Policy and Advocacy

COVID-19 recovery in West Africa is “austerity on steroids” and sets the region on a destructive path ahead

 

Austerity, spiraling debt and vaccine inequity will bring the inequality crisis to levels never reached before, reveals new index.

West African governments are planning to “slash and burn” their way out of COVID-19 induced economic loss, reveals new analysis from Oxfam and Development Finance International (DFI) today. The organizations are calling for an urgent change of course as West African governments are preparing their annual budgets and participating in the Annual Meetings of the World Bank and IMF, which are crucial discussions to focus the recovery on fighting inequality and poverty.

The Commitment to Reducing Inequality Index (CRII) shows that 14 out of 16 West African nations intend to cut their national budgets by a combined $26.8 billion over the next five years in an effort to partly plug the $48.7 billion lost in 2020 alone across the entire region due to the pandemic. Such austerity has been encouraged by the IMF, through its COVID-19 loans. 

This massive raid on public finances could push millions more West Africans into poverty and hunger and potentially trigger the worst inequality crisis in decades.  Women will be impacted more severely due to their very high concentration in low paid informal jobs and unpaid care work.  Meanwhile, the collective net worth of West Africa’s three wealthiest men surged by $6.4 billion in the first 17 months of the pandemic ―enough to lift 18 million people out of extreme poverty.

This plan is austerity on steroids. Rather than investing toward a positive new future for the people of West Africa, the region’s governments are instead reaching back to a 1980s playbook ―despite it being a hugely discredited one. The danger is that these governments will cut their way into worsening poverty and skyrocketing inequality.

This comes at a time when the region has lost the equivalent of seven million jobs, infection rates are increasing, there is no vaccine in sight for the vast majority of people and the Sahel is facing one of its worst hunger crisis. This is not the time for governments to be ripping away the public goods, support and services that millions of people need.

The index ranks 15 member states of the Economic Community of West African States and Mauritania (ECOWAS+) on their policies on public services, tax, workers’ rights, smallholder agriculture and pandemic response spending, all areas pivotal to reducing inequality and weathering the COVID-19 storm. 

The index highlights that West African governments are again the least committed to reducing inequality in Africa. Most support measures in response to COVID-19 were temporary and did little to reduce inequality, while triggering a sharp increase in debt ―debt servicing in 2020-2021 will siphon off about 61.7 percent of government revenue in West Africa. The support programs have been replaced with austerity measures as COVID-19 infection rates are increasing in many countries of the region. Less than 4 percent of West Africans are fully vaccinated.

Sierra Leone ranks low (13th) on the index. Its government was trying to implement anti-inequality policies before COVID and sharply increased education and health spending. But large corporations pocketed 92 percent of government pandemic support funding, while only 1.5 percent was spent on social protection. Sierra Leone’s $860 million upcoming spending cuts (2022-26) are equivalent to two and a half times its annual healthcare budget.

Nigeria was the region’s worst performing country in tackling inequality going into the pandemic. Nigeria’s health budget (as a percentage of its overall budget) is the third lowest in the world (3.6 percent) and 40 percent of its population does not have access to healthcare services. Nigeria loses $2.9 billion a year from tax incentives to corporations but in 2021 increased value-added taxes (VAT), which apply to everyday products like food and clothing and fall disproportionately on poor people, from 5 percent to 7.5 percent.

Mali has the highest level of income equality among ECOWAS countries with a tax rate on the richest people that is 9% higher than the world average. But it ranks last on healthcare spending, devoting less than 5 percent of its annual budget on health. Nearly 38 percent of Mali’s population (8 million people) have no access to healthcare and 6.5 percent of households face catastrophic healthcare costs spending each year. Women’s labor rights are often not respected and they lack legal protection from marital rape and sexual harassment. Mali plans to slash its budget by $3.3 billion over the next five years.

Burkina Faso ranks middle (9th) on the Index. It spends nearly 23% of its budget on education, the highest share in the region and 9th in the world. But the wealthiest 20% of the population has 44% of the income, and in rural areas, 47.5% of the population lives in poverty. According to the IMF, such a level of inequality reduces Gross National Product growth by at least 1% per year. The government plans to cut $1.27 billion through 2026.

If the governments of West Africa were to increase fairly their tax revenue by 1 percent in the next five years, they would raise $56.89 billion. This is more than enough to cancel the planned $26.8 billion budget cuts and build 600 fully-equipped hospitals across West Africa.

West Africa is at a crossroads. Will the region come out of COVID-19 with policies which exacerbate inequality, or implement a recovery plan that works for everyone and not only for the privileged few?

The pandemic has taught us it is urgent to invest massively in public education, health and social protection and to use more progressive taxation of income and wealth to pay for this. We also need to increase worker’s rights ― especially for women who disproportionately take on the most precarious jobs.

Oxfam and DFI published in 2019 the first “West African Commitment to Reduce Inequality (CRI) index” showing that West African governments were the least engaged across the continent in reducing inequality.

Download “Adding Fuel to Fire: How IMF Demands for Austerity Will Drive Up Inequality Around the World” for more in-depth analysis on austerity measures encouraged by the IMF through its COVID-19 loans. Between March 1, 2020 and March 15, 2021, all countries in West Africa received IMF emergency support to respond to the pandemic through various types of loans. For more information on austerity measures encouraged in the loans received by West African countries refer to Annex 1 and Annex 2 of the report.

OECD tax deal ignores the wishes of the world’s poorest countries

October 7th 2021

On the eve of technical talks to thrash out the final details of the Organisation for Economic Cooperation and Development’s (OECD) corporate tax deal, Oxfam is calling for world leaders to bring fairness and ambition back to the table and deliver a tax plan that won’t leave developing countries with “next to nothing”. As it stands the deal on the table means that if you’re a nurse in Mexico, a market vendor in Thailand or a small business crippled by COVID-19 in Kenya, this deal will not deliver for you.

This proposed agreement is the OECD’s effort to update the century-old flawed rules for taxing multinational companies. According to the G20 the proposed deal will create a ‘fairer international tax architecture’. Unfortunately, the fine details of the agreement indicate that this will not be the case. While Oxfam acknowledges that the deal will introduce two major new features in the international tax system – formulary apportionment and a global minimum tax – which could dent both tax avoidance and extreme tax competition- this is an agreement made by the world’s richest countries, for the rich.

What could have been an historic agreement to enable developing countries to access their fair share of corporate tax revenue, to help them achieve the Sustainable Development Goals (SDGs), is rapidly becoming a rich country stitch-up instead. As the final details of the deal are being ironed out it is hugely disappointing that the legitimate and strong concerns coming from a broad coalition of developing countries are being ignored. IMF data indicate that proportionally speaking, low- income countries lose the most tax revenue due to tax avoidance. Oxfam believes that it is impossible to develop long term solutions to global poverty and inequality as long as the current international tax system continues to drain essential financial resources from developing countries.

Ireland has recognised that changes to this global tax system are necessary and over the last decade has supported the OECD’s Base Erosion and Process Shifting (OECD BEPS) process, and engaged with various ongoing initiatives at EU level to address corporate tax avoidance. Oxfam recognises that Ireland has made some important changes to close the more egregious forms of tax avoidance that Ireland has facilitated. However, none of these aforementioned processes have succeeded in fundamentally transforming the global tax system.

140 countries are currently negotiating a two-pillar tax deal under the OECD-G20 umbrella. The first ‘pillar’ aims to make the world’s largest corporations pay more taxes in the countries where they earn profits. Based on current proposals, Oxfam estimates that it will affect only 69 multinationals and would only apply on ‘super profits’ above 10 percent. Loopholes could let the likes of Amazon and ‘onshore’ secrecy jurisdictions like the City of London off the hook. Extractives and regulated financial services are excluded from the deal.

According to the OECD Pillar 1 of the agreement aims to “ensure a fairer distribution of profits and taxing rights among countries” but our analysis shows that it delivers almost no meaningful revenue for developing countries, while forcing them to sign away their right to tax multinational corporations through unilateral measures and submit to mandatory arbitration. Our impact assessment suggests that Pillar 1 could result in a loss of revenue for developing countries when the gains of Pillar 1 are compared to the taxing rights they would have to give up.

This means that countries most in need of more tax revenue will get next to nothing for hospitals and schools and social care under these new corporate tax rules. Nigeria, Africa’s biggest country in terms of its population and size of its economy has refused to sign up to the OECD deal to date, as it stands to receive as little as 0.02 percent of its GDP in additional money each year —equivalent to 48 cents per citizen.

The second ‘pillar’ of the agreement is about defining a global minimum corporate tax rate. An updated draft of the OECD tax plan this week dropped "at least" from a proposed minimum global corporate tax rate of "at least 15 percent".

Only large multinational companies with a turnover of more than €750 million would be subject to the new minimum tax, which according to the OECD will exclude 85-90% of the world’s multinational companies. It is also important to stress that the 15% rate is a starting point which can end up being much lower due to the so-called ‘substance carve-out’ in the OECD agreement

The 15 percent rate is well below the UN Financial Accountability, Transparency and Integrity (FACTI) Panel recommendation made earlier this year, which called for a 20- to 30-percent global corporate tax on profits. The Independent Commission for the Reform of International Corporate Taxation (ICRICT) has called for a 25 percent global minimum tax to be applied. 

A 25 percent global minimum corporate tax rate would raise nearly $17 billion more for the world’s 38 poorest countries (for which data is available) than a 15 percent rate. These countries are home to 38.6 percent of the world’s population. Ireland’s position on this issue, is in direct contradiction to its stated commitments to human rights and the anti-poverty goals of its Overseas Development Aid (OAD) Programme.

The UN is so concerned about Ireland’s approach to corporate taxation that it is currently investigating the impact of Ireland’s international tax policy on the ability of countries of the Global South to raise revenue and fulfil their human rights obligations, in particular those that relate to children.

Moreover, Ireland’s continued opposition to tax reform being addressed at the UN rather than at the OECD, where developing countries would have a more equal say in any agreement, undermines the world’s most important multilateral institution at a time when Ireland is trying to revitalise the UN through its membership of the UN Security Council. Although Ireland claims to be defending the rights of small countries against richer countries, it has continued to ignore the stated wishes of poor countries.

The fixed 15 percent rate will overwhelmingly benefit rich countries and increase inequality. The G7 and EU will take home two-thirds of new cash that it will bring in, while the world’s poorest countries will recover less than 3 percent, despite being home to more than a third of the world’s population.

Developing countries are more heavily reliant on corporate tax. In 2018, African countries raised 19 percent of their overall revenue from corporate tax, compared to just 10 percent for OECD nations.

You may ask why developing countries are supporting a deal that is not in their interests? It is important to understand the political economy realities of these negotiations whereby low-income countries can be effectively bullied through threats of trade sanctions, blacklists etc. unless they sign up. There is no place in the twenty-first century for such gun-boat diplomacy and unequal treaties.

It is shameful that while the majority of the world struggles with scarce vaccine supply and worsening hunger and poverty, rich nations are grabbing for an ever-bigger slice of the pie. But developing countries can still fight for a fairer tax deal. If the agreement fails to reflect their interests, they should have no qualms about leaving the negotiating table and chucking this one-sided money-grab onto history’s scrap heap.

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25 humanitarian organisations and NGOs urge EU leaders to “provide a lifeline” to Afghan refugees at the Forum on providing protection for Afghans at risk

25 humanitarian organisations and NGOs are jointly urging EU leaders to expand safe and legal pathways from Afghanistan and the region. The call reiterates recommendations outlined in a joint statement released on 16 September that called on the EU and its Member States to live up to their commitments to refugee protection and humanitarian leadership, and share responsibilities with countries neighbouring Afghanistan. The upcoming Forum on providing protection for Afghans at risk, planned for Thursday 7 October, provides a key chance for them to do so.

The organisations are pressing leaders to seize this opportunity to:

  1. Make ambitious pledges to resettle at least 36,000 refugees identified by UNHCR as in need of resettlement across different regions in 2022. This must be in addition to launching a dedicated scheme to resettle Afghan refugees from neighbouring countries, including those in a protracted situation.

    Resettlement can provide a durable solution for refugees in need, while strengthening the capacity of states in the region to continue offering protection.
  2.  

  3. In addition to resettlement, use all available legal pathways to immediately bring people in need of protection to safety from Afghanistan and the region, with predictable and secure protection upon arrival. This includes, for instance, an expanded and flexible use of family reunification, humanitarian visas, community sponsorships, as well as higher education scholarship and work visas.

    Such pathways will provide a lifeline to people with urgent protection needs, and prevent them from making dangerous border crossings in search of safety. It remains crucial, however, that evacuations and humanitarian admissions remain additional to resettlement and are not counted towards annual resettlement quotas.
  4.  

  5. Uphold access to a fair and full asylum process for Afghan and other nationals in Europe, while supporting their inclusion, integration and participation in society. These pathways to safety cannot replace the right for Afghan and other asylum seekers to seek protection in Europe, no matter how they reach the territory. Among others, all rejected asylum cases of Afghan nationals must be urgently reviewed, deportations to the region must be formally suspended in line with the principle of non-refoulement, and any pushbacks or denial of access to asylum or reception for asylum seekers in Europe must be promptly investigated and sanctioned by EU institutions.

In recent weeks, the European Commission, European Parliament, regions and cities, and civil society have led the way in showing solidarity with Afghan refugees and calling for significant and urgent pathways to safety. European leaders must now follow suit.


END

Notes to editors

Read the joint statement released on 16 September that called on the EU and its Member States to live up to their commitments to refugee protection and humanitarian leadership, and share responsibilities with countries neighbouring Afghanistan.

Our planet has spoken and it demands climate action

Amid a world in parts burning, in parts drowning and in parts starving, the IPCC has just tabled the most undeniable wake-up call yet for global industry to switch from oil, gas and coal to renewables.

It is so important that our governments use everything in their power to bring into effect the urgent change that is needed to protect our future. And we, citizens of the world, must use our political power and behaviours to push big polluting corporations and governments in the right direction as there is no Plan B.

What is climate change?

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IPCC describes humanity’s slimmest chance to keep global warming to 1.5°C and avert planetary ruin and their report is yet more unimpeachable proof that climate change is happening now, and that global warming is already one of the most harmful drivers of worsening hunger and starvation, migration, poverty and inequality all over the world. 

In recent years, with 1°C of global heating, there have been deadly cyclones in Asia and Central America, floods in Europe and the UK, huge locust swarms across Africa, and unprecedented heatwaves and wildfires across the US, Turkey, Greece and Australia ―all turbo-charged by climate change.

Over the past 10 years, more people have been forced from their homes by extreme weather-related disasters than for any other single reason ―20 million a year, or one person every two seconds. The number of climate-related disasters has tripled in 30 years, with the UN estimating that 1.23 million people have died and 4.2 billion have been affected by droughts, floods and wildfires since 2020 alone. 

Rahela trying to catch fish for her family as they have nothing to eat after cyclone Bulbul. Gabura, Shamnagar. Photo: FabehaMonir/Oxfam

The richest one percent of people in the world, approximately 63 million people, are responsible for more than twice as much carbon pollution as the 3.1 billion people who make up the poorest half of humanity. Those with money and power may take comfort in knowing they will be able to buy some protection against the effects of global warming for longer than people without those privileges and resources ―but can’t buy their way out of this problem forever. No one is safe. Our land, water and air is on the line, which means our survival as a species is on the line. The IPCC report is clear - we are at the stage now when self-preservation is either a collective process or a failed one. 

The main perpetrators of global warming ―that is, rich countries that have reaped massive wealth by burning fossil fuels― must be the ones to cut their emissions first, fastest and furthest. They must also pay their climate debt to developing countries by scaling up finance to help them adapt to the effects of climate change and transition to clean energy. Other major polluters don’t get a free pass and must also drastically cut emissions. The world has as much to gain in terms of human safety, development, opportunity and jobs by running a global economy on renewables, as it has to lose in continuing business-as-usual.

Very few nations ―and none of the world’s wealthy nations― have submitted climate plans consistent with keeping warming below 2°C, let alone 1.5°C. If global emissions continue to increase, the 1.5°C threshold could be breached as early as the next ten years.

The IPCC report must spur governments to act together and build a fairer and greener global economy to ensure the world stays within 1.5°C of warming. They must cement this in Glasgow. Wealthy country governments must meet their $100 billion-a-year promise to help the poorest countries grapple with the climate crisis.

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‘Net zero’ - a dangerous distraction gambling with our planet’s future

Lucy Njeri lives in the Rift Valley in Kenya. In late May her seeds began to germinate when the rains arrived. But instead of the expected long rainy season, the rains stopped after just a week. Since then, each day she scans the horizon looking for rain. The bean crop is already ruined. She has some faint hopes for the maize, but only if the rains come soon. If not, they won't be able to plant again until next year and there will be widespread hunger.

Climate change for us is real. It is already here. It is causing great hunger.

~ Lucy Njeri

Every week a new country or corporation announces a target to achieve ‘net zero’ carbon emissions as their contribution to stopping climate breakdown. While these look good on paper, and are often reported uncritically in the media, without clear definition they risk being dangerous distractions that gamble with our planet’s future.

While in theory achieving net zero emissions is a worthy North Star, it’s striking how much that one small word ‘net’ can obscure. ‘Net zero emissions’ and ‘zero emissions’ do not mean the same thing. Instead, in many cases, net zero targets are a green-washing exercise that allows for business as usual.

Net zero targets have become popular because they give government and corporate leaders what they are desperate for. A convenient way to look like they are taking dramatic action to stop the climate crisis while largely failing to do so. 

Photo: Andy Aitchison / Oxfam

What is needed is an immediate, dramatic and irreversible reduction in the billions of tonnes of carbon countries and corporations are pumping into our atmosphere on a daily basis. To meet the Paris targets, by 2030 the world collectively should be on track to have cut carbon emissions by almost half, with the sharpest cuts being made by the biggest emitters. On current plans, we are on track to only have reduced emissions by one percent compared to 2010 levels.

Later this year, governments will come together in Glasgow for the follow-up climate summit to the 2015 Paris meeting. If we are to save our planet, and prevent millions of lives being lost, it is vital that governments and corporations are not allowed to get away with vague 'net zero' targets. They must be asked continuously and relentlessly what their plans are to cut their own carbon emissions.

Net zero targets are also risky because instead of focusing on cutting carbon emissions, for example rather than rapidly ending the use of fossil fuels, they rely instead on using other methods to remove carbon from the atmosphere. This can allow countries and corporations to continue to pollute, as the millions of tonnes of carbon emissions their factories and power plants produce will somehow then be removed from the atmosphere, cancelling out their pollution and supposedly achieving ‘net zero'.

The problem is this removal of carbon either relies on virtually unproven new technologies, or on a level of land use that is completely impossible and would lead to mass hunger and displacement of people across the world. Despite the buzz devoted to new technologies (that will somehow rescue us from the need to stop belching CO2 into the atmosphere) none have yet proven possible to use at scale.

The only proven way to remove carbon from the atmosphere is to use land to do so - by growing billions of trees and storing carbon in trees and soil. While stopping deforestation and sustainably restoring and managing lands wherever possible is of course a good thing to do and brings enormous environmental and social benefits, it is mathematically impossible to plant enough trees to meet the combined 'net zero' targets announced by governments and corporations, as there is simply not enough land to do this.

Land is a finite resource that is a vital lifeline for growing food. It is central to the lives and livelihoods of millions of small farmers and local communities around the planet.

We have calculated that the total amount of land required for planned carbon removal could potentially be five times the size of India, or the equivalent of all the farmland on the planet.

Our analysis also shows that the net zero targets of just four of the big oil and gas producers alone could require an area of land twice the size of the UK.

If the oil and gas sector as a whole adopted similar net zero targets, it could end up requiring land that is nearly half the size of the United States.

There is a very real risk that the explosion in 'net zero' commitments will fuel a new surge in demand for land, particularly in low-and middle-income countries, which would lead to mass displacement and hunger.  In India, for example, as part of an afforestation drive, traditional lands have been fenced off, and communities who have rights to use this land have been forcibly evicted and left homeless. These conflicts are impacting nearly half a million tribal and forest-dwelling people.

Aguiratou Ouedraogo is a 39 year farmer and mother. She fetches water from a well to water her market garden crops, with the help of another farmer with whom she shares the agricultural plot. Photo: Matias Tellez/Oxfam.

Instead of using land as a carbon farm that helps big emitters sound good while sidestepping the actual hard work required to cut emissions, we need to manage land in ways that tackle climate change and hunger together, while strengthening the rights and resilience of communities reliant on it for both their food and economic security.

It is clear to us all that climate change has already begun, and unless drastic action is taken now a future of terrible hunger, extreme temperatures, floods, storms and droughts is a certainty.

But we can still stop this.

At the Glasgow Climate Summit, real, transparent, concrete and timebound cuts to carbon can be agreed for 2030.

A forest of flimsy net zero commitments for 2050 and beyond risks letting governments and corporations off the hook, substituting the illusion of action for the hard work that must be done immediately if we are to avert climate disaster. 

Our demands

  • A much stronger focus on cutting carbon emissions in the near term (by 2030). Unless the biggest emitters of carbon dioxide take urgent action to cut emissions by half by the end of the decade, runaway climate breakdown will become inevitable.
  • That the G20 prioritises ambitious climate action in the run-up to COP26 in Glasgow to ensure that global heating is kept below 1.5°C.
  • That companies cut emissions in their own operations and supply chains first and foremost. Ambitious action to cut emissions by 2030 requires phasing out support for new fossil fuel production. The fossil fuel industry cannot use 'net zero' as a prop for continuing business as usual.
  • Transparent targets that distinguish between reducing and removing carbon, instead of blurring the boundaries with short-term (2030), medium- (2040) and long-term targets.
  • That land use must ensure zero hunger. Land and nature are important parts of the climate solution, but where we do use land for climate mitigation, it must prioritise food security and build the resilience of small-scale farmers who rely on land. Nature-based solutions must strengthen the rights and livelihoods of local communities and protect ecosystems, and be subject to strong social and environmental safeguards that ensure that local communities, Indigenous people and frontline defenders have a seat at the table.
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