Find us on Google+

Thursday, 10 July 2014

Swiss made poverty?

A telling quote from a recent article on how mispricing and the opacity of commodities trading in Switzerland is contributing to Africa's underdevelopment :
Switzerland is a global hub for trade in commodities, and so exerts a significant influence on Africa's development. But critics say the way commodities are traded through the country is shrouded in opacity and this ultimately deprives developing regions such as Africa of revenue….

For example, a 2010 study by Christian Aid showed that as Zambia's copper production soared in the 2000s, Switzerland came to account for more than half of the southern African country's exports of the commodity. But the price of Swiss re-exports of the copper was far higher than that received in Zambia.

In 2008, the study estimated, Zambia's GDP would have been 80 percent higher if the copper leaving its borders in that year alone had received the same price as Switzerland. It's a pattern of trade mispricing that has persisted, critics say.

A study in January by the Centre for Global Development, a trade and aid think tank, estimated that developing countries may be losing between $8 billion and $120 billion a year because of mispricing of commodities in Switzerland….

In other cases, commodities such as copper will be recorded as destined for Switzerland but instead go to a Swiss-based trading house and onwards to, say, China.

The Centre for Global Development study found that from 2007 to 2010, 99.8 percent of Zambia's exports to Switzerland - 27.7 percent of all its exports - were not recorded as entering Switzerland. For mineral-rich Burkina Faso, a west African gold producer, 100 percent of its exports to Switzerland over this period, accounting for 15 percent of all exports, also "vanished".

This all adds to the levels of opacity associated with Switzerland, and the companies involved have not come under the kind of international pressure for disclosure that has been exerted on the country's famously secretive banks.
More detail via Reuters. It is very strange that western governments spend a huge amount of money on development efforts whilst at the same time their companies exploit the very same countries. Perhaps it's not strange. It is all part of the cruel game they have come to call "development". A mirage rather than a real attempt to make a difference. And Switzerland is the latest example, but it is definitely not alone! 

Chola Mukanga 
Economist | Consultant | Researcher 
Copyright © Zambian Economist 2014


  1. Hi cho this is exactly what has been happening to zambia's copper transactions The current Mines & Minerals Act of 2008 promotes transparency by requiring that an import certificate indicating the country of destination for our minerals being exported be availed to our revenue authority(ZRA).Despite the law being very clear about this matter mining houses have failed to comply and complained that the requirement is a non starter. As a result our government has withheld about $600million in form of VAT refunds, an amount equivalent to about 3%of Zambia's unrebased GDP .Transparency is key on the part of investors if our nation is to get a fair share of benefits from our natural resources.

  2. The difficulty is that a Zambian company wants to sell on EXW (Ex Works) terms at the farm or mine gate. I shall talk about farms. The ordinary industrial buyer whether in the UK or Russia or China wants to buy on DDP (Delivered Duty Paid) terms. In between, there is a gap. The gap includes transport from the farm to the storage silo near the railway. The storage capacity and the train capacity must match. At Maputo there is more storage to build a ship load and so on at the other end. Where is the buyer? Demand varies across the world. It is expensive to monitor all possible buyers. Arranging the trading stage of business takes skill and money. Each element is a risk. The price when the journey starts may be different by the end. For 30 years, commodities were not profitable. Now for 16 years there has been a boom. It is not easy to start such a business from scratch. Zambia needs sales capacity abroad, financial capacity at home, storage and cheap, RELIABLE, transport for each of its major opportunities. This will take years of loss and insecurity to establish. The Swiss have the capacity now. Although perhaps trading firms from London, Chicago, Tokyo and Dubai, especially London & Dubai - they manage oil money just like Switzerland, should be encouraged to come to Zambia to compete.

  3. "It is very strange that western governments spend a huge amount of money on development efforts whilst at the same time their companies exploit the very same countries."

    I would like to see a comparison between donor aid recipient countries, and their raw materials exports. My hunch is that the countries that export most raw materials receive most donor aid.

    Why should Zambia receive a billion in donor aid while exporting tens of billions of collars in copper, cobalt, and probably diamonds and gold?

    'Donor Aid' is a scam - it is the externalisation of even the tax obligation of the largest corporations, onto the (Western) taxpayer. Everyone gets robbed, however people in Africa are getting robbed more.

    Did you read Minister Chikwanda's plea to the UK to help Zimbabwe, because of their "ingenuity"? The UK is behind the demise of Zimbabwe, through reneging on paying for land reform back in 1997, to the instigation of economic sanctions, to Tony Blair's stated desire to want to invade Zimbabwe like Iraq, an ambition only stopped by South Africa and Lord Guthrie:

    (THE POST) Chikwanda urges UK to help Zim

    "Our appeal is that Britain will use its ingenuity to try and help some of our neighbours like Zimbabwe to get over the blink because you see our economies in the southern Africa are interlinked and if there is a problem in one neighbouring country, they tend to spill over into the other country," Chikwanda said. "It is just in that context that we appeal."

    (STICKY) (NEWZIMBABWE) Blair 'would have loved' to topple Mugabe

    (HERALD ZW) UK invasion plot: Nujoma speaks out
    December 4, 2013
    Mabasa Sasa in ETUNDA VILLAGE, Namibia

    (DAILY TELEGRAPH UK 2011) Tony Blair 'visited Libya to lobby for JP Morgan'


All contributors should follow the basic principles of a productive dialogue: communicate their perspective, ask, comment, respond,and share information and knowledge, but do all this with a positive approach.

This is a friendly website. However, if you feel compelled to comment 'anonymously', you are strongly encouraged to state your location / adopt a unique nick name so that other commentators/readers do not confuse your comments with other individuals also commenting anonymously.