African millionaires are even richer (and still pay little in taxes)

It was a bit of a perverse coincidence.

A blow of statistical reality that drew, with a cold stroke, a disturbing panorama.

At the end of last January, on almost simultaneous dates, two figures came to light that condense the economic polarity in Africa.

A solid hierarchy of income and income that, without having caused it, covid-19 has contributed to exacerbate.

High above, from their privileged vantage points, the 18 African

confirmed with satisfaction that their wealth had increased by an average of 15% during 2021, according to Forbes magazine.

At the bottom, in the struggle for subsistence, a UN report warned that 3% of the population had fallen into extreme poverty (less than 1.70 euros a day) in the last year.

The analysis focuses on 15 continental western countries, but other estimates point to a widespread phenomenon.

The very rich have found new tributaries to feed the overflowing stream of their wealth.

In particular, the improvement in stock values ​​which, after a convulsive 2020, tended to rise last year.

"Thanks, in large part, to the fact that central banks injected large amounts to stabilize financial markets," says Joab Okanda, a Kenyan researcher, activist and adviser for Africa at the NGO Christian Aid.

Okanda reminds that this latest wave of bonanza in the great fortunes is not exclusive to Africa.

It is not even as pronounced as in Western countries.

Although the contrast with the extensive impoverished layers adds, by their mere coexistence, a plus of obscenity to the ultra-rich African.

Beyond the swings of the stock market, sometimes so cryptic, more obvious reasons explain this 15% rise in the accounts of the 18 richest men in Africa (there is no woman on the list).

“In many cases, the goods and services in which their wealth resides have increased in demand: some sectors have done very well during the pandemic,” explains Anne-Sophie Robilliard, Africa coordinator at the World Inequality Database (WID), the inequality statistics factory headed by Frenchman Thomas Piketty, world famous for his work

.

Robilliard mentions, as an example, telecommunications, which in Africa seem like an inexhaustible pool of banknotes, supported "by population growth and the greater coverage of

services ."

Or cement, the pillar of the fortune of Nigerian Aliko Dangote, the richest among the super-rich, with some 12.8 billion euros to his credit.

Covid-19 has barely contained the real estate

in your country and other states on the continent where the Dangote Group operates.

This trend is a symptom of a broken economic system, a model that does not work, at least for the poor

Joab Okanda, Kenyan researcher, activist and adviser for Africa of the NGO Christian Aid

The good financial health in the exclusive

– in the midst of a global pandemic and with rampant misery around them – lends itself to magnetic headlines.

It adds fuel to the scandal among those who bet on redistributive approaches.

The ostentation of zeros and more zeros outrages many.

It discourages so many Africans who, every day, go out to make ends meet with empty pockets.

For Okanda, it is just the tip of the iceberg in an underlying trend.

The luxury product made in a well-oiled engine room.

"It's a symptom of a broken economic system, a model that doesn't work, at least for the poor," he says.

Taming inequality

Looking structurally, it is convenient to broaden the view of privilege to include plain millionaires.

The HNWI (

, in English), according to the acronym – of a certain euphemistic aroma – so in vogue lately.

“Billionaires are still a minority.

It is the increase in the accumulation of wealth that is most worrying, since it causes a huge social gap”, estimates Susana Ruiz, head of tax justice at Oxfam Intermón.

New World Wealth (NWW), a South African consultancy, estimates that the continent has some 125,000 HNWIs, citizens who hoard at least one million dollars (about 900,000 euros).

Of these, 6,200 exceed 10 million dollars (nine million euros).

And 275 go beyond 100 million dollars (90 million euros).

NWW head of research Andrew Amoils forecasts a sharp rise in African millionaires over the next decade: "The number of HNWIs is expected to rise 40% in 10 years."

Nouveau riche proliferate and the fortunes of those who already are soar.

The figures handled by Oxfam, compiled from the Wealth-x database, are illuminating.

Between 2016 and 2021, Africans with more than 50 million dollars (45 million euros) increased their assets by more than 41%.

Billionaires are still a minority.

It is the increase in the accumulation of wealth that is most worrying, since it causes a huge social gap

Susana Ruiz, head of tax justice at Oxfam Intermón

The explosion of millionaires in Africa has a positive reading, of a pure semantic relationship.

There are more rich people because many countries on the continent are growing at a good pace, that is, they generate wealth.

And everything indicates that this will be the case in the near future, as long as the war in Ukraine does not knock down –with its unpredictable shock wave– the optimism of the forecasts.

The great challenge, the experts agree, is to take advantage of growth to distribute wealth, so that not only the elites capitalize (forgive the anglicism) the increases in GDP, constant in most African countries.

A long-term challenge for Africa: to tame the inequality inherent in capitalism through social policies.

Despite advances in this direction, the present drowns hope.

Fiscal progressivity – the redistributive mechanism par excellence – continues to be the exception and not the rule in Africa.

"Most countries do not have a proper progressive system," says Okanda.

"Typically, the tax burden on the top of the distribution [the richest] is very low," adds Robilliard.

From the International Center for Tax and Development, the Ugandan Jalia Kangave alludes to a "tradition" in Africa: "Make the tax burden fall on indirect taxes", VAT and the like that tax the citizen equally, regardless of their level of income. rent.

Kangave is wary of efforts – all the rage these days – to lift the informal sector out of fiscal obscurity.

She thinks it's unfair and diverts attention: “Street stalls and small shops may not declare income, but they already pay a lot in fees of all kinds.

And meanwhile, the emphasis of the debate is not on the rich paying more taxes.

In recent years, a more equitable distribution horizon has managed to materialize in ambitious tax laws.

Thus initiating a (frequently) tortuous long-distance race towards its effective implementation.

"There have been undeniable advances in the last decade, but that last turn of the screw has not just been given," says Ruiz.

Kangave, who has commissioned to optimize fundraising among HNWIs in Uganda and Rwanda, can attest to this.

He assures that, in many cases, there are already “robust legal frameworks, broken down into dividends...”.

But he lists endless technical pitfalls.

Noteworthy is the lack of information.

A vacuum that is reflected, for example, in the absence of cadastres to control property, "so important among the wealthy classes of many countries," he explains.

Or the lack of coordination between different tax agencies,

Street stalls and small shops may not report revenue, but they already pay a lot in fees of all kinds.

And while the emphasis of the debate is not on the rich paying more taxes

Jalia Kangave, from the 'International Center for Tax and Development'

Kangave recalls a bloody case: "The Ugandan customs service detected that someone was importing goods worth hundreds of millions of euros, but, studying his declaration, I saw that this was not reflected in his income."

Inability or lack of political will?

“A combination of both,” Kangave replies.

According to Robilliard, the laziness when it comes to properly controlling African fortunes often hides subtle forms of

.

In short, the determination of the powerful to prioritize their interest (and not that of the people), sometimes incurring in corrupt practices.

When the vocation of service is scarce, the embrace with the economic elite is served.

Axiom still too widespread in Africa, all the experts consulted agree.

Monopolies and capital flight

The WID researcher denounces the tricks of the very rich to "twist the law in their favor."

The Congolese-Danish Christian Kingombe, who worked for years for the Development Center of the OECD and is now dedicated to attracting investment for African SMEs, mentions the “tax holidays that large companies enjoy in many countries”.

Okanda, for his part, does not hesitate to affirm categorically that the African norm is that "political power is captive of economic power."

And he offers as clear evidence the government response in Kenya, South Africa and Sierra Leone to the ravages of covid-19, dissected in a report by Christian Aid and the Financial Transparency Coalition.

On average, 63% of the funds went to private companies.

And only 21% was allocated to social spending.

The ties at the political-economic cusp can be translated, Robilliard maintains, into "perks to big businessmen so that their businesses are protected, thus benefiting from monopolistic positions that allow them to set high prices."

Or in a systematic award, with hardly any public scrutiny, of lucrative contracts.

“Nangote is getting the lion's share of the Nigerian infrastructure investment pie.

With conditions for its workers that, by the way, leave a lot to be desired,” says Okanda.

According to Kingombe, part of the concentration of African wealth – and the high-level racketeering it fosters – dates back a few decades: “During the privatizations of the 1980s and 1990s, many public monopolies became quasi-private monopolies.

And the more supply there is in a sector, the less possibility of interference between political and economic power.”

A mixture of a blind eye and limited tracking capabilities explains another vector of inequality: the immense capital flight that the continent suffers.

In 2019, an Oxfam study raised the alarm about its magnitude.

The NGO estimated that African millionaires invest or deposit no less than 75% of their wealth outside of Africa.

Through instruments of dubious legality or taking advantage, with all the law, of the "international financial architecture", laments Okanda, co-author of the report during his time at Oxfam.

Be that as it may, the result is disturbing: some 13,000 million euros that are lost through the drain of the African public coffers.

African millionaires invest or deposit as much as 75% of their wealth outside of Africa, according to a recent Oxfam report

Ruiz warns of another structural trend detected in many states.

A vicious circle that chains the future of the new generations and from which inequality emerges, once again, triumphant.

Collection in Africa adds up to meager numbers, with a continental average of tax revenue in relation to GDP that does not reach 17% (half that of the OECD).

So many African countries have been resorting to borrowing for years to finance their public spending.

The logical consequence: debt levels have skyrocketed, now reaching 640 billion euros in sub-Saharan Africa, the highest figure in a decade.

“Enlarging the ball of debt has a lower political cost than fighting with the economic elites to increase collection,” explains Ruiz.

Immersed in the political present or in conscious irresponsibility,

To reverse fiscal lukewarmness and retrace the dangerous path of debt, Kangave places its hope in civil society, which is increasingly organized in countries like Kenya or Ghana.

"It is the middle classes that must put pressure on governments, people worried about survival may not have the capacity to get involved in this cause as much as would be desirable," he considers.

A couple of months ago, Okanda and other Kenyan activists presented a campaign in Nairobi with a clear message: that the rich pay more taxes.

According to some, they armed themselves with a quixotic will.

For others, they planted the much-needed seed of change.

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