David Hencke
guardian.co.uk, Thursday 25 November 2010 20.35 GM
Claims that hundreds of millions of pounds of EU aid for Africa is being handed over to banks and private equity funds and then funnelled into tax havens
Hundreds of millions of pounds of European Union aid to help the poor in Africa is being handed over without public scrutiny to banks and private equity companies and funnelled into tax havens, a new report claims.
Counter Balance, a group of non-government organisations, has investigated the €1.1bn (£932m) of annual aid from the taxpayer-funded European Investment Bank to Africa and the Caribbean. It alleges that the cash disappeared into African banks, a Luxembourg tax haven and a Nigerian bank whose managing director was under investigation for fraud.
The EIB is able to borrow billions on the markets to fund the aid because it has a triple AAA credit rating. This means Britain and other leading EU economies are underwriting its loans and there is now concern, following the Irish financial crisis, that there could be problems with its lending to Africa.
The report claims that:
•A €50m loan was given to the Intercontinental Bank of Nigeria in 2007 when the MD was under investigation by Nigeria's economic and financial crimes commission – the equivalent of Britain's Serious Fraud Office. The bank was bailed out by the state less than two years later.
•A €15m loan to the National Bank of Malawi was publicised on the EIB's website but never made. The bank thought the EIB had given it to NBS Bank in Malawi — but it had not. It has now "inexplicably" ended up at First Merchant Bank in Malawi, but only €2.8m has been handed out.
• A €7m loan for Gabon and a €5m loan to Rwanda granted more than a year ago have still not been spent.
• Some 60% of EIB's investment in private equity funds for Africa – some €125m – is in one African country, Mauritius, where according to the EIB "the comprehensive regulatory framework favours private sector development".
• Another €4m in private equity investment destined for Angola was given to a company based in Delaware but registered in Luxembourg, a tax haven. Another firm registered in Luxembourg handled a €5m investment for Cameroon and Chad.
The report condemns the EIB for lack of checks and failure to make public what is happening to the cash. "The bank provides next to no information on where this money ends up. This is compounded by the EIB's rigorous protection of its clients' commercial confidentiality as well as the interest of the latter to protect the confidentiality of the ultimate clients benefitting from the loans."
The EIB said the bank had "exemplary transparency and accountability standards". It said: "Working with African financial institutions allows the EIB to pass on specific sector understanding, banking best practice and ensures more effective lending and cheaper financial support for local companies."
The spokesman said that information was held back for commercial reasons. " No bank in the world would release all this information about its clients," he said.
The EIB admitted that there had been confusion about which bank in Malawi had received its cash but said that "we like to spread the money around to different banks".
