Upheaval on the global stage, the war in Ukraine, conflict in the Horn of Africa, severe climatic shocks, high international inflation, increasing global commodity prices, high prices of agricultural inputs and low intra-continental trade are fuelling food insecurity across Africa. Of the 24 countries classified as hunger hotspots by the UN’s Food and Agriculture Organization […]

By Meena Raman
SHARM EL-SHEIKH, Egypt, Nov 22 2022 – COP 27 delivered on what was the ‘litmus test’ for its success – consensus on the establishment of a fund on loss and damage. What seemed impossible was made possible, largely due to the unity of the G77 and China and the role of the Egyptian Presidency. Also important were efforts by civil society groups who put pressure on the United States, the main blocker to having the fund.

Until the final hours of the climate talks, it was uncertain whether the deal would be sealed, given behind the scenes diplomacy by the COP Presidency team. The G77/China was led by Pakistan, that wielded a strong moral voice at the conference, following the catastrophic and devastating floods which was attributed to climate change.

It was a big win for loss and damage issues at Sharm el-Sheikh, to spotlight what was once seen as an ‘orphan child’ of the process, with usual priority given to mitigation (emissions reductions), while adaptation to climate impacts is treated as the ‘step child’.

However, there is nothing significantly meaningful on finance, given the overall stance of developed countries in the process, with the loss and damage fund remaining empty for now, with the hope that it will deliver more in the coming years when the fund is set up and is resourced.

The Santiago Network on Loss and Damage (SNLD), which is to be a technical assistance facility for developing countries also was devoid of any financial commitments. The finance decisions adopted only exhorted developed countries to deliver on the USD 100 billion per year by 2020 pledges and to double adaptation funding.

New pledges, totalling more than USD 230 million, were made to the Adaptation Fund at COP27, a small sum given the scale of the needs in developing countries.

An overarching alarm and agony of many developing countries at the Sharm el-Sheikh talks were the persistent efforts by developed countries to not own up to their historical responsibilities for past emissions, and to delete or dilute the foundational principles of equity and common but differentiated responsibilities and respective capabilities (CBDRRC) between developed and developing countries under the UNFCCC and the Paris Agreement.

This attempt was repeatedly called out by developing countries, especially from the Like-minded developing countries (LMDC), the African Group, the Arab Group and ABU (Argentina, Brazil and Uruguay). The effort to remove this differentiation was at the heart of the fight on many fronts, especially on the issue of mitigation and finance, which seemed like a repeat of negotiations in Paris.

Developed countries continued their efforts at using terms such as ‘major emitters’, ‘major economies’, and the ‘G20’ in relation to who should show more ambition on mitigation, while in the discussion on finance, it was about “broadening the donor base”.

The retort from developing countries was that these issues were already settled under the Paris Agreement and that the principles and provisions of the Agreement should be respected and implemented.

The climate talks which began on Sunday, 6 Nov, were supposed to end Friday, 18 Nov, but decisions were only gavelled early morning of Sunday, 20 Nov, when the official plenary began at 4 am. Delegates were visibly exhausted and bleary-eyed following long days and nights of negotiations which were particularly intense since Wed, 16 Nov.

Apart from the loss and damage fund, other issues that were deadlocked during the week were the cover decisions (as to what they should contain), the mitigation work programme, the global goal on adaptation and matters related to finance.

Among the sticky issues in relation to mitigation were on how the temperature goal of 1.5°C should be reflected, how to advance efforts following the controversial paragraph adopted on the phase down of unabated coal and inefficient fossil fuel subsidies from COP 26 decision in Glasgow, and the peaking of emissions by 2025.

In order to avoid spats in public given the wide divergence between Parties in the full glare of the public and world media, the COP 27 Presidency team resorted to informal consultations and diplomatic efforts behind the scenes to find compromises on the difficult issues with draft texts which were reviewed by Parties.

This was the reason for the delay in convening the final plenary, as Parties also wanted to gauge if they could live with the draft decisions, as they assessed the overall balance of the package of decisions among the key issues of mitigation, adaptation, loss and damage and finance.

COP 27 President Sameh Shoukry convened plenary and gavelled the adoption of the various decisions. Following the adoption of the decisions, he said that “despite the difficulties and challenges of our times, the divergence of views, level of ambition or apprehension, we remain committed to the fight against climate change…. and that as much as sceptics and pessimists thought that climate action will be taking a back seat on the global agenda, we rose to the occasion, upheld our responsibilities and undertook the important decisive political decisions that millions around the world expect from us.”

Minister Shoukry added that “We listened to the calls of anguish and despair resonating from one end of Pakistan to the other, a country with literally more than a third of its area flooded, a resounding alarm of the future that awaits us beyond 1.5 degrees. A bleak future…, a future that I do not wish for my grandchildren nor for any child on this planet.”

“Today, here in Sharm el-Sheikh, we establish the first ever dedicated fund for loss and damage, a fund that has been so long in the making. It was only appropriate that this COP, the implementation COP in Africa, is where the fund is finally established.”

“Millions around the globe can now sense a glimmer of hope that their suffering will finally be addressed, swiftly and appropriately,” he said further, adding that “We leave Sharm el-Sheikh with renewed hope in the future of our planet, with an even stronger collective will and more determination to achieve the temperature goal of the Paris Agreement.”

Among the significant decisions adopted are highlighted below.

The cover decisions – Sharm el-Sheikh Implementation Plan

The cover decisions adopted under the COP (Conference of Parties to the UNFCCC) and CMA (Conference of Parties to the Paris Agreement) are referred to as the Sharm el-Sheikh Implementation Plan. The COP and CMA decisions are similar in many respects. Highlights of some of the main aspects of the decisions adopted under the CMA are as follows:

The decision “Stresses that the increasingly complex and challenging global geopolitical situation and its impact on the energy, food and economic situations, as well as the additional challenges associated with the socioeconomic recovery from the coronavirus pandemic, should not be used as a pretext for backtracking, backsliding or de-prioritizing climate action.”

It “Reaffirms the Paris Agreement temperature goal of holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change;” and “Reiterates that the impacts of climate change will be much lower at the temperature increase of 1.5 °C compared with 2 °C7 and resolves to pursue further efforts to limit the temperature increase to 1.5 °C”.

On enhancing ambition and implementation, the decision “Resolves to implement ambitious, just, equitable and inclusive transitions to low-emission and climate-resilient development in line with the principles and objectives of the Convention, the Kyoto Protocol and the Paris Agreement, taking into account this decision, the Glasgow Climate Pact (GCP) and other relevant decisions of the COP and the CMA.”

(The developed countries of late, have been mainly focussing on the GCP, and much less on the Paris Agreement and even less of the Convention. Some major developing countries have raised concerns that the GCP is being put at the same level as the Convention and the Paris Agreement.)

On mitigation, the decision “Notes with serious concern the finding in the latest synthesis report on nationally determined contributions (NDCs) that the total global greenhouse gas emission (GHG) level in 2030, taking into account implementation of all latest NDCs, is estimated to be 0.3 per cent below the 2019 level, which is not in line with least-cost scenarios for keeping global temperature rise to 2 or 1.5 °C” and “Emphasizes the urgent need for Parties to increase their efforts to collectively reduce emissions through accelerated action and implementation of domestic mitigation measures in accordance with Article 4.2 of the Paris Agreement.” (Article 4.2 of the Paris Agreement states: “Each Party shall prepare, communicate and maintain successive NDCs that it intends to achieve. Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of such contributions.”)

The decision also “Calls upon Parties to accelerate the development, deployment and dissemination of technologies, and the adoption of policies, to transition towards low-emission energy systems, including by rapidly scaling up the deployment of clean power generation and energy efficiency measures, including accelerating efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies, while providing targeted support to the poorest and most vulnerable in line with national circumstances and recognizing the need for support towards a just transition.” (This is a repeat of the decision from the GCP).

A new and significant outcome on “pathways to just transition”, where there is a decision to “establish a work programme on just transition for discussion of pathways to achieving the goals of the Paris Agreement”. It also decided “to convene, as part of the work programme on just transition, an annual high-level ministerial round table on just transition, beginning at its fifth session”.

On finance, the decision “Notes with concern the growing gap between the needs of developing country Parties, in particular those due to the increasing impacts of climate change and their increased indebtedness, and the support provided and mobilized for their efforts to implement their NDCs, highlighting that such needs are currently estimated at USD 5.8–5.9 trillion26 for the pre-2030 period.”

It also “Expresses serious concern that the goal of developed country Parties to mobilize jointly USD 100 billion per year by 2020…has not yet been met.

The decision also “Calls on the shareholders of multilateral development banks (MDBs) and international financial institutions (IFIs) to reform MDB practices and priorities, align and scale up funding, ensure simplified access and mobilize climate finance from various sources and encourages MDBs to define a new vision and commensurate operational model, channels and instruments that are fit for the purpose of adequately addressing the global climate emergency…”.

Loss and damage fund

In a separate decision, Parties agreed to “establish new funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change, in responding to loss and damage, including with a focus on addressing loss and damage by providing and assisting in mobilizing new and additional resources, and that these new arrangements complement and include sources, funds, processes and initiatives under and outside the Convention and the Paris Agreement.”

It was also decided “to establish a fund for responding to loss and damage whose mandate includes a focus on addressing loss and damage.” Parties also agreed to “Establish a transitional committee on the operationalization of the new funding arrangements for responding to loss and damage.

Mitigation work programme

Parties decided “that the work programme shall be operationalized through focused exchanges of views, information and ideas, noting that the outcomes of the work programme will be non-prescriptive, non-punitive, facilitative, respectful of national sovereignty and national circumstances, take into account the nationally determined nature of NDCs and will not impose new targets or goals.” (This was a grave concern to many developing countries).

It was also decided “that the work programme shall function in a manner that is consistent with the procedures and timelines for communication of successive NDCs established in the Paris Agreement,” and “that the scope of the work programme should be based on broad thematic areas relevant to urgently scaling up mitigation ambition and implementation in this critical decade…”

Meena Raman is Head of Programmes at Third World Network – headquartered in Penang, Malaysia.

IPS UN Bureau

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By Ndongo Samba Sylla and Jomo Kwame Sundaram
DAKAR and KUALA LUMPUR, Nov 22 2022 – The ongoing plunder of Africa’s natural resources drained by capital flight is holding it back yet again. More African nations face protracted recessions amid mounting debt distress, rubbing salt into deep wounds from the past.

With much less foreign exchange, tax revenue, and policy space to face external shocks, many African governments believe they have little choice but to spend less, or borrow more in foreign currencies.

Ndongo Samba Sylla

Most Africans are struggling to cope with food and energy crises, inflation, higher interest rates, adverse climate events, less health and social provisioning. Unrest is mounting due to deteriorating conditions despite some commodity price increases.

Economic haemorrhage
After ‘lost decades’ from the late 1970s, Africa became one of the world’s fastest growing regions early in the 21st century. Debt relief, a commodity boom and other factors seemed to support the deceptive ‘Africa rising’ narrative.

But instead of long overdue economic transformation, Africa has seen jobless growth, rising economic inequalities and more resource transfers abroad. Capital flight – involving looted resources laundered via foreign banks – has been bleeding the continent.

According to the High Level Panel on Illicit Financial Flows from Africa, the continent was losing over $50 billion annually. This was mainly due to ‘trade mis-invoicing’ – under-invoicing exports and over-invoicing imports – and fraudulent commercial arrangements.

Transnational corporations (TNCs) and criminal networks account for much of this African economic surplus drain. Resource-rich countries are more vulnerable to plunder, especially where capital accounts have been liberalized.

Jomo Kwame Sundaram

Externally imposed structural adjustment programs (SAPs), after the early 1980s’ sovereign debt crises, have forced African economies to be even more open – at great economic cost. SAPs have made them more (food) import-dependent while increasing their vulnerability to commodity price shocks and global liquidity flows.

Leonce Ndikumana and his colleagues estimate over 55% of capital flight – defined as illegally acquired or transferred assets – from Africa is from oil-rich nations, with Nigeria alone losing $467 billion during 1970-2018.

Over the same period, Angola lost $103 billion. Its poverty rate rose from 34% to 52% over the past decade, as the poor more than doubled from 7.5 to 16 million.

Oil proceeds have been embezzled by TNCs and Angola’s elite. Abusing her influence, the former president’s daughter, Isabel dos Santos acquired massive wealth. A report found over 400 companies in her business empire, including many in tax havens.

From 1970 to 2018, Côte d’Ivoire lost $55 billion to capital flight. Growing 40% of the world’s cocoa, it gets only 5–7% of global cocoa profits, with farmers getting little. Most cocoa income goes to TNCs, politicians and their collaborators.

Mining giant South Africa (SA) has lost $329 billion to capital flight over the last five decades. Mis-invoicing, other modes of embezzling public resources, and tax evasion augment private wealth hidden in offshore financial centres and tax havens.

Fiscal austerity has slowed job growth and poverty reduction in ‘the most unequal country in the world’. In SA, the richest 10% own over half the nation’s wealth, while the poorest 10% have under 1%!

Resource theft and debt
With this pattern of plunder, resource-rich African countries – that could have accelerated development during the commodity boom – now face debt distress, depreciating currencies and imported inflation, as interest rates are pushed up.

Zambia’s default on its foreign debt obligations in late 2020 has made headlines. But foreign capture of most Zambian copper export proceeds is not acknowledged.

During 2000-2020, total foreign direct investment income from Zambia was twice total debt servicing for external government and government-guaranteed loans. In 2021, the deficit in the ‘primary income’ account (mainly returns to capital) of Zambia’s balance of payments was 12.5% of GDP.

As interest payments on public external debt came to ‘only’ 3.5% of GDP, most of this deficit (9% of GDP) was due to profit and dividend remittances, as well as interest payments on private external debt.

For the IMF, World Bank and ‘creditor nations’, debt ‘restructuring’ is conditional on continuing such plunder! African countries’ worsening foreign indebtedness is partly due to lack of control over export earnings controlled by TNCs, with African elite support.

Resource pillage, involving capital flight, inevitably leads to external debt distress. Invariably, the IMF demands government austerity and opening African economies to TNC interests. Thus, we come full circle, and indeed, it is vicious!

Africa’s wealth plunder dates back to colonial times, and even before, with the Atlantic trade of enslaved Africans. Now, this is enabled by transnational interests crafting international rules, loopholes and all.

Such enablers include various bankers, accountants, lawyers, investment managers, auditors and other wheeler dealers. Thus, the origins of the wealth of ‘high net-worth individuals’, corporations and politicians are disguised, and its transfer abroad ‘laundered’.

What can be done?
Capital flight is not mainly due to ‘normal’ portfolio choices by African investors. Hence, raising returns to investment, e.g., with higher interest rates, is unlikely to stem it. Worse, such policy measures discourage needed domestic investments.

Besides enforcing efficient capital controls, strengthening the capabilities of specialized national agencies – such as customs, financial supervision and anti-corruption bodies – is important.

African governments need stronger rules, legal frameworks and institutions to curb corruption and ensure more effective natural resource management, e.g., by revising bilateral investment treaties and investment codes, besides renegotiating oil, gas, mining and infrastructure contracts.

Records of all investments in extractive industries, tax payments by all involved, and public prosecution should be open, transparent and accountable. Punishment of economic crimes should be strictly enforced with deterrent penalties.

The broader public – especially civil society organizations, local authorities and impacted communities – must also know who and what are involved in extractive industries.

Only an informed public who knows how much is extracted and exported, by whom, what revenue governments get, and their social and environmental effects, can keep corporations and governments in check.

Improving international trade and finance transparency is essential. This requires ending banking secrecy and better regulation of TNCs to curb trade mis-invoicing and transfer pricing, still enabling resource theft and pillage.

OECD rhetoric has long blamed capital flight on offshore tax havens on remote tropical islands. But those in rich countries – such as the UK, US, Switzerland, Netherlands, Singapore and others – are the biggest culprits.

Stopping haemorrhage of African resource plunder by denying refuge for illicit transfers should be a rich country obligation. Automatic exchange of tax-related information should become truly universal to stop trade mis-invoicing, transfer pricing abuses and hiding stolen wealth abroad.

Unitary taxation of transnational corporations can help end tax abuses, including evasion and avoidance. But the OECD’s Inclusive Framework proposals favour their own governments and corporate interests.

Africa is not inherently ‘poor’. Rather, it has been impoverished by fraud and pillage leading to resource transfers abroad. An earnest effort to end this requires recognizing all responsibilities and culpabilities, national and international.

Africa’s veins have been slit open. The centuries-long bleeding must stop.

Dr Ndongo Samba Sylla is a Senegalese development economist working at the Rosa Luxemburg Foundation in Dakar. He authored The Fair Trade Scandal. Marketing Poverty to Benefit the Rich and co-authored Africa’s Last Colonial Currency: The CFA Franc Story. He also edited Economic and Monetary Sovereignty for 21st century Africa, Revolutionary Movements in Africa and Imperialism and the Political Economy of Global South’s Debt. He tweets at @nssylla

IPS UN Bureau

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