US Stand on Dirty Money Laudable

The US has taken serious steps to rescue African government coffers. First it warned 23 African Heads of State at an African Union summit in Munyonyo, Uganda, in July 2010 that the US would no longer be a safe haven for corrupt politicians’ dirt money.

Second, Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act which obligates all energy and mining companies registered with the US stock exchanges to disclose not only what they pay to US government but also to foreign oil, gas and mineral-producing countries like Tanzania. The two measures (though belated) are a right dose in fostering transparency in third world countries, Tanzania in particular.

The US commendable stand runs counter to the UK’s poor handling by the Serious Fraud Office move of the matter involving Sailesh Vithlani, a Tanzanian alleged to have linked the BAE System of UK to corruptly deprive Tanzanian government $40 million for the controversial military radar in cahoots with over six top Tanzanian government officials in 2002.

To assure Africa that the US would not only act within but also across its borders, Obama’s secretary
general said that Washington would seize money stolen by corrupt leaders and hidden in America and the West. He further added that US was also willing to support the development of African judiciaries to deal with the monster of corruption.

Tanzanians are getting used to having their leaders hoard money in offshore accounts.

The Dodd-Frank Wall Street Reform and Consumer Protection Act will champion transparency and accountability in handling revenues from oil, gas and minerals in resource rich countries thus sweeping out corruption and political instability that have been dominating such countries for decades now.

Over 90 per cent of world’s largest internationally operating oil and gas companies and eight of the world’s 10 largest mining companies are to be covered by the legislation. In Tanzania, very few companies will be affected if any, due to the fact that most companies operating in the country are not registered with US stock exchanges. However, in future, companies such as Gallery Gold and Tanzania Royalty Exploration Corporation (TRE) among others are going to be covered.

These companies will be forced to furnish information relating to what they pay to resource rich countries to the Securities and Exchange Commission of US where interested groups such as members of Publish What You Pay (PWYP) can get that information and compare it with what the resource rich governments declared to have received.

It is not clear whether subsidiary companies such as the African Barrick Gold (ABG) whose 75 per cent of its shares are held by the mother company Barrick which also hold shares of its other subsidiary Barrick Gold Corporation of US that is listed in the New York Stock Exchange will be covered by the legislation.

The force towards making investments socially responsible and transactions with governments transparent and available to public scrutiny is spreading like bush fire. The Hong Kong Stock Exchange in June ordered all companies registered with it to disclose not only what they pay to foreign governments but also, all social and environmental liabilities they have wherever they operate.

Efforts directed towards ending the resource curse in many resource rich countries mostly in Africa are numerous. Such measures include PWYP Global Coalition and Extractive Industry Transparency Initiative.

When defending the legislation, Senator Cardin said: “This provision is a critical part of the increased transparency and corporate responsibility we are striving to achieve in the financial industry, given the catastrophic events in the Gulf of Mexico, oil companies, in particular, should well understand that secrecy fosters instability, corruption and greater risk. We now have the tools to help people in resource-rich countries hold their leaders accountable for the money made from their oil, gas and minerals.”

According to the Transparency International 2009 report, oil and mineral exports from Africa in 2006 were over $249 billion. This amount is eight times the value of farm exports which amounted to only $32 billion and six times the value of international aid going towards Africa of $43 billion Africa does not need aid if its natural resources are well tapped and spent.

In 2007, mineral exports in Tanzania accounted for 44.2 per cent of all exports but their contribution to the GDP was 3.5 per cent only. Tanzania despite being ranked the fourth in gold production in Africa last year has been losing a lot of revenue from the sector. In Tanzania, mining contracts are still held as classified even to Parliament and some of them were entered into under dubious circumstances.

It is high time countries like Canada, UK, Australia and major stock exchanges called for transparency to enable third world countries to benefit from the extractive industry. Such efforts should not only cover the monitoring of home companies abroad but also denounce the laundering of money by developed countries.

Stephen Msechu