Project presentation
Programme
NORGLOBAL
TAX HAVENS, CAPITAL FLOWS AND DEVELOPMENT (TaxCapDev)
Mapping the capital flight from African countries
More capital disappears illegally from African countries than the continent receives in aid. Norwegian
researchers want to find out more about how this happens and what can be done to prevent it.
Huge quantities of coltan, tungsten and wolframite are mined
deep within Eastern DR Congo. The minerals are used worldwide in
the metals and electronics industries. The extraction of resources
from the region generates huge amounts of capital.
The question is where does it go? The region remains poor and
underdeveloped. The miners, their families and the villages are left
with small change. Nor does the value creation from the mineral
industry have an impact on the national treasuries. Meaning that
little is left over for welfare investments and state-building.
Now, Morten Bøås, Research Professor at the Norwegian Institute of International Affairs (NUPI) in Oslo, aims to follow the
capital flow from parts of the mining industry in DR Congo. The
goal is to map the formal and informal networks that organise the
extraction, transport and sale of minerals and where the capital
flows go. Bøås says that more knowledge is needed about how
these networks operate, so that local authorities, aid organisations
and the international community can implement measures to
limit the capital flow out of the country.
Tax havens and stolen assets
Mineral extraction in DR Congo is one of three topics in the research
project Follow the money: The role of cross-border networks in
natural resource extraction, stolen assets recovery and tax havens’
capital flow. Researchers shall also study how African states can
recover assets that former heads of state have taken out of the
country. There are many examples of heads of state who have
stolen vast amounts from their own countries and hidden it
abroad. Recovering these assets is often a long process for the
countries involved.
The third topic deals with international tax havens’ role in the
capital flow from African countries. It is an undisputed fact that
huge amounts of capital stemming from value creation in African
countries end up in tax havens rather than being spent on local
social development. Researchers take concrete cases in Tanzania
and Kenya as their point of departure, two countries with growing
economies and functioning government administration.
The mining industry in Africa exports minerals worth huge amounts of money out of
the country, but only a small percentage benefits the country and the common good.
Photo: Shutterstock
The research project is headed by Morten Bøås, and is a collaboration between NUPI, Fafo, the International Law and Policy
Institute (ILPI) and the renowned South African research institute
the Institute of Security Studies (ISS). Local research communities
in DR Congo, Tanzania and Kenya will also contribute. The project
started in 2015 and will conclude in 2017, and has a budget of
NOK 7.2 million.
Growth without prosperity
In the last ten years, the African continent has experienced
unprecedented economic growth. Economic activity and value
creation are record high. Nonetheless, many of the African countries struggle with widespread poverty, high unemployment u
PROJECT PRESENTATION / SEPTEMBER 2015
and weak public institutions. Project manager Bøås says that it
may seem a paradox that the growing economy has so little impact on the development of prosperity in Africa.
This is partly explained by the fact that a great deal of the African industry is based on raw materials. Local and foreign companies extract minerals which are then exported out of the country,
without being refined or processed at home. Africans remain at
the bottom of the value chain and benefit little from the value
of the resources that are extracted. Without local processing of
minerals, job creation remains low and the mineral industry has a
limited economic effect.
In addition, many countries have weak public institutions that
are often unable to collect statutory direct and indirect taxes from
business activities.
«Huge amounts of capital are unfortunately diverted away from
government finances in Africa. They follow informal channels and
end up in the pockets of civil servants, local bigwigs, politicians
and in foreign tax havens. This capital flight takes place both in
conflict-ridden countries with weak government control, such as
DR Congo, and in apparently well-functioning countries such as
Kenya and Tanzania. The research project aims to study how the
capital flight is organised in states in which the rule of law is weak
and in states in which it is relatively stronger», says Bøås.
With respect to heads of state stealing assets from their own
countries, the researchers will study the methods they have used
to do so. There are plenty of examples of this. Egypt’s former president Hosni Mubarak and his family are assumed to have syphoned
billions from their country. Other examples are Libya’s former
president Muammar Gadaffi and his family, who are assumed to
have hidden billions abroad. The researchers aim to find out what
means have been used to do this, and map the legal and practical
challenges for the countries of recovering the assets.
Risky project
The researchers will use both quantitative and qualitative methods in conjunction with the mapping. They will systematise existing research in the area and analyse figures and statistics. They will
also review international legal frameworks and national guidelines
on trade and capital flow.
The researchers will also conduct several field surveys. They plan
to conduct in-depth interviews of people who have participated
in or been witness to different types of illegal cross-border capital
transfers. It will also be relevant to observe players and work processes. Some of the field work will be conducted in conflict-ridden
areas, such as Eastern Congo. This is not without risk, according to
Bøås.
«My job starts in the mineral mines in the east of Congo. I
will follow the work in the mines and the transportation of the
minerals out of the jungle to their buyers. I will then observe and
interview those who transport the minerals out of the country to
the global market, i.e. map the whole of the first part of the value
chain», says Bøås.
The Research Council of Norway
P.O. Box 564
NO-1327 Lysaker
Tel.: +47 22 03 70 00
[email protected]
www.rcn.no
Publisher
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www.rcn.no/norglobal
The researchers must hone
in on environments that may
have a lot to hide. The areas in
DR Congo where the mineral
mines are largely located are
more or less governed by
Morten Bøås is a Research Professor at
different rebel groups. The
the Norwegian Institute of International
safety of the researchers and
Affairs (NUPI) and project manager.
their local partners must be
Photo: NUPI
our top priority when we are
out in the field, says Bøås.
Through the research project, Bøås and his colleagues hope
to shed new light on the formal and informal networks that
govern the cross-border capital flows in Africa, in the hope that
new know-ledge about this can help to plug some of the leaks.
«We can’t do it all, but we can make a small contribution to this
important work», says Bøås.
Facts
Project name: Follow the money: The role of cross-border
networks in natural resource extraction, stolen assets
recovery and tax havens’ capital flow.
Allocated: NOK 7.2 million
Project period: 2015-2017
Project manager: Morten Bøås, Research Professor at the
Norwegian Institute of International Affairs (NUPI)
[email protected]
Partners: Norwegian Institute of International Affairs
(NUPI), Norway
The research foundation FAFO, Norway
International Law and Policy Institute (ILPI),
Institute for Security Studies (ISS) South Africa.
The NORGLOBAL programme
The NORGLOBAL programme is funded by NORAD.
Norway-Global partner (NORGLOBAL) shall strengthen
research on and with the South. It includes these research
sub-activities: Globalisation of environment, energy and
climate research (GLOBMEK), Poverty and Peace (PovPeace),
CGIAR, Women and gender, ECONPOP, Western Balkan
countries, TaxCapDev, HUMPOL, AIDEFFECT and Malawi.
Programme coordinator:
Inger-Ann Ulstein
Tel: + 47 22 03 73 43
[email protected]
Text: Eirik Vigsnes, Mediepartner AS
Translation: Allegro Language Services
Layout: Design et cetera AS
Printing: 07 Gruppen AS
Oslo, September 2015