POVERTY: EU money earmarked for African development winds up in tax havens and African banks

  The headquarters of the European Investment Bank in Luxembourg Photo: Art Directors & TRIP / Alamy

By Leah Hyslop 01 Dec 2010
EU money earmarked for African development winds up in tax havens and African banks, report claims
A new report alleges that the European Investment Bank’s lending practices in Africa facilitate tax evasion and corruption.
Counter Balance, a coalition of NGOs dedicated to challenging the European Investment Bank (EIB), issued the report, entitled Hit and run development: some things the EIB would rather you didn't know about its lending practices in Africa, and some things that can no longer be covered up last week.
In it, the organisation claims that millions of pounds earmarked by the EIB last year for funding development in Africa ended up in tax havens and African banks, one of whose managing directors was being investigated for fraud at the time.
On its website, the EIB says that its aim in the sub-saharan African, Carribean and Pacific countries is "to support projects that deliver sustainable economic, social and environmental benefits”, particularly “private sector-led initiatives that promote economic growth and have a positive impact on the wider community and region."
Counter Balance claims however that the bank is neglecting its traditional role in financing small- to medium-sized enterprises (SMEs) to concentrate on intermediated loans (large loans to private banks, who are then expected to lend to SMEs) and offshore private equity funds.
The group says that these practices not only “prioritise profit maximisation over concerns about sustainable development”, they make it difficult to trace what happens to the money, and can faciliate “sinister practices such as tax evasion, money laundering and personal enrichment".
“When development money is given to unaccountable financial bodies with no development interest or experience, untracked by the EIB and resulting in alleged corruption and money laundering, it is hard to see how the EIB is meeting its legal obligations under its mandate,” the organisation said.
One case study highlighted in the report centred on a €50 million (£42 million) loan to a bank in Nigeria in 2007, when its managing director was under investigation by Nigeria's economic and financial crimes commission.
A spokesman for the EIB said that that the bank had a "zero-tolerance" policy on corruption and that many of the loans to African banks mentioned in the report had been discussed, but never actually made. “When financing projects that contribute to reducing poverty and promoting economic development in Africa the European Investment Bank works closely with fund managers selected for their track record and expertise specialist management skills," he said.
“All projects funded by the EIB and intermediaries are subject to the highest accountability standards, examined and are subject to the Bank's due diligence with this respect both before approval and following signature through the Bank's monitoring process."
Regarding the EIB's use of offshore financial centres, the spokesman added that the EIB "does not do business in blacklisted offshore financial centres, has strict internal rules regarding the use of offshore financial centres and ensures that beneficiaries of EIB funding conform to international standards on the use of offshore financial centres."
Around 10 per cent of the EIB's budget is spent outside of the EU every year. In 2009, this approximated to €10 billion (£8.3 billion) of investment
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8168734/EU-money-earmarked-for-African-development-winds-up-in-tax-havens-and-African-banks-report-claims.html