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Africa loses $88.6 billion annually according to a United Nations report from 2020. Funds that could be used towards local climate, poverty reduction, and food security initiatives are, unfortunately, evaporating because of tax evasion.
The report states that because of activities like illegal trade, and avoiding tariffs and taxes, large corporations take money away that African governments could use for social programming and infrastructure. A Brookings Institute report states that these billions of dollars which are lost every year could be crucial to the continent’s economic development.
Gbemisola Joel-Osoba, global policy economist at the ONE Campaign, says that financial independence is critical for African countries today, and yet the challenges to keep capital within African countries are tremendous. “We are losing our money,” says Joel-Osoba.
Part of the work Joel-Osoba does at The ONE Campaign is campaigning for greater transparency of global aid coming into Africa and domestic tax policies in various countries. ONE also focuses heavily on advocating for ending extreme poverty and preventable diseases in Africa. As a global movement, ONE has worked to put pressure on African governments to support programs around these issues, and also create effective policies around issues like poverty, hunger and unemployment.
To name a few of their projects, ONE has helped secure approximately $37.5 billion in funding for health initiatives like the Global Fund to Fight AIDS, and were able to get the BUILD Act passed as a law in the U.S. to bring more private sector investments in Africa.
Future of Good sat down to chat with Joel-Osoba about the current state of global development finance, and the domestic and global work that needs to be done for African economies to be self-sufficient.
This conversation was edited for length and clarity.
Neha: I know a lot of your work at The ONE Campaign focuses on domestic resource mobilization, can you talk about what this entails?
Gbemisola Joel-Osoba: Domestic resource mobilization (DRM) has to do with how governments are raising revenue, and how they’re spending it. I typically do most of my analysis on government projects and budgets, especially for African countries. So that’s on the expenditure side; on the revenue side, I look at tax policies and if African governments are mobilizing enough revenue to support their spending.
Neha: Why is it important for African governments to pay attention to DRM?
Gbemisola: If African economies are not mobilizing resources domestically, then they are relying on borrowing aid, and these outer sources of financing are dependent on factors that are outside their own control. But they can control how much they are mobilizing internally, how much revenue they are raising, and they can roll out policies that will help to boost their own domestic resources.
Neha: And how does strengthening DRM help in decolonizing development finance?
Gbemisola: It’s very obvious that development finance has been clearly colonized and that African countries are really on their own. We can’t continue to rely on richer countries to get us out of poverty and move to the developed status that we want to get.
Neha: What are some challenges that have been prevalent when it comes to DRM in African countries?
Gbemisola: There’s been some challenges in mobilizing DRM even both domestically and globally. On the domestic front, when there is a conflict and political instability in a country, businesses can’t stay open and they can’t pay taxes. There’s also the issue of corruption as leaders and many civil service politicians are pocketing money that should be going into the government coffers. So these issues are affecting government’s ability to mobilize domestic resources
Neha: What about on a global level?
Gbemisola: On the global side, some of the challenges that are being studied because of DRM is one example of a weak global financial framework that enables big corporations to avoid tax in the low income countries. Another example is the ineffective use of tax waivers and tax incentives which is causing significant leakage in domestic resources.
Neha: Given the billions of dollars that’ve been lost because of tax evasion, can you talk about the importance of transparency when it comes to international aid and funds that come into and flow out of Africa?
Gbemisola: [At ONE], we’ve been having a recent conversation about how we can continue to boost accountability, to get the public to continue to hold our leaders accountable, because we still see this issue of corruption, diversion of funds being perpetrated across the continent, and we are trying to do more work around that area.
One critical area that we’re looking at is empowering our supporters with information they need to be able to hold the government accountable. [We want to] get them to see that the government got this amount of money, and make them question how they are spending this money — what are they using it to do?
Neha: How could international funders better support decolonizing global aid through how they finance development in Africa?
Gbemisola: It starts with transferring some of the decision making rights to African countries. The other aspect is also capacity building. For instance, development financial institutions can use technical assistance as a tool of investment — so spend more on building the capacity of businesses in those countries so that they are able to be independent. You are transferring expertise to them, helping them to be sustainable in how they run their organization and make more money.
Neha: What can African governments do to support these decolonizing efforts?
Gbemisola: Governments in Africa also have a role to play in ensuring that they create a stable environment that will attract private sector investments. So even if donor governments are trying to mobilize private sector investors into Africa, African governments also have a role to play by strengthening their own policy environment, ensuring stability, and not drastically changing tax policies. The future of development finance is collaborative.