AMDC and TJN-A host dialogue on Africa's response to the commodity crisis

AMDC and TJN-A host dialogue on Africa's response to the commodity crisis

Addis Ababa, 21March 2017 (ECA) – The African Mineral Development Centre (AMDC), in collaboration with the Tax Justice Network – Africa (TJNA), convened an all-day session of experts, member States and other stakeholders to discuss the impact of the fall in commodity prices on Africa and policy responses that countries can consider adopting. These focused on actions under the auspices of the Africa Mining Vision (AMV) that countries can consider which will add value to minerals and use mining to drive greater socioeconomic development, in order to lessen vulnerability to raw commodity price fluctuations. The colloquium was attended by representatives of seven African countries, three non-African countries and a large variety of think tanks and civil society organizations.

It was emphasized that failure to diversify has left African economies as commodity-dependent as in the past. Indeed, as noted by Kojo Busia, Coordinator of AMDC, “the era of low commodity prices invites sober reflection”. Biniam Behre of the Permanent Mission of the State of Eritrea added that “African countries were not making the most of their minerals during boom years”. The AMV highlights the importance of policies to promote inclusive, productive industrialization based on mineral endowments, and African states have been adopting these through Country Mining Visions (CMVs) with the assistance of AMDC.

The experts and member State representatives noted that Africa has a huge potential to industrialize based on mineral endowments, but that this potential has not been met. Greater linkages with manufacturing, agriculture, and regional cooperation through value chains is necessary to capitalize on this but as of yet has not been a policy priority. Mechanisms to invest mineral rents accrued during boom periods in productive activities and infrastructure on the continent should be pursued. H.E. Albert Yankey, Ambassador of the Republic of Ghana, proposed that these issues be central to the annual deliberations of the African Ministers of Finance and Economic Planning.

In addition to linkage development, participants agreed that policy must address the prevalent illicit financial flows (IFFs) in the extractives sectors, and adopt new fiscal mechanisms to deal with these. Indeed, cementing a coherent approach to mineral taxation in tax and licensing systems will be crucial to ensure firms are paying their fair share. Charles Akong of AMDC proposed that “fiscal harmonization is critical to prevent a race-to-the-bottom among African countries regarding tax policies”. 

At the end of the colloquium, participants urged African countries to adopt a regional approach to mineral-based development. Indeed, harmonizing fiscal approaches across countries, while still recognizing country-specific features and caveats, will help close IFF gaps. Building regional mineral value chains will help connect varying national mineral endowments with a larger pooled sub-regional or pan-African market. Organizations such as AMDC are best poised to promote best-practices across the continent, such as Tanzania’s successes in mineral auditing. The time to act is now, so that Africa may slowly lessen its vulnerability to the inevitable boom-and-bust mineral cycle. 

Issued by:

Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Ethiopia
Tel: +251 11 551 5826
E-mail: ecainfo@uneca.org

African tax authorities equipped with tools to deal with transfer pricing issues

Dar es Salaam, 21 March 2017 (ECA) – The African Minerals Development Centre (AMDC) together with the Minerals and Energy for Development Alliance (MEfDA) and the World Bank, has delivered the first of two regional workshops on transfer pricing in Africa’s mineral sector.

The first workshop was successfully held from 13-16 March 2017, and included senior decision makers from tax administration authorities, revenue agencies, and ministries of finance and mines.

Charles Akong of AMDC noted that “transfer mispricing represents one of the key issues which contribute to African countries missing out on the full benefits of their minerals”. Indeed, ensuring that transactions between multinational mining companies and their affiliates are conducted as independent entities through applying the arm’s length principle remains a key challenge facing tax administration authorities across the continent.

As part of follow up activities to implement the recommendations of the landmark African Union High Level Panel on Illicit Financial Flows which was led by President Thabo Mbeki of South Africa, participants were equipped with critical knowledge of the complexity of transfer pricing issues and illicit flows that occur along the mineral value chain and through global mineral production and trade.

The workshop focused on skills to assess, prioritize and audit risks associated with transfer pricing. Participants also examined proactive measures to protect tax bases from being eroded and undermined by tax avoidance and illicit profit shifting practices by mining companies.

Both workshops have been placed within the context of AMDC’s support to countries to implement the Africa Mining Vision, the continental framework to reform and transform the sector to ensure greater mobilization of domestic revenues along the entire value chain. The Vision aims to create a ‘transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development’. In accordance with the forward-looking framework, the AMDC works to support governments to strengthen their fiscal governance in ways that curb illicit financial outflows from the sector.

The four-day intensive training in Dar es Salaam drew on the Transfer Pricing Source Book developed by the World Bank and MEfDA as well as the work on fiscal harmonization and illicit financial flows in the minerals sector in Africa undertaken by AMDC. The forthcoming second workshop will be geared towards Francophone and Lusophone countries.

Issued by:

Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Ethiopia
Tel: +251 11 551 5826
E-mail: ecainfo@uneca.org