Africa's Missing Billions - Oxfam International
Africa's Missing Billions - Oxfam International Africa's Missing Billions - Oxfam International
Table 2: Key costs to the national economy in the context of armedcrime/societal violence and conflict 40CostDirect costs• Medical/rehabilitation costs due to casualties,injuries, disability• Policing, criminal justice system, private security• Military expenditure• Care for refugees and displaced people• Physical destruction: loss/depletion ofinfrastructure and livelihood assetsIndirect costs• Reduced economic activity due to insecurity,reduced mobility, reduced workforce (throughcasualty or brain drain), capital flight. Thisincludes tourism.• Macroeconomic impacts: inflation, reducedsavings, investment, and exports; increased debt• Loss of development aid• Wealth transferred to illicit economyIntangible costs• Health-related quality of life: suffering,psychological impact• Other quality of life: reduced job opportunities,access to schools, public services• Loss of social capitalArmedCrimeArmedConflictThese are all real costs to each country involved but not all will benoted as a drop in GDP, because GDP captures the market value ofall goods and services produced, whether these increase wellbeing inthe country or not. 41 GDP will be reduced by most of the indirectcosts; but most of the direct costs represent ‘unproductiveexpenditure’ i.e. extra expenditure due to the insecurity.Diversion of resources from productive expenditureThere are two factors at play which reduce productive expenditure:1. Total income to governments and the vast majority of householdsfalls in times of armed conflict. At state level, the collection ofdomestic and border taxes dwindles catastrophically due to lossesin taxable production, tax evasion, and low administrativecapacity. 42 This is exacerbated by decreasing external balance,soaring foreign debt, accelerating inflation, and budget deficit.12Africa’s missing billions, IANSA, Oxfam, and Saferworld, October2007
2. The proportion of state expenditure diverted into conflict-relatedactivities – both military spending and combat-related health care– will probably rise at the expense of investment in essentialservices. At household level, families may have to spend moneyon healthcare for injuries, which will prevent them, for example,from sending their children to school.Government social expenditure per head fell dramatically during thewars in Angola, Ethiopia, Liberia, Somalia, and Uganda. 43 Accordingto the World Health Organisation, treating large numbers of patientswith gunshot wounds in Africa ‘has a draining effect on basic healthcare and diverts much-needed resources from other health and socialservices’. 44 The same is true at household level; in South Africa, asignificant proportion of non-fatally injured patients are forced intodebt to pay medical expenses resulting from firearm injuries. 45Proportions of direct, indirect, and intangible costsAlthough no studies have been undertaken in Africa, studies fromelsewhere clearly show that for societal violence and crime, intangiblequality of life costs are the greatest, followed by the indirect cost ofproductivity losses, and finally by direct medical costs. 46 If indirectcosts are higher for societal violence, then this trend will be evenmore pronounced for conflict situations.There are too few data to say how the GDP loss during armed conflictis apportioned. There is only one example in Africa where there hasbeen an attempt to quantify the costs of conflict by countingindividual costs (rather than modelling). This study of the cost ofconflict in northern Uganda found that the key costs were: 47• Military costs (relating only to the war in the north of thecountry): 28 per cent of total costs;• Losses to agriculture and livestock, the mainstays of the region:over 20 per cent;• Lost income from tourism: almost 14 per cent;• War-related medical costs: over 10 per cent.It is expected that different costs will be more prominent in differentcontexts. For example, the cost of the material damage during theRwandan genocide was around $1bn, whereas reconstruction for theDRC is estimated at $20bn. 48As an illustration, each category of cost is briefly explored below.13Africa’s missing billions, IANSA, Oxfam, and Saferworld, October2007
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Table 2: Key costs to the national economy in the context of armedcrime/societal violence and conflict 40CostDirect costs• Medical/rehabilitation costs due to casualties,injuries, disability• Policing, criminal justice system, private security• Military expenditure• Care for refugees and displaced people• Physical destruction: loss/depletion ofinfrastructure and livelihood assetsIndirect costs• Reduced economic activity due to insecurity,reduced mobility, reduced workforce (throughcasualty or brain drain), capital flight. Thisincludes tourism.• Macroeconomic impacts: inflation, reducedsavings, investment, and exports; increased debt• Loss of development aid• Wealth transferred to illicit economyIntangible costs• Health-related quality of life: suffering,psychological impact• Other quality of life: reduced job opportunities,access to schools, public services• Loss of social capitalArmedCrimeArmedConflictThese are all real costs to each country involved but not all will benoted as a drop in GDP, because GDP captures the market value ofall goods and services produced, whether these increase wellbeing inthe country or not. 41 GDP will be reduced by most of the indirectcosts; but most of the direct costs represent ‘unproductiveexpenditure’ i.e. extra expenditure due to the insecurity.Diversion of resources from productive expenditureThere are two factors at play which reduce productive expenditure:1. Total income to governments and the vast majority of householdsfalls in times of armed conflict. At state level, the collection ofdomestic and border taxes dwindles catastrophically due to lossesin taxable production, tax evasion, and low administrativecapacity. 42 This is exacerbated by decreasing external balance,soaring foreign debt, accelerating inflation, and budget deficit.12Africa’s missing billions, IANSA, <strong>Oxfam</strong>, and Saferworld, October2007
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