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24 BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018 WORLD BUSINESS & ECONOMY Global illicit cross-border financial flows peak $1.6trn annually ...Switzerland, U.S ranked top promoters of financial secrecy Bukola Odufade A Financial Secrecy Index published recently by the Tax Justice Network (TJN) has ranked Switzerland and the United States as the biggest promoters of financial secrecy in the world. This is just as over $1.6 trillion illicit crossborder financial flows take place annually. The report stated that illicit crossborder financial flows have been estimated at $1-1.6 trillion per year: dwarfing the US$135 billion or so in global foreign aid, and that since the 1970s African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion. “So Africa is a major net creditor to the world - but its assets are in the hands of a wealthy élite, protected by offshore secrecy; while the debts are shouldered by broad African populations, according to their findings,” it said It however stated that some rich countries suffer as well too, citing European countries like Greece, Italy and Portugal, which have been brought to their knees partly by decades of tax evasion and state looting via offshore secrecy. The index, which ranks jurisdictions according to their secrecy and the scale of their offshore financial activities, also indicated that an estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. According to the index, secrecy jurisdictions is used as an alternative to the more widely used term tax havens as they use secrecy to attract illicit and illegitimate or abusive financial flows. The ranking, which is politically neutral, is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight. “The 2018 release confirms the long-term picture, that the richest and most powerful countries have continued to pose the greatest global risks – with Switzerland and the U.S. established as the key facilitators of illicit financial flows,” said TJN chief executive Alex Cobham. Switzerland, a well-known tax haven, whose practices were uncovered by ICIJ’s 2015 Swiss Leaks investigation, is still the worst offender as far as financial secrecy is concerned, according to TJN’s analysis. “Switzerland has delayed the implementation of automatic information exchange, and in 2017 lawmakers attempted to stop it altogether with countries they deemed ‘corrupt’,” the report noted. As for the United States, it has refused to take part in international efforts to curb financial secrecy and instead set up a parallel system that seeks information on U.S. citizens abroad but does not provide data to foreign countries. Several U.S. states are also considered tax havens including Delaware, which doesn’t tax intangible assets such as intellectual property, patents or trademarks. “More than 66 percent of the Fortune 500 have chosen Delaware as their legal home,” claims the state’s Division of Corporations website. Some of the criteria used to build the index include the absence of a public register, harmful tax residency rules and whether the system allows for bearer shares, which obscure ownership. TJN noted some improvements since the 2008 financial crisis, most notably the automatic exchange of information that will be implemented in 2018 for many countries, including the Bahamas, Samoa and St. Kitts and Nevis. The report also underlines increased public pressure in favor of public registers of companies’ owners. Yet, in the meantime the European Union, put together a blacklist of 17 secrecy jurisdictions last month, only to delist eight countries a few weeks later, including Panama (ranked 12 on the secrecy index) and Macao (ranked 22). In addition, members of the EU themselves rank high on the secrecy index: Luxembourg, the Netherlands, Malta and Germany are among the top 20 jurisdictions promoting financial secrecy. As for the United Kingdom, it continues to shelter financial secrecy through its crown dependencies, including tax havens Guernsey (ranked 10), Jersey (ranked 18) and the Isle of Man (ranked 42). Among the countries that are new on the TJN list are Kenya, with a very high secrecy score of 80%, even higher than Mauritius (72%), which is one of Africa’s most high-profile tax havens. Although Kenya ranks high (9) on TJN’s secondary index based on secrecy only, it is much lower on the main index (27), given its rather small market share. This “is an example of how interests of western financial service lobbyists have successfully lured governments into a race to the bottom,” said the report. “The damage being done to public services around the world is incalculable, and the violations in human rights are severe, whether this be through a lack of access to clean drinking water in sub-Saharan Africa or the pressures facing public health services in the UK and U.S.,” said Liz Nelson, TJN Director responsible for the Tax Justice and Human Rights program. 2018 Secrecy Ranking See full index here 1. Switzerland 2. USA 3. Cayman Islands* 4. Hong Kong 5. Singapore 6. Luxembourg 7. Germany 8. Taiwan 9. United Arab Emirates (Dubai) 10. Guernsey* 11. Lebanon 12. Panama 13. Japan 14. Netherlands 15. Thailand * British overseas territory or crown dependency. If Britain’s network were assessed together, it would be at the top. Electric cars, niche metals lure cash to Africa’s mines Rising commodity prices may have revived enthusiasm for African resources, but it’s unlikely to be the old mainstays of coal and iron ore pulling crowds next week as the mining industry meets in Cape Town. The electric-vehicle boom and shifting industrial demand have transformed formerly niche metals -- from lithium and cobalt to praseodymium and neodymium -- into the hot new drawcards of African mining. Far smaller and cheaper than the gargantuan mine, port and rail developments pursued by the likes of BHP Billiton Ltd. and Rio Tinto Group during the last boom, these next-generation mines may stand a better chance of success. Here are five metals grabbing attention across the continent. Rare Earths in Malawi Struggling commodities trader Noble Group Ltd. surprised metal market watchers in November with a 12 million-pound ($17 million) investment in a rare-earth project in Malawi. The owner, Mkango Resources Ltd., says its deposits of neodymium and praseodymium will be used in magnets for products such as electric-vehicles and wind turbines. Niobium in Tanzania U.S. private equity firm Denham Capital Management LP is backing the Panda Hill niobium project in northern Tanzania. Niobium -- named for a Greek goddess who became a symbol of the tragic mourning mother -- is used to dramatically lighten steel for industrial pipes and aircraft parts. Panda promises to be the first new niobium mine in 40 years. The metal is currently mined in only three places on Earth. Graphite in Mozambique Traditionally sold to steel mills and the lubricants industry, graphite is benefiting from new demand for lithium-ion batteries needed to power new electric vehicles like Tesla Inc’s Model 3. Australia’s Syrah Resources Ltd. in November started shipments from what it says is the world’s largest deposit, located in northern Mozambique. Cobalt in Congo Although the world’s biggest commodity trader, Glencore Plc, was drawn to the Democratic Republic of Congo for its copper, by-product cobalt has become the star performer. Prices for the metal, another key component in electric-vehicle batteries, have tripled in the last two years and Glencore is moving to capitalize on the growing demand. It will more than double its cobalt production in the central African country to at least 58,000 tons by 2019, approximately 40 percent of global supply.
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018 ENERGY, POWER & RENEWABLE 25 No angel can fix electricity distribution in Nigeria at current tariff’ SUNDAY ODUNTAN, EXECUTIVE DIRECTOR, research and advocacy, Association of Nigerian Electricity Distributors (ANED), in an interview with Business.a.m says pricing is the major issue facing electricity distribution in the country. He said for the sector to get out of the coma it has found itself, generator use by minister of power, works and housing, and chief executive officers of power companies should be banned. Excerpts: How would you measure the impacts of privatisation of the nation’s power sector in the last four years? Does it really worth the effort? Those who think privatisation should not have been done are very shortsighted. Anybody saying privatisation is not a good idea is a distraction. They should look at how things are done in the world over; whether we can do better by putting things in the private sector or whether we should allow government to continue. Government has no business running business. Government cannot run business successfully. A case of NEPA/PHCN before privatisation, I am not saying that we are there yet but you cannot correct wrongs of 50 years in four years. It would be very unfair for anybody to expect miracle at this point but it is very fair for people to expect more progress that we have made. So, I would admit that we could have done better but people need to ask why we have not done better than we have done. Those are the critical issues and not sentiments; saying privatisation is not a good idea. The way to go is privatization; it is only the private sector that can boost enterprises. Largely, I would say that the road has been rough and I think it is a matter of time before things definitely get better. For me, privatisation is a good idea. How the process was done? What happened immediately after privatization? Where were we? Where are we now? Where are we supposed to be? And why are we not where we are supposed to be? Those are the issues we are supposed to address and not why we should have privatised. We have not made much more progress because those who bought into the privatization exercise also failed to live up to the dotted lines that were signed. The government signed a Performance Agreement with new investors by saying that they will fulfill their part of the agreement, which would be conditional upon fulfilling our part of the agreement too. The government then that privatized also failed to live up to what they committed to do. Nigerians must begin to respect the sanctity of contract. By and large, since the power assets were privatized on November 1, 2013, there have been connections of new electricity customers and communities in the country, while 612,552 meters procured and installed. Also, distribution companies network upgrade is happening faster than Power Holding Company of Nigeria (PHCN)era, improved customer care services across the discos and employment and training of numerous better qualified electricity employees across Nigeria There were insinuations in some quarters that the privatisation of the power sector was fraught with irregularities in order to favour the cronies of the former administration. What is your take on this? I think it is unfortunate to say the exercise was rigged. The World Bank was involved in the privatization process and it applauded it as the most transparent in Nigeria’s history. It was that transparency that made powerful people like Aliko Dangote and Femi Otedola lose their bid. Besides, the new investors paid $1.4 billion for the acquisition of the 11 distribution companies. Regrettably, most of the funds were paid as severance to the workers of the defunct Power Holding Company of Nigeria (PHCN). The power distribution companies have continued to seek fund in spite of the encumbered balance sheets due to NEMSF Fund that went to legacy gas debts. How would you react to criticism that your members have continued to seek intervention fund to run their business in post –privatisation era? Power distribution companies didn’t take intervention fund, but took intervention loan, which they are paying back and parts of their headache today. The CBN collects the loan repayment as first line charge every month. That intervention was money that was used to settle legacy gap debts (Debts that were incurred before privatization to the gas suppliers). They factored the money into tariff over time. What other practical steps can be taken to wrestle Nigeria out of the jaws of power epilepsy? All those in charge of power should be barred from using generators including minister of power, permanent secretary, ministry of power, chief executive officers of all power generation companies (Gencos) and distribution companies (Discos). All of us must be barred from using alternative source of power. If we are all on the grid and have no access to generators, we would act immediately we discover power outage in our areas. We all know whom to call when there is no light and I believe that we would act accordingly if there were no alternative sources for us to bank on. What is your take on the submission that the power sector is currently challenged due to failure of your members to remit revenue? The current cost of electricity is in excess of N68 per kilowatt. When we get the N68 invoice from NBET, we are instructed to sell the same product for N31.58k. If I buy the product for N68 and I am legally allowed to sell at 31.58k, how can I give prepaid meters? How do we also factor in the running cost? We are saying that the tariff is nonreflective. It does not reflect the whole cost of producing “If I buy a product for N68 and I am legally bound to sell at 31.58k, how can I give prepaid meters” electricity down to the end users. I am being made to buy at real cost but not being made to sell to consumers at real cost and people complain about estimated billing. Also, the approval of payment of N26 billion MDA debts by government out of N67 billion total debts is yet to vetted. However, it is noteworthy to point out that, not a dime is coming to the DISCOS as government has proposed to do a net-off aggregate debt to NBET . We have been hovering round this issue since November 2013 because we have not gotten it right. Once we don’t get the figure right, the business cannot be sustainable How has the N50 billion CAPEX fixed by government impacted on your members? If the allowable capex for all capital expenditure is only N50 billion, it means that you limited; you cannot spend outside the allowable capex. We are saying that the allowable capex is not even enough to buy meters alone, talk less of fixing transformers. Remember we don’t fix the price of what we sell, but the NERC. What we are saying is that the calculation is wrong. We can’t run the system like this. You can’t fail to factor in all that is required to make the sector open. What is your take on the government’s proposal to divest 40 percent of its shares in Discos? My opinion is that they have every right to their shares; they can sell it. I am just waiting for the kind of investors that would come and buy it. There is nothing wrong with that. How do ANED members cope with the lingering forex challenges afflicting the sector? We are bleeding and unless something is done, and whatever would be done should be done sincerely not some people misleading the government. What they are saying is that the current operators are not good enough. So let them go and bring other ones from anywhere; they will fail given the current scenario. How come you don’t see the white investors here?. How many foreign investors do we have among the 11 Discos? When we talk of performance of Discos, we should use Yola as the yardstick, which is currently being run by the Federal Government. It has been returned to the federal government so on that account Yola should be performing very well. How many meters has Yola rolled out since it was returned to the government?. Why can’t government metered all the customers under Yola Disco? Why can’t we see meteoric performance of Yola to show that privatization is an evil act?. I am now interested in Yola because it is a Disco and wants it to progress. I am happy that Yola is in the hand of government. If Yola is making progress, then something is wrong with other investors, but if Yola is not making progress, then something is wrong with government’s policy or way of handling the power sector. If the federal government can’t fix Yola, no angels can fix other Discos in the country.
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Page 9 and 10: EXECUTIVE KNOWLEDGE SERIES BUSINESS
Page 17 and 18: Q&A BUSINESS A.M. FEBRUARY, MONDAY
Page 23: Zinox set to reposition e-commerce

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