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Rachel Etter-Phoya, Mukupa Nsenduluka ■ The tax justice and climate crisis crossroads in resource-rich Africa

A poster held up at a climate crisis march which reads

You’re likely reading this using technology containing minerals that once lay far below Africa’s mineral-rich soils. For the African continent is home to almost one-third of the world’s mineral reserves

If you dig a bit deeper though, you’d find there’s some healing needed in the relationships between extracting minerals and society across the continent, and the world. Although natural resources account for almost one-third of total government revenue in some African countries, tax avoidance by mining multinational companies may cost sub-Saharan Africa as much as US$730 million per year in corporate income tax, according to the International Monetary Fund. The resulting inadequate funds means our public services – our schools, hospitals, and roads in Africa – don’t serve us as well as they could. It also hampers governments in introducing more progressive tax systems.

Government coffers are emptier than they should be, and as if this wasn’t enough, African governments are also grappling with the impacts of the climate crisis on their people. They’re coping with the fallout from flooding and droughts, sometimes within the same national borders, sometimes only months apart.

Current global carbon emissions reflect the deep inequalities in and across nations. Southern and Eastern Africa have the lowest emissions in the world. Sub-Saharan Africa could increase its per capita emissions by 20 per cent and still be in line with the agreed 1.5 degrees Celsius ceiling of the global pact for climate change, the Paris Agreement. Unfortunately, other regions have far exceeded their fair share. Scientists have issued a wake up call that we have already transgressed six of nine planetary boundaries and so we know what’s been agreed in itself isn’t enough.

Africa’s resource futures

The future of Africa’s extractive industries hangs in the balance as the demand for fossil fuels dips with international efforts to keep global warming below the 1.5 degrees Celsius. For almost half of African countries, two fossil fuels—petroleum and coal—are the most plentiful resources. African nations facing the risk of stranded assets, such as Chad, the Republic of Congo, Gabon, Mozambique, and Nigeria, may be counting on these resources for revenue and to meet domestic energy needs.

Yet new markets and greater demand for metals and minerals needed for low-carbon technologies – of which Africa has many – are promising. As Marit Kitaw, Interim Director the African Minerals Development Center (AMDC), writes

As global demand for batteries, electric vehicles, and renewable-energy equipment surges, African countries could harness their large deposits of minerals for the goal of fostering green industrialization. This would enable the continent to meet development objectives while also tackling climate change.

Marit Kitaw, September 2023, ‘Making the Most of Africa’s Strategic Green Minerals’, Project Syndicate

However, simply transitioning from fossil fuels to “green” minerals without accompanying systemic transformation to international tax rules and African industrial policy would enable ongoing corporate tax abuse and raw-material exports.

The Africa Mining Vision – adopted by all African Union members in 2009 to tackle “the paradox of great mineral wealth existing side by side with pervasive poverty” – seeks to transform mining from primarily export-driven extraction traded on markets outside the continent, to more extraction integrated into industrial policy, including domestic value addition and deliberate linkages to other sectors.

We, the writers of this article – Mukupa and Rachel – took these intersecting, complex conditions to heart and thought about how one treatment, tax, can help in the healing.

Principles of tax justice

In a brief published as part of the Feminist Action Nexus for Economic and Climate Justice earlier this month, The Principles of Tax Justice and the Climate Crisis in Africa’s Resource-Rich Nations, we explore what the principles of tax justice – the 5Rs of tax justice – might mean for the extractive industries in Africa’s resource-rich nations, especially in the context of the climate crisis. All the more so for women, who so often bear the greatest brunt of illicit financial flows, the climate crisis, and other adverse impacts associated with the extractive industries.

The 5 principles of tax justice include raising revenue, redistributing wealth to create a more equal society, repricing to make activities that infringe on the rights of others more costly, improving representation by reinforcing the social contract between voters and representatives, and supporting reparations to redress historical and colonial legacies.

African nations have been tackling the challenges posed by the existing international tax system for decades. For the last 60 years, decision-making on international tax has been confined to the Organisation for Economic Co-operation and Development (OECD), a membership body of the world’s richest nations, where no African nation is a member. In a historic move in 2022, Nigeria, on behalf of the Africa Group, put forward a resolution at the United Nations to start intergovernmental discussions on international taxation with a view to setting up an intergovernmental tax body within the UN. It was adopted by unanimous consensus.

The road to recovery

Last year’s UN resolution is good news for all. But OECD member states and their dependencies – responsible for almost 7 in every 10 dollars lost to corporate tax abuse – are not going to accept the necessary transformations easily, even though most of their citizens are also adversely affected by an unfair international tax system. These are the very same nations that are historically and currently most responsible for the climate crisis because of their greenhouse gas emissions.

The next months are pivotal. António Guterres, the Secretary-General of the UN, published a ground-breaking report in August 2023, which confirms much of the analysis by members of the Global Alliance of Tax Justice, setting out three options for progress on international tax within the auspices of the UN.

At the UN General Assembly last week, the moderator of the debate concluded that a consensus had emerged around the central option of the three proposed in his report: a framework convention on tax. This is the longstanding aim of tax justice campaigners. Yet the UK, the US, and the EU with its powerful members, countries most responsible for enabling much of the tax losses – and yet suffering themselves in terms of absolute losses – were conspicuously silent. 

Tax justice is a deeply needed planetary salve. As Guterres wrote,

The present report comes amid increasingly urgent concerns that the international financial architecture, and with it the international tax system, have not sufficiently supported the post-pandemic economic recovery, financing of the Sustainable Development Goals and climate action.

Report of the Secretary-General ‘Promotion of inclusive and effective international tax cooperation at the United Nations’, 2023

We hope our brief here sparks further thought for the role of tax in Africa’s resource-rich nations in light of the climate crisis. Given their shared vision and common objectives with Guterres’ report, we join the call for greater collaboration between the feminist, tax justice and climate justice movements.

You can download the brief The Principles of Tax Justice and the Climate Crisis in Africa’s Resource-Rich Nations here.

Photo by Markus Spiske on Unsplash

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