Following Jersey Finance’s various promotional materials including Value to Britain, its Moving Money report which claims to show the beneficial role of offshore centres, and its publications on Jersey’s links to Russia, China and India, comes a report on Jersey’s Value to Africa.
After reading the report and its different sections dealing with Africa’s potential and its need for Foreign Direct Investment, criticizing NGO estimates of Illicit Financial Flows and offshore wealth, and finally promoting Jersey as a jurisdiction which is compliant with international tax and money-laundering standards, it is still hard to find in it a convincing answer to two essential questions:
a) How exactly will Jersey help Africa?
b) Why Jersey?
This paragraph in the report summarizes its main pro-Jersey points:
“Jersey can efficiently facilitate investment into Africa and support philanthropic activities there. It is a location where investors from across the globe can pool their funds and conduct cross-border deals safe in the knowledge that they are protected by a legal system based on internationally respected English common law and with a trusted centuries-old judiciary. The self-governing island’s ‘tax neutrality’ ensures that any investment routed through it will not incur additional taxation, while its physical, cultural and business links to the City of London ensures access to deep capital markets.”
Which doesn’t really answer either of the questions above.The first sentence makes a strong claim which is not supported by the rather generic information in the rest of the paragraph.
The report correctly notes that domestic tax revenues are low and that tax authorities in Africa tend to have low capacity. Strangely, it then ignores the possibility that both of these might improve over time, particularly in the 25-year timeframe proposed.
It also largely reduces the role of government spending to providing infrastructure and strong institutions, scooting over the need for increased public spending to support healthy and educated citizens. There is no mention of the potential for industrial policy to create jobs and greater value in local economies, despite citing data from a UN report which contains “Africa” and “Industrializing for Growth” in its title.
Lastly, since a large part of the argument revolves around the need for more Foreign Direct Investment (FDI) into Africa, it’s worth noting what the United Nations Conference on Trade and Development (UNCTAD) had to say about that in June 2013:
“… to date, there is no evidence to indicate that FDI in Africa is contributing to economic diversification through backward and forward linkages. Under such circumstances, the tendency of FDI to reinforce enclave-type development – with external integration gaining more importance over the internal integration of the local economy – is a real concern. Against this background, this note questions the automatic efficiency gain assumptions implicit in the design of FDI policies in many African countries.”
“It is misleading to assume that attracting FDI per se will automatically generate opportunities for technology transfer, linkages with domestic enterprises and opportunities for diversification into more dynamic activities.”
“… policies towards FDI should be designed as a complementary component of a wider and more integrated development strategy needed to raise growth, create jobs, build productive capacity and foster a dynamic and vibrant domestic private sector.”