising foreign investment, sustainable
debt payments and adequate remittances from the African diaspora to fund
development. Our discussion paper tells a different story: of significant
and dramatically rising flows of resources out of Africa northwards,
draining the continent of the important resources needed to address its own
development, including in health. The paper synthesizes data about the
outflow of Africa's wealth, to reveal factors behind the continent's ongoing
underdevelopment, as the basis for proposing policy measures to reverse
these flows.

The statistics speak loudly of a continent being progressively dispossessed
of its wealth, and thus the resources it needs to improve health and human

* A debt crisis with repayments in the 1980s and 1990s that were 4.2 times
the original 1980 debt levels, and annual debt repayments equivalent to
three times the inflow in loans and, in most African countries, far
exceeding export earnings, leaving a net flow deficit of by 2000 of $6.2
* Unequal exchange in trade and trade liberalisation policies that have
lowered rather than increased Africa's industrial potential and exacted an
estimated toll in sub-Saharan Africa of $272 billion over the past 20 years.
* Flows of private African finance that have shifted from a net inflow
during the 1970s, to gradual outflows during the 1980s, to substantial
outflows during the 1990s. 
* Falling foreign direct investment (FDI) from roughly one third of FDI to
third world countries in the 1970s to less than 5% by the 1990s, and a shift
to highly risky speculative investment in stock and currency markets - with
erratic and overall negative effects on African currencies and economies.

Africa is commonly and mistakenly represented as the (unworthy) recipient of
a vast aid inflow. Aid flows in fact dropped 40% during the 1990s, and the
phantom aid that flows back to the source countries in technical and
administrative costs was estimated in one study to be $42 billion of the
2003 total official aid of $69 billion, leaving just $27 billion in 'real'
aid to poor people. 

There is also a perverse subsidy in the extent to which industrialised
countries exploit the global stock of non renewable natural resources . This
takes place through the extraction of minerals and natural resources from
Africa by Northern investors with little investment in return and few
royalties provided. It also takes place through use of global goods like the
earth's clean air. Forests in the South absorbing carbon from the atmosphere
are estimated for example to provide Northern polluters an annual subsidy of
$75 billion. A method for measuring resource depletion used by the World
Bank suggests that a country's potential GDP falls by 9% for every
percentage point increase in a country's dependency on resource extraction.
This implies, for example, that Gabon's people lost $2,241 each in 2000,
based on oil company extraction of oil resources, 

These outflows deplete the resources available for productive and human
development. They are felt most heavily by women and poor communities, and
undermine progress towards the achievement of human security for the
majority of African people. 

They imply that the first step to effect genuine growth and to deliver
welfare and basic infrastructure is for African societies and policymakers
to identify and prevent the vast and ongoing outflows of the continent's
existing and potential wealth. 

Current global reform agendas do not address these outflows. While they
point to debt and unfair trade, they do not seek to reverse the outflow of
African wealth. 

Campaigns to reverse resource flows and challenge perverse subsidies are
emerging from grassroots struggles and progressive social movements, such as
those in Africa that are resisting privatisation and commodification of
basic services, pressuring for rights to generic anti-retroviral medicines
and resisting encroachments on human development through trade and
macroeconomic policies that intensify inequities. 

These grassroots struggles can be consolidated by national governments and
regional co-operation to improve disclosure of financial flows and apply
policies within Africa to prevent the outflows and encourage the 'stay' of
domestic investment resources. The paper points to some options - systemic
default on debt repayments, strategies to enforce domestic reinvestment of
pension, insurance and other institutional funds; national-scale regulation
of financial transfers from offshore tax havens; clearer identification and
renegotiation of tied or phantom aid; and improved calculation and
negotiation around of the costs of FDI (not simply the benefits), including
natural resource depletion, transfer pricing and profit/dividend outflows. 

EQUINET welcomes the focus on this year's World Health Day on one area
through which Africa is bleeding- its loss of human resources. We would
however urge that to deal with this effectively in the continent, and
address the inequity globally in the resources needed for health and human
development goals, we need to deepen the debate. In 1998 EQUINET highlighted
that a critical dimension of equity is the power and ability people have to
make choices over health inputs and their capacity to use these choices
towards health. For Africa this must surely include bringing control over
the resources for health and development back within the continent. 

Please send feedback or queries on the issues raised in this briefing to the
EQUINET secretariat at TARSC, email admin at equinetafrica.org . EQUINET work
on economic policy and health is available at the EQUINET website at


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