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The East African : Dec 22nd 2014
42 The EastAfrican BUSINESS DECEMBER 20-26,2014 EU states must expose anonymous companies to cu≥b money launde≥ing T≥adeMa≥k East Af≥ica o≠e≥s $16m to fund innovation By ISAAC KHISA The EastAfrican THE TRADEMARK East Africa Challenge Fund has launched a $16 million fund for innovators who develop strategies and products that can help reduce the time and cost of transporting goods and services across East Africa. The fund, dubbed Logistics Innovation for Trade (Lift), will offer grants ranging from $200,000 to $750,000 to winning proposals from innovators globally. Lift is aimed at helping develop new technologies that can lead to a 15 per cent reduction in the time and cost of transport on the Northern and Central Corridors by 2016, ensure better co-ordination of the logistics chain and come up with business models that help small and medium enterprises to participate in the logistics chain. The fund is also meant A s they discuss the European AntiMoney Laundering Directive next week, European parliamentarians and diplomats have the opportunity to end secret company ownership — a tactic used by criminals around the world. Anonymous companies can open bank accounts, wire money, buy property and transact business like any other company. They are an attractive method for hiding, moving and using money and other assets. The negative effects of fi- nancial secrecy in Europe go way beyond this continent’s borders. This is an issue for the entire world, including the developing countries and especially Africa. While Europe supports development aid or foreign investment flows into Africa, for example, illicit financial flows are moving in the opposite direction. It is established that Africa loses more money every year through illicit financial flows than it gets in aid. Indeed, anonymous companies facilitate money laundering, tax evasion and embezzlement from developing countries to the tune of $1 trillion each year. A World Bank study of 200 big corruption cases showed that 70 per cent imply the use of shell firms. Consider the Democratic Republic of the Congo, which COMMENTARY CAROLINE KENDE-ROBB AND ALVIN MOSIOMA “While Europe supports development aid or foreign investment in Africa, illicit financial flows are moving in the opposite direction.” lost an estimated $1.36 billion between 2010 and 2012, when national assets were sold at below-market prices to anonymous companies registered in the British Virgin Islands. We do not know who ben- efited when these assets were sold for profit, because we do not know who owns the companies. But we do know that the amount lost would have been enough to fund the country’s health and education budgets for two years. In a country that has some of the world’s worst malnutrition and child mortality rates, and an estimated 7 million children out of school, this should trouble us all. And dozens of similar examples do, unfortunately, exist throughout Africa. The argument for en- hanced transparency is not just humanitarian. Africa’s foreign investors, including European firms, have also been hit by anonymous company ownership. In 2012, a US-registered company, Cobalt International Energy, saw its company value drop $900 million when details emerged that three of the most powerful officials in Angola had held concealed interests in the company, triggering an investigation by the US Securities and Exchange Commission. Should be transparent It does not have to be this way, of course, and momentum has been growing for change. The Africa Progress Panel and the Financial Transparency Coalition are part of the growing movement of nonprofit organisations, governments, and think tanks who demand that the details of a company’s true owners, its uniquely identifiable human owners, should be transparent and publicly available. In 2013, the G8 commit- ted to further transparency on company ownership, and in April this year, the British government announced it would establish an open, publicly available beneficial ownership register. We know that European politicians find these arguments compelling, too, because in March, the European parliament voted 643 to 30 in favour of public registers of company ownership in the future AMLD. But, unfortunately, the commission and the member states are not unanimous. The future AMLD has been discussed for two months — behind closed doors — in the so-called trilog process involving the EU Parliament, the Commission and the Council. Under the influence of some member states like Germany, the creation of public beneficial ownership registers is under tough fire. But a glimmer of hope is coming from some member states like Denmark and the Netherlands, who announced last week that they were in favour of that process. Sweden also hinted it may join the movement. Now, all the EU member states must follow suit and do away with anonymous companies for good. Alvin Mosioma is the chai≥ of the Financial T≥anspa≥ency Coalition and executive di≥ecto≥ of the Tax Justice Netwo≥k–Af≥ica. Ca≥oline Kende-Robb is the executive di≥ecto≥ of the Af≥ica P≥og≥ess Panel, which is chai≥ed by Kofi Annan. to develop new services, including information and communications technology (ICT), to help buyers to find the right suppliers and facilitate more efficient logistics, improve financial services, provide training, and document how to reduce red tape and enforce standards in the industry. TradeMark East Africa Uganda director Allen Asiimwe noted that trade across the region is growing at a rate of eight per cent per annum, and emphasised the need to reduce the cost of transport and transit times on the main transport corridors. “The high cost of freight and transport erodes the competitiveness of goods exported by the East African countries, raises the cost of living and reduces trade, economic growth and job creation,” Ms Asiimwe said. Data from TMEA shows that East Africa has the highest freight and transport costs in the world. For the landlocked countries, transport costs can be as high as 75 per cent of the value of exports. Lift fund manager Isaac Njoroge said only private companies in the transport and logistics industry in the EAC and those providing services to it are eligible to apply for the grant. Executives of logistics firms in Uganda welcomed the grant but said it will only be useful if non-tariff barriers are eliminated. “Unless non-tariff barriers are eliminated, nothing much will improve,” said James Byenkya, operations manager at Ataco Freight Services Ltd. $200,000 The minimum amount that the TMEA Challenge Fund will offer as grants to innovators in the region Paul Lugobe, operations manager at Uganda’s Freightnet Ltd, also called for an upgrade of roads across the region. The fund comes at a time when the EAC states are implementing a Single Customs Territory that is expected facilitate faster movement of goods and ease the cost of doing business in the region. Since its inception in 2012, the TMEA Challenge Fund has supported other trade innovations worth $10 million, including the recently launched Airtel cross-border money transfer scheme and the Africado Ltd project in the Kilimanjaro region of Tanzania. The high cost of freight and transport erodes the competitiveness of goods exported by the East African countries.
Dec 15th 2014
Dec 29th 2014