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Learning about capital flight in South Africa
What do twelve business journos from Kenya, Uganda, Zambia, Nigeria and South Africa who converged on Johannesburg's Institute for the Advancement of Journalism have in common? Surprisingly, quite a lot. Apart from sharing an almost universal preference for meat over vegetarianism and Brad Pitt over George Clooney (as a get-to-know-you activity revealed), they would be sharing a training room for the next five days in a quest to learn more about all things finance and corporate-governance related.
During that time, the twelve would be taught by Thomson Reuters Foundation consultant and former Financial Times Africa editor David White and South Africa's National Treasury spokesperson Jabulani Sikhakhane. Both had invaluable experience to offer: David, a career at the world’s most respected daily financial publication, and Jabulani, experience as the former editor of Business Report, the business supplement appearing in several leading South African newspapers, and the vast knowledge gained from years of working with economic decision-makers in government.
The pair would "facilitate" discussions and learning about topics ranging from tax to reporting on public accounts to the growing phenomenon of cross-border profit shifting by companies.
Between impromptu one-minute "radio" introductions of trainees, and trying their hands at seamlessly interweaving truths and lies politician-style, the group was visited by Mari-Lise du Preez, a researcher from the South African Institute of International Affairs (SAIIA). The unassuming manager of SAIIA's Governance of Africa's Resources Programme shared some startling facts about the magnitude of illicit financial flows globally,
Quoting a May report by research organisation Global Financial Integrity and the African Development Bank, du Preez said that in 2012 alone, the African continent lost between $43 and $46 billion in disguised financial flows. This money, illicitly earned, transferred or spent, outstripped the amount Africa received in official development assistance by a factor of almost three to one over the past thirty years, she said. These clandestine transactions were made possible by two conditions: "opacity" in the global financial system and weak governance and corruption in the countries from which the money is sourced, she said.
On the topic of governance, Jabulani stepped in to share some pointers around what to look for when reporting on public spending. He also favoured the journos with a hugely useful explanatory session about the bond market.
David treated the class to several discussions about profit shifting and so-called base erosion – a strong emphasis on the course. In the spotlight were multinationals such as Google, which, through complex tax avoidance mechanisms, paid only 35 million British pounds in tax for UK sales of 4.9 billion pounds last year.
Increasing focus is being put on the use of tax havens – which companies like Google, Amazon, Apple and Starbucks have used to avoid paying millions and built up their cash reserves at the same time. There are between 38 and 69 tax havens in the world, depending on one’s definition. These states charge little or no tax, and instead rely on the revenue they earn when companies register within their borders.
In response to the growing awareness, countries like Ireland – traditionally used by techie companies as a haven for tax-dodging – are looking at changing the laws that allow for such practices.
David urged journos to look out for such examples in their own countries. “What’s ironic about Google is that you can get most of this information by googling it,” he said.
The group was also visited by Bongi Mlangeni, another former journalist and deputy director of non-profit organisation Corruption Watch. The organisation has fielded thousands of complaints since its inception in January 2012, and conducts research, investigations (about one a month) and advocacy around corruption. Mlangeni said that an estimated R10 billion was lost in South Africa during the 2011/12 year; a figure the group hopes to bring down by partnering with the public.
While most corruption uncovered in the media is at a national level, Mlangeni warned that much more exists on a micro scale. “There is a lot of corruption at community level, where it is seen as petty,” said Mlangeni. “But if nothing is done about it, it escalates.”
Another highlight was being able to pick the brains of senior officials at the African Tax Administration Forum in Pretoria, a body that aims to establish itself as the “voice for tax issues in Africa”.
Highly useful practical exercises also generated much excitement and, at times, heated debate and confrontation – all among good friends, of course.
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