European multinational companies are undermining Africa’s development. Africa is making progress in the fight against poverty and inequality, but it is too slow, especially for the 226 million Africans - the majority of them women and girls - who go to bed hungry every night. The European Union has made commitments to fight poverty and increase food security in Africa, such as the Food Security Policy Framework in 2010, but it has failed to prevent some reckless companies from undermining its own development objectives.
This hypocritical stance hurts the most vulnerable people, who see their land grabbed or find it hard to get fair prices for their produce. At the same time Africans often fail to benefit from the investments of European companies because the companies do not pay the taxes they are due. At the EU - Africa Summit, governments should take action on these two crucial areas where multinational companies are undermining African and international development efforts in the continent.
Land, agriculture and food security
Inadequate European policies have incentivised or failed to prevent European companies from buying or leasing large tracts of Africa, often taking plots used by local communities to grow their food and make a living. For example, the European policy on biofuels dictates that biofuels should be part of the energy mix for transportation within the EU. As the EU cannot provide the land necessary for their cultivation, land the size of Belgium has been bought by around 100 European companies sometimes with dire consequences for local communities. Investments in Kisarawe, Tanzania, by the UK company Sun Biofuels and in Ngith, Senegal, by the Italian-Senegalese company Senethanol have displaced and undermined the rights of local communities and farmers.
European companies and pension funds are also investing in land in developing countries, sometimes for purely speculative purposes. Land held by speculators is often taken out of production and therefore no longer produces food or contributes to the local economy.
Land is crucial for the survival of communities of small-scale farmers throughout Africa. They rely on it to produce the food that sustains their families. Smallholders produce 80 percent of all food consumed in Sub-Saharan Africa. Most of the African land is worked by women, so empowering and supporting smallholders is a crucial tool to promote gender equality. Land is also a crucial asset which, thanks to its earning potential and intrinsic value, can be used to obtain badly-needed credit.
In the Manhiça District, Mozambique, smallholder farmers are facing a number of challenges from large agribusiness companies that have targeted the region in recent years. Companies have not only taken land, profiting from the lack of formalization of the customary law and the low levels of awareness about land rights among smallholder farmers, but also put pressure on communities to shift the crops they grow and accept lower prices. As a result, local communities are trapped in poverty - a vicious circle that is only slowly being broken down by increasing awareness and supporting farmers in registering their lands.
Tax dodging by multinational companies in Africa is greater than development aid to the continent. It is depriving African countries of much needed money to pay for schools, hospitals and other essential services.
The African Union revealed last weekend that between $50 - $60bn a year is lost in Africa solely through the manipulation of trade prices by multinational companies – and this is just one form of tax dodging. Ten percent of the money Ethiopia loses through tax dodging by corporate investors would enrol 1.4 million more children in school.
Zambia, for example, is an extremely wealthy country in terms of natural resources, but its human development index score is among the 25 lowest in the world. A lot of the money invested in the country by multinational companies is through the secretive world of tax havens to escape taxation.. ActionAid research has shown that Zambia Sugar, a subsidiary of Associated British Foods, siphoned over US$83.7 million out of Zambia into tax havens including Ireland, Mauritius and the Netherlands by exploiting double taxation treaties signed with these countries. This resulted in an estimated loss of US$27 million in public revenues, enough to put 48,000 children in school.
How do we tackle these problems?
European and African countries need to take action to ensure multinational companies do not undermine the African development. . But in an increasingly globalised world where multinational companies have revenues several times larger than many countries and operate across multiple countries and through hundreds of subsidiaries, it is difficult for a single country to tackle the problem effectively. There is a need to adopt a coordinated approach.
ActionAid calls on European and African governments to:
Introduce measures to tackle tax evasion and avoidance. Multinational companies should pay their taxes in the jurisdictions where they do business and make their profits, so that they make their fair contribution to national budgets and expenditure.
Refrain from pressuring African governments to sign Double Taxation Treaties that can facilitate tax avoidance and the use of tax havens, and agree to full reviews of existing treaties to eliminate such abuses.
Require companies to make their accounts and company structures (including beneficial ownership) public and fully transparent.
Protect the rights of African smallholder farmers and put them at the core of the EU-Africa cooperation on agriculture. These rights include access to land, the right to use, exchange and sell their own seeds, access to water and financial resources, and the possibility to provide input into agriculture research so that it respects their knowledge and matches their needs.
Acknowledge the need to regulate and monitor the increasing role of the private sector, in land grabs in Africa. In addition, the Voluntary Tenure Guidelines agreed at the Committee on World Food Security should be recognised as the international standard for land issues, and the EU and Africa should commit to support their implementation.
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