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Corruption Kills Millions, Steals Trillions - The Borgen Project
In a report released by ONE, an anti-poverty organization, it is estimated that corruption causes 3.6 million unnecessary deaths and costs poor countries $1 trillion each year.

Using three different methodologies to calculate the cost of corruption, all three measures indicated that the loss was either $1 trillion or $2 trillion.

In what is called a “trillion dollar scandal,” corrupt business practices, “anonymous shell companies, money laundering and illegal tax evasion” all serve to severely reduce the effectiveness of poverty relief efforts.

While extreme poverty has been reduced to half its original level over the past 20 years and has the potential to be completely eradicated by 2030, corruption is putting much of that progress at risk.

While corruption is damaging in almost all countries, it is especially dangerous in poorer and developing countries and mostly affects children. It is estimated that millions of deaths could be avoided if corruption was combated and recovered funds were reinvested in essential fields.

Furthermore, the money that is siphoned out of poor countries is not from international development aid, which has helped make a considerable improvement, but rather directly from businesses in these countries. The money is generated by domestic businesses and illegally extracted out of the country. The largest source of financial drain is the illegal manipulation of cross-border trade.

The organization found that even recovering a small amount of the money lost to corruption could dramatically affect development. In Sub-Saharan Africa, a small amount of recovered funds could provide an education to an additional 10 million children each year; pay for an additional 500,000 primary school teachers; provide antiretroviral drugs for more 11 million people with HIV/AIDS and buy nearly 165 million vaccines.

The report stresses action that serves to end the secrecy that allows corruption to thrive. If specific policies were implemented that increased transparency and combated corruption in the four areas of “natural resource deals, the use of phantom firms, tax evasion and money laundering,” developing countries could considerably stem the financial drain.

Natural resources in particular can provide a vital source of funds that could greatly increase economic growth in many developing countries. Corruption concerning natural resources is particularly bad, with approximately 20 countries in Sub-Saharan Africa rich in natural resources but receiving few benefits from these reserves.

Specifically, One calls for mandatory reporting laws for the natural resource sectors and publish open data so citizens are able to track where travels from and to, ensuring that the funds are not lost to corruption.

Published in anticipation of the G20 meeting in Brisbane, Australia in November, the organization stresses the importance for the G20 nations to address the issue. Now that the cost of corruption has been defined in real terms, the fight against corruption can become more directed and effective.

— William Ying

Sources: ONE 1, ONE 2, ONE 3, BBC, The Guardian, ABC News, Yahoo News
Photo: Blogspot

Hunger in South Africa Starvation
South Africa is one of the few countries able to provide its entire population with food. Each individual is able to receive approximately 600 grams of starch, 300 grams of fruit and vegetables, and 150 grams of meat or fish, according to the Food and Agriculture Organization of the United Nations. However, hunger in South Africa continues to be a prevalent issue.

 

Causes of Hunger in South Africa

 

Thus, 11 million South Africans are unsure where their next meal will come from, a concept known as “food insecure.” A quarter of the South African population is currently struggling from malnourishment and hunger. The rural areas are where hunger hits the hardest, and the majority of South Africa’s poor are living in the rural parts of the country.

The reasoning for this is because natural resources are being wasted and are not being put to appropriate use. The cost of food is rising, and many South Africans are finding it increasingly difficult to afford or access nutrient dense foods at an affordable price.

Dr. Gerhard Backebery, Executive Manager of the South African Water Research Commission states, “Although not conclusive, it seems that most poor people are buying and not growing the food that they are eating. At the same time it is of major concern that available natural resources (such as water, soil and plants) are under-utilized.”

 

Devastating Health Outcomes of Hunger in South Africa

 

People are not merely dying of hunger in South Africa, but more specifically, they are dying from the side effects of lacking proper nutrients.  What people are able to eat is directly stemmed from what they are able to afford. Children, in particular, are suffering from undernourishment and malnourishment; a study in the Eastern Cape shows that some children are only ingesting meat one time per month, therefore they are severely lacking in minerals such as zinc and iron.

One in five children are reportedly stunted from lack of necessary nutrients and minerals.  Their nutrient deficiencies can have a lasting effect on their growth process, causing significant impairment to their physical health and mental development.

For example, iron deficiencies can cause poor attention spans and fatigue, making brain activity slower and learning more difficult.

Food fortification is one of the main methods to help reduce malnutrition and deprivation of nutrients.

Wheat flour, sugar, and maize flour now include essential vitamins and minerals. The addition of fortification in food has led to a reduction in birth defects. Children who are not breastfed, or who have been improperly breastfed, present elevated levels of malnourishment, growth defects, diarrhea, and are at greater risk of HIV and AIDS.

Other factors such as access to clean water, sanitization and health care can have a large impact on resolving hunger in South Africa. They influence health and can lead to maintaining essential nutrients that may otherwise be lost due to diarrhea and dehydration.

– Rebecca Felcon

Sources: UNICEF, Food Bank, Mail and Guardian
Photo: Telegraph

africa_natural_resources.jpg
Countless everyday appliances and gadgets would not exist if it were not for the minerals that come from Africa. From cars to cell phones, laptops, airplanes and batteries, much of what makes the world go round depends on resource-rich African nations that are being fueled by a global commodities boom.

Although much can be said of whether the rising demand for these minerals is actually benefiting those at the bottom of the pyramid, it is certain that emergent African economies are growing thanks to these raw materials. If well-managed, Africa’s mineral resources can lift the continent out of poverty and catapult it toward growth and prosperity for all.

Here are some of the everyday objects that are created with African natural resources.

1.       Cars

The catalytic converters in cars that are made to reduce pollution are made with platinum and rhodium. South Africa alone produces 72% of the world’s platinum and 83% of the world’s rhodium.

2.       Electronics

Devices such as cell phones, laptops, and other electronic gadgets are made from tantalum. Africa provides 71% of the world’s tantalum, with Mozambique leading the region as the source of 24% of the global production of the mineral, followed by Rwanda with 20% of the production.

3.       Jewelry

In 2011, more than 57% of the world’s diamonds, nearly 75% of the world’s platinum and 20% of the world’s gold was found in Africa. Botswana is the world’s second largest producer of gem diamonds, and in 2011, the diamond industry accounted for half of the government revenue.

4.       Batteries

The cobalt used in the electrodes of rechargeable batteries is growing rapidly in demand due to the use of portable electronic devices. In 2011, Africa accounted for 58% of the global production of cobalt, while the Democratic Republic of Congo alone represented 48% of this supply. Mineral mining, however, has been implicated in funding conflict in the country.

5.       Airplanes

Many aircraft parts are made with aluminum alloys, which can account for up to 80% of the jet’s weight. Jet engines also use superalloys that contain cobalt and chromium. South Africa represents 47% of the global production of chromite – used to produce chromium -, while Guinea represents 8% of the world’s production of bauxite, used to make aluminum. Guinea has almost half of the world’s bauxite reserves and is predicted to become a world-leading producer of iron ore in the next decade.

6.       Electricity

Besides coal and gas, Africa produces 16% of the world’s uranium, which is the source of the nuclear fuel that provides 14% of the world’s electricity.

7.       Oil

Last year, Africa produced 10% of all the world’s oil – nearly 9.4 million barrels per day. Leading this production is Nigeria, with 37 billion barrels of proven reserves of oil – enough to keep supplying oil at 2011 levels for the next 40 years.

– Nayomi Chibana
Feature Writer

Sources: African Minerals Development Centre, CNN
Photo: CSMonitor

Poverty in Namibia

Located on the southernmost part of Africa’s western coast, Namibia is not recognized by most Americans.  Namibia invests heavily in its people’s education and health, possesses a free press, competitive business markets and one of the lowest rates of corruption in Africa.

However, it is marked by an extremely large economic divide among its citizenry.  Although it is technically a middle-income country, there is much poverty in Namibia as a result of income inequalities.  The UNDP rates the income disparity in Namibia as the highest in the world, at 70.7 on a scale of 0 to 100. The top 5 percent of Namibians control 70 percent of the country’s GDP, while the poorest half of the population controls only 3 percent of GDP.  Poverty is most prevalent in rural areas of the country and among women, as is often the case.  Women head around 40 percent of households in Namibia, and these households are the poorest in the country.  Half of the country’s population lives below the poverty line.

The government’s poor land redistribution contributes significantly to Namibian poverty.  During the era in which Namibia was ruled by the apartheid regime in South Africa, large white-owned commercial farms dominated agriculture with cattle production.  The Namibian government has now divided these farms up and given the portions to natives in Namibia, still committing them to cattle production.  Essentially, the government has reproduced the apartheid era farms, but in a weakened form, as they are smaller and no longer subsidized by the South African government.  Experts suggest that a shift towards tropical agriculture and crop cultivation rather than cattle production is the solution to these land distribution issues.

Namibia also faces a severe HIV/AIDS epidemic, in which 19.7 percent of the country is afflicted.  As a result, life expectancy in the country has declined from 61 to 49 years.  Promoting economic growth in the country is difficult due to an under-educated and low-skilled workforce.  The economy is subsisted largely on the export of primary resources for little profit.

USAID uses its “ABCDE’s of development” to combat poverty in Namibia:  AIDS and TB prevention, care, and treatment, basic education, community-based natural resource management, democracy and governance, employment creation/enterprise development.  Through PEPFAR, the US has given $42.8 million in funds for disease management and prevention.  USAID has also provided training to 4,000 teachers in Namibia in the hope of developing human capital to form a more skilled workforce.  USAID also promotes community-based democratic programs to help strengthen the country’s democracy and governance.

Namibia, rich in natural resources such as diamonds, uranium, lead, gold, copper, zinc, bountiful fisheries, natural gas, and some of the most spectacular and varied scenery and wildlife in the world, could greatly benefit the world’s economy. It also benefits from an extremely developed infrastructure and a politically stable government.  If the country can overcome its disease issues, poor land redistribution and income inequalities, it will be an asset to the global economy.

–  Martin Drake

Source: World Bank, USAID, IRIN News
Photo: Steps For Children

EITI Improves Transparency and Payment
The G8 Summit in Northern Ireland on June 17 focused heavily on transparency and trade and brought the EITI — the Extractive Industries Transparency Initiative — into the spotlight. Immediately after the G8 Summit, it was announced that Italy and Germany would be implementing and piloting EITI, respectively, a step forward towards increased transparency for extractive industries worldwide.

Transparency for extractive industries is particularly necessary for developing countries that suffer from what is known as the resource curse– the trend for countries with high amounts of natural resources to be low in development. The resource curse is often perpetuated by irresponsible extraction processes that disrupt life in the host country and negatively impact its economy.

EITI, an initiative first introduced in 2002 by UK Prime Minister Tony Blair, focuses on transparency in the extraction industries — mining and logging being the largest ones worldwide — so as to address at least one element in the “resource curse”: the countries from which the extraction companies originate. While the initial implementation of EITI standards between 2002 and 2005 was aimed at voluntarily committing companies, by 2005 EITI standards took the form of “a disclosure standard implemented by countries.”

Stakeholders in EITI include over 70 of the world’s largest oil, gas, and mining companies, including Britain’s BP, America’s Chevron, Britain and Australia’s Rio Tinto, and Brazil’s Vale. The transparency standards include improved payment and revenue reporting on the parts of both company and host country. It aims to answer the questions, “How much are governments receiving?” and “Where does this money go?”

The G8’s commitment to and support for the EITI shows a continued dedication to improving transparency worldwide and addressing the resource curse. While EITI still faces obstacles such as ensuring members procure timely reports and that these reports are not so delayed as to prove entirely unhelpful. At present, 23 countries are considered EITI Compliant, and 16 have status as EITI Candidates including the recent additions of the Philippines and Honduras.

– Naomi Doraisamy
Source: Christian Science Monitor, EITI, Thomas Reuters Foundation
Photo: Christian Science Monitor

resource-curse-foreign-investment
“What is a house without food?” A report from the NGO Human Rights Watch poses this question straight from the lips of a resettled farmer in Mozambique. The report examines Mozambique’s coal mining boom due to foreign investment, documenting the resettling of farmers in resource-rich areas that causes food insecurity.

In Mozambique in particular, the mining companies Vale and Rio Tinto displaced local communities from 2009-2011, a move that majorly disrupted daily life for almost 1400 households. For many of these displaced families, the investment in natural resources that should have brought increased profits to the region and country instead jeopardized regular access to food, water, and income opportunities.

The Paradox of Plenty

Statistically, countries with a high amount of natural resources experience lower economic growth and a slower development rate than countries with less natural resources. This is known in economic theory as the “resource curse,” or the paradox of plenty. Multibillion dollar companies investing in these countries’ economies promise a “trickle-down” effect that rarely — if ever — improves the quality of life and average daily income.

A number of phenomena are linked to the “resource curse.” From a historical perspective, regions with visible high amounts of natural resources are seen as more attractive targets for conquest and imperialism. With this precedent of constant push and pull of conquering countries, the host region’s development of governance and infrastructure is stunted. These regions, while relatively stable in governance now, developed with a major disadvantage in the modern economic environment.

Another chief indicator of the “resource curse” is rampant corruption on both state and local level. Extractive industries often collude with corrupt governments to allow them mining or logging rights to land claimed by indigenous people. In the Indian state of Andhra Pradesh, indigenous communities who should have been protected by constitutional law from exploitation of their land were bypassed entirely when their state leaders covertly gave foreign companies leases to mine bauxite.

While corruption on the ground level could theoretically be bypassed entirely if a foreign company advocated for the rights of the people in the surrounding region, the “resource curse” is certainly not limited to an individual country’s ability to manage its own natural resources. While Rio Tinto and Vale did implement relocation plans approved by the Mozambican government, company representatives did acknowledge the poor arability of the land to which households were relocated.

Growth Poles

Even so, the World Economic Forum sees foreign investment in the natural resource sector as a key part of making Africa’s economies more globally competitive. Growth poles — simultaneous investments coordinated in many sectors to support self-sustaining industrialization — are posed in the Africa Competitiveness Report 2013 as a way to make investing in the host country profitable.

A WEF project entitled “The Madagascar Integrated Growth Poles Project” tested the concept of growth poles, partnering both public agencies and private corporations (including Rio Tinto) to develop infrastructure, provide skills education for both the engineering and hotel industries, and improve the process of business creation. These projects improved the overall business environment in Madagascar, according to the WEF. In 2005, private investment in Madagascar was US$84 million; this number increased to US$1045 million in two years.

What sets “growth poles” apart from isolated foreign investment is dedication to expanding the market in the host country. While the largest investments may initially be extraction of natural resources, they serve as profitability assurance for other firms to invest – both international and domestic.

Responsible Foreign Investment

The key to responsible foreign investment in a country experiencing the “resource curse,” is the balancing of the investor’s profits and economic development for the host country. Partnership of MNCs (multinational corporations) and NGOs hold the most promise, because while companies – both in-house and international – ultimately invest in natural resources for the bottom line, aid and development ventures can improve the standard of living in the communities most affected by natural resource development.

Furthermore, in order for foreign investments to improve developing countries, they should not be isolated or exploitative. These ventures must be planned so as to strengthen and not undermine existing enterprises in the host country. Foreign business investments that help host countries the most are ones that promote and supplement investment in all sectors.

Responsible implementation of foreign investment in Africa’s natural resources is rare. If WEF’s Growth Poles Project is any indicator, there are ways to improve a country’s chances against the “resource curse.” MNCs Rio Tinto and Vale certainly have the resources and precedent to face Mozambique’s mining backlash with an increased dedication to developing growth poles in the region, and in their other investments, to improve development.

– Naomi Doraisamy

Source: BBC,Human Rights Watch,World Economic Forum,World Watch
Photo: AEFJN

brazil_president_dilma_rousseff_africa_debt_opt

Brazil’s President Dilma Rousseff recently announced that her country would offer several African nations almost a billion dollars in foreign aid. According to Ms. Rousseff’s spokesman, most of the aid offered will be in the form of debt forgiveness:  Brazil will cancel almost $900 million in African debt accumulated in the past 40 years.

Over the last ten years, Brazil‘s trade with Africa has increased fivefold, though the country’s increasing investment in Africa has not always been positively received. Mining operations in Mozambique by Brazilian MNC Vale and Australian Rio Tinto were blocked in April when community members displaced by the companies staged protests.

The debt forgiveness offer shows Brazil‘s increasing ties with Africa, in no small part due to the continent’s rich supply of natural resources. “To maintain a special relationship with Africa is strategic for Brazil‘s foreign policy,” Ms. Rousseff’s spokesman told reporters.

Countries benefiting from this cancellation include Congo-Brazzaville, Mozambique, Tanzania, and Zambia. These countries have rich resources of oil, coal, and natural gas, each reason for further economic development in Africa.

– Naomi Doraisamy

Source: BBC
Photo: Photo

africa_infrastructure_natural_resource_copper_iron_mine_global_poverty_opt
We look at sub-Saharan Africa today and see a region in transition. Many countries struggle and the region as a whole faces larger poverty rates than most of the world, yet we also see a few bright spots, countries moving in the right direction. Though, we do not always see the opportunity for the sub-Saharan Africa to entirely transform itself, this transformation could occur sooner than we think.

The untapped wealth of resources in Africa is huge, and many countries have the opportunity to turn that potential wealth into gains for people living across the income spectrum. Already, we are seeing some signs. A third of African countries’ economies grew by rates exceeding 6 percent in 2012. Global demand on resources is going anywhere but down. What remains to be seen is how the countries tap into that demand. Natural gas could become a major export of Mozambique and Tanzania, and large deposits of iron ore can be found in Guinea and Sierra Leone, copper in Zambia, and cobalt in the Democratic Republic of the Congo.

The question is how all this will  be managed. African governments will need to reverse a worrying trend of corruption. In order for the region to see long-term gains, money will need to be reinvested into education, healthcare, and agriculture. Too often the money needed to build up the necessary infrastructure is instead skimmed off the top. However, this problem is not solely the fault of corrupt government. Off-shore registered companies operating in Africa create multiple avenues for tax evasion. These companies, run primarily by foreign investors, extract wealth from the region whilst returning very little in terms of financial support.

The solution then will need to be a combination of stronger local government, investing within to create a stable platform for growth, and also international assistance, in a regulatory fashion. International cooperation on taxation is on the agenda for the upcoming G-8 summit. Cracking down on the extraction of wealth, from both abroad and at home, will be crucial to setting Africa on the path to realizing its full potential.

– David Wilson
Source: The New York Times
Photo: Bloomberg

Neglecting Environment Prolongs Global Poverty

The actions and decisions of humans have had negative effects on the environment and the world’s natural resources. However, research suggests not all humans deplete resources unnecessarily; the poor are often best at sustaining the environment because they recognize its direct connection to their survival. According to The Centre for Science and Environment, wealthier nations are to blame. The Centre speculates that if impoverished nations developed and consumed at the rate of the West, two more planet Earths would be needed to produce enough resources and absorb the waste.

So, if wealthy nations are consuming at an alarming rate while poorer nations excel at sustaining their environment, why is the latter suffering economically?

The answer is simple, but sad; industry frequently exploits less developed countries. They send their most environmentally unfriendly ventures to the Third World to circumvent the high cost of doing such work in the developed world. As a result, large-scale deforestation occurs to make land available for lease to international companies. Prime agricultural land is damaged by harsh pesticides and fertilizers to produce cash crops for wealthier countries and ten times the amount of water a typical Indian family should consume in one day, if they get water at all, is used for meat breeding for richer nations.

Disregarding the environment when addressing poverty leads to an incomplete solution because the two are directly related. The natural resources needed to lift people out of poverty, though sustainable, are not unlimited. Thus the environment can only sustain us for as long as we sustain it.

– Dana Johnson

Source: Global Issues
Photo: UN

africa economic development commodity industrialization un
A new report from the United Nations Economic Commission for Africa (ECA) and the African Union says the key to long-term development in Africa is commodity-based industrialization. The study collected data mostly from nine African countries and the continent’s five sub-regions. Those countries are Algeria, Cameroon, Egypt, Ethiopia, Ghana, Kenya, Nigeria, South Africa and Zambia.

The report urges African nations to take advantage of their abundance of natural resources by using a commodity-based industrialization strategy. Each nation should frame its own specific policy for commodity-based industrialization so that it can direct its own development.  This is necessary to address poverty and gender disparities, youth unemployment, and other challenges African nations faces. The report states that “massive industrialization based on commodities in Africa is imperative, possible, and beneficial.”

Instead of African nations shipping raw materials to foreign nations to make commodities which are of higher value, the report recommends adding value to raw materials locally. Not only does this increase the profit to African nations but also fosters diversification of technological capabilities, an expansion of an advantageous skills base, and deepened industrial infrastructures in individual countries.

Case studies were prepared for Algeria, Cameroon, Egypt, Ethiopia, Ghana, Kenya, Nigeria, South Africa and Zambia.

Essee Oruma

Source: UN News Centre