As Africa's richest woman stands accused of embezzlement and money laundering, we highlight the role illicit financial flows play in keeping countries trapped in poverty as well as our efforts to boost incomes for normal Angolans struggling to support their families.
A massive trove of leaked documents has highlighted how Africa's richest woman made her fortune by exploiting her homeland, Angola, an oil-rich country where just over a half of the population live in poverty.
Billionaire Isabel dos Santos, the daughter of the ex-president and former head of Angola’s state oil company, is now set to face criminal charges.
The scandal, dubbed the Luanda Leaks, is the latest example of how poor countries like Angola are routinely stripped of revenue by ‘illicit financial flows’ – money which is illegally or abusively earned or transferred.
Christian Aid estimates that illicit financial flows cost poor countries $416 billion every year in lost revenue, with a lack of transparency in the global financial system helping to make this possible.
“Secretive shell companies based in tax havens enable unscrupulous individuals and businesses to hide and move their wealth,” explains Christian Aid Ireland’s Head of Policy and Advocacy, Sorley McCaughey. “Without this infrastructure, the theft of assets at such a large scale would simply not be possible.”
This lost money could otherwise be used to fund essential public services like healthcare and infrastructure. These are sorely needed in a country like Angola, which is still struggling with the legacy of 40 years of war, and where one in every twelve children dies before their fifth birthday.
While Isabel dos Santos has amassed an estimated $2bn fortune, most ordinary Angolans, like Rosa Domingos, find it much harder to raise enough money to convert their business aspirations into a reality.
Proactive, outgoing and energetic, Rosa is a natural entrepreneur. Three years ago, she decided to set up a bakery in her home village of Santo Antonio in rural Angola.
As anyone who has ever set up a business knows, the hard part lies in finding the money to get started. Some entrepreneurs can rely entirely on their own savings, but most need a business loan or an investment backer to help them get going.
For Rosa, the main upfront cost she faced was for an oven. But there are no banks in rural Angola. No matter how good the business idea or how skillful the entrepreneur, with limited savings and no way to borrow funds to bridge the remaining gap, there’s simply no way of getting good ideas off the ground. With access to financial institutions beyond the reach of most rural Angolans, it is hard to break free from a cycle of poverty.
That is why Christian Aid’s local partner, the Angolan Congregational Church (IECA), is supporting aspiring businesswomen like Rosa by setting up village loan groups. These schemes offer small loans of up to 100 US dollars – for rural women to launch or scale up small businesses. When one woman repays her loan, another can benefit from the scheme, which also offers business management training.
Using her loan, Rosa was able to build an oven, helping her to kick start her baking business; and the rest is history. Her thriving bakery focuses mainly on bread products, selling different loaves and rolls to customers locally and through market stalls in neighbouring villages and towns.
“My children all go to school”, says Rosa, proudly. “With help from that loan, my earnings from selling bread mean that we’ve got enough to pay for the things they need.”
As well as funding business start-up costs, many women have used their loans to invest in equipment to help transport their produce to market, such as a bicycle or handcart, instead of having to walk for hours carrying their goods on their head. And as the women gradually repay their loans, a small proportion of the repayment is allocated by the village loan groups towards a village ‘solidarity fund’ – a basic community insurance scheme that supports neighbours facing hard times, such as unexpected medical or funeral costs.
But Christian Aid’s partners in Angola don’t only provide practical help for individuals. They also work to challenge and change the systems that keep people trapped in poverty.
Our partner the Gender Observatory (ASSOGE) works with street vendors, the vast majority of whom are women, in the capital city Luanda.
Like rural entrepreneurs, street vendors struggle to access funds to invest in their businesses. They also face widespread discrimination and harassment from the authorities, which view them as a nuisance.
ASSOGE works to change public perceptions of street vendors, seeking to highlight the vital role that they play in Angola’s economy and to protect them from abuse. As part of this work, ASSOGE also campaigns for government and financial institutions to promote and support micro-businesses.
With support from Christian Aid, our local partners work hard to break down the barriers that ordinary Angolans face in their efforts to work their way out of poverty. But these efforts continue to be undermined by a failure of international institutions to adequately tackle illicit financial flows which enable unscrupulous individuals and companies to rip off poor countries, to the tune of hundreds of billions of dollars, every single year.
Find out more about Christian Aid Ireland’s tax justice campaign here.
ASSOGE’s work is funded by Irish Aid, the Irish Government’s programme for overseas development. IECA’s work is funded by Christian Aid supporters.