Tag: science & technology

Africa needs its own tax deal  

“African leaders have to wake up and tax those who have money” – Winnie Byanyima executive director of UNAIDS 

On 8 October 2021, 136 out of the 140 countries involved the negotiations signed an agreement to tax multinationals. On the surface this seems like a significant achievement. Getting broad international agreement on anything beyond platitudes is almost impossible these days, let alone where the USA agrees to it. However, like most global deals the primary drivers of this deal (and thus the interests it serves) are those of the developed world (particularly the USA) where most of these large multinationals are from.  

Interestingly Kenya and Nigeria have refused to sign the deal, both are not thrilled by the comparatively low tax rate agreed upon and the removal of policy making space that the deal implies.  

Taxes are critical, especially for African states that have a myriad of needs to finance. Africa, does need a multilateral tax deal, but not this one. Rather, what the continent needs is its own deal, that suits Africa’s interests rather than those of Washington and Brussels.  

What is the deal and why is it a problem  

The global tax deal known as the ‘two-pillar solution,’ was initiated by the Organisation for Economic Co-operation and Development (OECD) and aims to counter tax evasion and avoidance, which are increasing under the digital economy. The two pillars of the deal are simple: 

  1. Companies with a turnover of more than $17bn and a profitability of more than 10% will have to pay their taxes in the country where they make their turnover,  rather than in the country where their head office is located. 
  2. In addition, a minimum tax of 15% on the profits of companies with a turnover of more than $850m will be introduced to limit global tax competition 

The official OECD statement, says that the aim is to “reform international tax rules and ensure that multinational enterprises pay their fair share of taxes wherever they operate.” 

However, there are some significant issues with the deal which are particularly problematic for Africa and are why Nigeria and Kenya have refused to sign on.  

  • Most African countries have tax rates that are higher than 15% (in Kenya and Nigeria it is 30%). This reduced rate would reduce revenue collected on corporate profits.
    average corporate tax rates in Africa and select markets https://home.kpmg/za/en/home/services/tax/tax-tools-and-resources/tax-rates-online.html
  • The 15% rate would either create a two-tier tax system where big multinationals have 15% rate and local companies have the higher national rate. Or it would force countries to bring their tax rates down in line with the OECD, again forcing them to give up significant revenue. 
  • The OECD tax deal “will require all parties to eliminate all taxes on digital services and other similar measures relevant to all businesses and commit to not introducing such measures in the future.” This closes the policymaking space for African countries in the ICT sector which is impacting (and making money from) almost all the other parts of the economy. Furthermore, as the Financial Transparency Coalition points out “ Oxfam estimates that 52 countries in the global South are likely to be net payers in this deal as a result of having to end their digital taxes. They would be forced to do this in exchange for an uncertain revenue flow from a deal that will come into effect in 2023 at the earliest and is not due to be renewed before 2030.” 

In short, this multinational tax deal does not work for Africa, it will limit our ability to collect revenue from large multinational companies, particularly the behemoths in the ICT sector.  

Bucking the trend 

If the global multilateral tax deal does not work for the continent, then the logical thing is for Africa to forge its own deal. The size, growth and demographics of the African market are significant enough that the big multinational companies (especially tech) are investing heavily on the continent. Pledging billions of dollars in investment, building billion-dollar fibre cables, and investing in new African headquarters. Subjecting these large multinational companies to a consistent tax regime across the continent would not fundamentally alter the attractiveness of the African market or endanger investment or jobs.  

Luckily, for the last several years Africa has been forging the continental free trade area, and this can be used to develop and implement an African multilateral tax deal, that enables the continent to raise more revenue, evens the playing field for African companies and preserves the continents policy making space and this can consist of 3 key elements.  

  1. Instead of the 15% proposed by the OECD a 25% tax on multi-national companies of more than $17bn and a profitability of more than 10%. African countries would be allowed to charge lower rates for companies whose beneficial ownership is located in Africa.  
  2. A climate tax on imported goods that have a high carbon footprint in their production. Rather than begging the developed world for funds for the green transition and to mitigate the impacts of climate change, it can be raised by taxing carbon imported onto the continent from those same countries.  
  3.  A tax on transfer pricing to prevent companies (especially extractives companies) from using clever accounting to minimise their tax exposure on the continent. 

African taxes in African markets 

As I have written about before Africa needs tax revenue, if we are ever to throw away the begging bowl and end the dependency on aid, we must be reliant on revenues raised on the continent. Like Kenya and Nigeria, I do not believe that the OECD tax deal is good for the continent. It limits our ability to raise that much needed revenue and limits the policy space available to make tax policy in the future in effect outsourcing African tax policy to the developed world.  

What is needed is for Africa to forge its own multilateral tax deal, one that is aimed at raising revenue, stopping tax evasion and illicit flows out of the continent, and protecting and enhancing African enterprises. This will not be easy, African countries have found it extremely hard to develop and implement multilateral tax policy. This does not mean that it is not worth trying.  

Genetically modified crops can work for Africa, but only if Africa owns it.

“Sixty per cent of the world’s arable land available today is in Africa. All efforts to feed the world — not just to feed Africa, but to feed the world — in the next decade or more are going to focus on Africa. Which means Africa has to do it right and have the scientific basis not to mess it up.” – Calestous Juma

Genetically Modified Organisms (GMO) are a topic that provokes spirited debate between its detractors and proponents. One side insists that GM crops offer a second green revolution to a continent with persistent food security problems, and governments and people should just get over their reservations and embrace them. The other side warns of dire ecological, economic, health and neo-colonial consequences if Africa allows its crops to come under the control of the corporate mono-culturalists for whom profit is their sole goal with the apparent concern around the health and well-being of Africans and their environment being PR at best.

This is not a black and white issue. Both sides have valid viewpoints. GM crops do have the potential to be highly beneficial to African farmers and enhance the food security and health of millions around the continent. However, the practices of the corporations that make, distribute and are lobbying for GM crops are disturbing. Furthermore, the concerns for people’s health and ecological sustainability should not be dismissed but addressed with data and testing.

Like the debate around GM crops, Africa does not face a black and white choice of refusal or submission GM crops and the companies that make them. Africa can chart a different path, with a policy that puts African farmers, food security and innovation at its heart. Africa can tap into the potential benefits of GM crops, driven by the needs of its farmers and innovations of scientists without having to give our agricultural future to the profit motives of foreign multinational Agri-corps. For that to happen, GM policy in Africa would have to be based around the ideals of public ownership, accountability and collaboration.

 

Potential and pitfalls

When dealing with the topic it is crucial that a proper definition of GMO’s be used. With that in mind I will use the WHO definition of “Organisms (i.e. plants, animals or microorganisms) in which the genetic material (DNA) has been altered in a way that does not occur naturally by mating and/or natural recombination… It allows selected individual genes to be transferred from one organism into another, also between nonrelated species.” [1]. People have been altering crops and animals for millennia, through techniques such as selective breeding. What makes GM different is that we are altering the blueprints of the organism, its DNA, to add or remove characteristics that we may like or dislike. This is a potentially powerful technology and it is unsurprising that it provokes such strong feelings.

The Potential – Higher, healthier yields with less inputs

By inserting desirable traits into the genes of plants, there are a number of advantageous properties that could be given to plants.

First are the yields farmers get, which genetic modification can significantly increase through several avenues. Plants can be modified to be resistant to bacterial, viral or fungal diseases as well as pests, reducing the number of crops farmers loose to these scourges. In addition, plants can be given genes that allow them to withstand environmental stresses. For instance, as rains become less consistent it would be a great benefit to have crops that can withstand periods of drought or heavy rains. With climate change causing shifting weather patterns resilient crops will be critical.

The second great benefit is health, and this come about in two forms. GM crops that can be made naturally resistant to pests and infections require less pesticide, herbicide, fungicide etc. This is healthy for the farmers who would handle less chemicals, healthier for consumers as less chemical use means less of these substances being ingested, and its better for the environment as there are fewer of these chemicals getting into the wider environment and having adverse effects (e.g. water run off into rivers and lakes that causes fish deaths and algal blooms). The second possible health benefit of GM is nutritional. Through genetic modification the nutritional value of the plant can be enhanced. An example of this is yellow rice which has been modified to produce Vitamin A in order to prevent Vitamin A deficiency in children which can cause blindness.

The third broad benefit is an offshoot of the other two. By modifying plants to require less pesticide, herbicide, fungicides and fertiliser, you reduce the inputs necessary for farming. In a continent where, expensive farm inputs such as fertiliser and pesticides are a constant burden for farmers, reducing the amount of inputs required while sustaining or improving yields would give farmers a leg up without having to resort to expensive subsidies or government programs as we do now.

The Pitfalls

However, GMO’s are not all rosy. First, is the reality that “life finds a way”. Try as we may eventually GM crops will mix with and reproduce with indigenous crops. What effect will this have on the farmers who have chosen not to grow GM crops, what characteristics will these crops have, and if the GM crops are patented will they be forced to pay royalties.

Which brings us to the second issue, and in my mind the most crucial. Corporate control. Currently GM crops are largely a corporate creation, patented and controlled by large agricultural biotech corporations whose prime motivation is profit and not the interests of African farmers and consumers. Companies like Monsanto develop crops to be compatible with their own herbicide so that you only get good yields when used in conjunction with their other products. In addition, such crops tend to have terminator seeds. The seeds produced by the plants are sterile and thus farmers must purchase new seeds every year guaranteeing the company a revenue stream. Furthermore, the patents that these corporations have on these crops blocks innovation, evolution and adaption forcing farmers into farming in a specific way.

The third question is one of safety. Do we know enough about GM crops and their impacts on the environment and human health to be confident enough to allow them into the market? Do we have the systems regulations and facilities to test these crops to ensure their safety?

GMO’s with an African (policy) flavour

The answer to the issues presented by GMO’s both their potential and pitfalls, is not to completely ban them or allow agro-chemical industry free reign in the continent. What is needed is good policy. Good policy on GMO’s in Africa would consist of three elements. The first is public ownership and accountability. A major problem with GM crops is their corporate nature. The only way to ensure that GMO’s would be beneficial to Africa is to strip the profit motive from their research, design, testing and regulation. And the only way to do that is public ownership. This brings us to the second element, accountability. There is a lot of mistrust around GMO’s, the motives behind them, their ecological and health impacts and their use. The only way to assuage these concerns is transparency. No for-profit corporation will be transparent about commercially sensitive information such as its own GMO’s, but public institutions can be transparent and can be designed to be so, by incorporating stakeholders and their concerns into their design and decision-making structures to ensure that those concerns are met. The third element is collaboration. If GMO’s are truly going to be beneficial to Africa it will require collaboration on two levels. First between stakeholders within the agricultural industry, research scientists, farmers, environmentalists, doctors, consumers will all need to come together to guide the development of GM crops for the African context. A context in which small farmers are the vast majority of farmers, where climate change and changing weather patterns are making farming harder and where growing populations require more agricultural productivity to feed them. The second level is internationally. No single African country has the ability to set up and sustainably fund institutions that can design, develop, test and disseminate GM crops over the long term. However, together they could do so. The ability to pool funding, expertise, and facilities only makes sense, especially as many African countries face similar agricultural challenges and most staple and commercial crops are grown across multiple countries.

African GMO’s

GMO’s need not be a threat to Africa, they could be an opportunity. However, in their current corporate dominated form they do pose a threat. They threaten to yoke African agriculture to the profit motives of multinational Agri-biotech companies, who are not accountable to the African public or governments.

As Calestous Juma urged, Africa must do agriculture right, and to do that we have to embrace and own the science. Since Fritz Haber and Carl Bosch invented the Haber-Bosch Process in the early 20th century that allowed the production of fertiliser on an industrial scale, to Norman Borlaug and short stalk wheat in the 60s and 70s that saved millions from famine, science in agriculture is how we have fed the world. If we are to feed and develop Africa we must embrace science as part of the solution, and GMO’s as part of that. Smart policy, that is public, transparent, accountable and collaborative, would help ensure that Africa owns its GMO’s and its own agricultural destiny.

[1] http://www.who.int/foodsafety/areas_work/food-technology/faq-genetically-modified-food/en/

Let’s go to the Moon: Africa’s Industrialisation needs African science

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone. – President John F Kennedy

In a previous post I urged a rethinking of Africa’s industrialisation path, that through a failure of imagination we have tried to industrialise Africa with policies that do not fit its own context. Part of that lack of imagination has been the lack of emphasis put on science in the pursuit of development in Africa. Industrialisation has always been accompanied by and often led by the growth and advance of science and technology. When Britain became the first industrial powerhouse it was on the back of scientific, engineering and technological advances in the steam engine, mechanisation and metallurgy. The industrial revolutions of the 20th century was driven by scientific discovery and advances in electricity, transportation, communications and computing, and it is no accident that many of them came out of the nation that invested the most in science, the USA. The East Asian tigers and China have all placed heavy emphasis and invested significantly in building and advancing their own scientific and technological capacities, because they know it is a key driver of industrialisation.

If Africa is to develop, industrialise and competently face the challenges of the 21st century then we need African science to flourish. This will require African policy makers to recognise the importance of science, invest in it, and to set and chase ambitious goals.

Science and Industrialisation – inseparable bedfellows

Science, technology and industrialisation are intimately linked. In fact, one could go so far as to say that without scientific advances and new technologies, industrialisation around the world may have been very different or not happened at all. Any study of the first industrial revolution (roughly 1760-1840) cannot ignore the impacts of the technological advances in iron and chemical manufacturing, the harnessing of steam and mechanisation. The second industrial revolution (1870-1914) was characterised by advances in steel, rail transport, telecommunications, electricity and the advent of applied science (the application of existing scientific knowledge to practical applications). The third industrial revolution (1960- today), or digital revolution is based on the advancement of technology from analogue electronic to digital devices, this was enabled by advances in materials science, quantum mechanics and mathematics. Now, according to some[1], the fourth industrial revolution is upon us and it will be marked by emerging science technologies such as AI, biotechnology and 3D printing.

If Africa is to develop and industrialise it must be a participant not just a recipient of the scientific revolutions taking place elsewhere. The rising powers of East Asia did this in the 1950s and 60s and invested heavily (and continue to do so) in building scientific and technological capacity just as their western counterparts had done over the preceding century. A great example of this is China. In 1977 China recognised Science and Technology as one of the four modernisations alongside agriculture, industry and national defence. And in the 1990’s deployed a series of policies such as increased funding, setting up an innovation infrastructure, increasing the societal importance of science and forcing technology transfer from foreign investors to achieve its goal of making China a global science and technology leader. China today is a world leader in areas such as hi-tech manufacturing, renewable energy and infrastructure.  Like China, African governments and policymakers must also recognise the importance of science and technology in development, that industrialisation is not just about factories, railways and trade. If Africa places as much emphasis on building scientific capacity as it does on infrastructure, trade or attracting FDI the continent would take the first step to building the sustainable growth that it seeks.

Walking the talk – investing in African science

Not only must science and technology be recognised as being as important as infrastructure it must get a comparable level of funding. There are three key ways of doing so. Investing in people, investing in scientific infrastructure and technology transfer. China has a target of investing 2.5% of GDP in scientific and technological research and development, and there is no reason why Africa cannot have a similar science and technology investment goal.

Investing in people

Investing in people is simple, it means funding STEM education at all levels (primary, secondary, university and post-graduate) to the level that is necessary to have the scientifically and technologically literate population able to work in a digitally driven economy and produce the scientists, engineers and mathematicians the continent needs at the foundation of its economy. In addition, there are a number of African scientists, mathematicians, and engineers who reside, teach and work outside the continent, kickstarting Africa’s scientific revolution would be easier if they were tempted back to Africa’s scientific agencies, research institutes and universities. This won’t be cheap, syllabuses will need to be updated, teachers trained, scholarships and bursaries funded, and the scientific diaspora given comparable salaries to what they can get elsewhere. However, in my view it is well worth the investment. Africa desperately lacks scientific capacity and that threatens its long term development, investing in human capital will provide a viable foundation for Africa’s future.

Invest in the infrastructure of science

Its one thing to have scientists, but that’s useless if the infrastructure doesn’t exist for them to thrive. By scientific infrastructure I don’t just mean giving greater funding to science departments at universities but also funding the myriad of research institutes, laboratories and agencies and technology parks that have been set up over the years. This also includes the sharing of science, scientific journals and conferences, which are crucial to the dissemination and progression of research and Africa has far too few of them, limiting the visibility and impact of African science. Putting money behind initiatives such as the Scientific African will help remedy this.

Technology transfer

Technology transfer is the idea that foreign investors should as part of their investments transfer some of the technical knowledge and skills which they have to the country in which they are investing. For Africa this would involve giving foreign companies incentives for technology transfer and moving R&D to the continent (such as tax breaks or subsidies), requiring the employment and training of locals in their operations and encouraging investors to enter into joint ventures with African companies when they invest in the continent. This will help insure that FDI into the continent doesn’t just build roads, power stations and factories, but also builds the people and skills that will develop the capacity for Africans to do these things themselves.

Let’s go to the moon

In 1961 President Kennedy asked the US congress to commit to a program to landing a man on the moon by the end of the decade. At that point in time, the USA had barely been able to put a man in space, going to the moon was barely conceivable, the technology and expertise didn’t exist, yet in July 1969 Neil Armstrong took the first steps on the moon. As the economist Mariana Mazzucato outlines in her new book ‘The Value of Everything’, going to the moon required the collaboration and coordination of a variety of different actors, from the aerospace sector to design and build the spacecraft, to the computer industry to invent computers that could run it, to the textiles sector to come up with suits that could walk on the moon. This not only resulted in the achievement of the mission of landing a man on the moon, it led to scientific and technological advances that have changed the world, such as modern computers with integrated silicon chips and multitasking software which are descended from the Apollo Guidance Computer where they were first developed and utilised.

The lesson Africa can learn from this, was that all these achievements came from having a singular focus on a specific challenge (going to the moon) and solving the problems it presented collaboratively between the private and public sectors. Today Africa faces a myriad of challenges, many of which such as climate change, or eradicating aids, or ending hunger contain multiple problems and require collaboration and problem solving between and within multiple sectors and significant funding, which only government can provide. What if we took a leaf from the moon-shot and African Governments funded a challenge. A challenge around which society can coalesce and benefit from as whole such building a green economy or ending hunger. Which like the moon mission could be broken down into various smaller problem-solving projects which would require investment in Science and Technology, would be coordinated by scientists, businesses, civil society, government departments and whole sectors from around the continent and help foster a sense of social cohesion through a goal that the majority of people believed in. I firmly believe if we are to confront and solve the challenges Africa faces in the 21st century we need to be ambitious, we need to think outside the box, focusing on and working collaboratively towards solving the big issues is a perfect way to do this, Africa should go to the moon.

[1] https://www.weforum.org/agenda/2016/01/what-is-the-fourth-industrial-revolution/