Donald Trump’s decision to cut $50m a year in aid to Zambia – one of the world’s poorest nations – is dreadful, and the reason given, corruption, rings hollow. There is evidence of large-scale looting, but the real scandal is that the theft appears legal, systemic and driven by foreign interests. In a paper presented to the Association for Heterodox Economics conference in London later this month, Andrew Fischer of Erasmus University Rotterdam argues that Zambia’s economy is not being plundered by domestic actors but rather by transnational corporate practices enabled by opaque accounting. His findings point to a staggering extraction of wealth that dwarfs the value of the aid intended to help.
Zambia is blessed – or perhaps cursed – with mineral wealth. It is Africa’s second-largest copper producer. The metal, key to the green energy transition, accounts for around 70% of the country’s export earnings. Despite this, in 2020 Zambia became Africa’s first pandemic-era defaulter. It has only just agreed a debt restructuring with major creditors. How did a nation so rich in natural resources become so poor? Prof Fischer says this is a textbook example of a low-income commodity exporter shaped by foreign capital, where export booms enrich multinationals rather than the country itself. In Zambia’s case, copper may bring in foreign exchange, but much of that money simply flows straight back out.
His most striking discovery is the scale and concealment of capital flight. He uncovered billions flowing out of Zambia, hidden in its balance-of-payments data. These were not flagged as “errors and omissions” but obscured in entries considered too elaborate to probe. In 2021 alone, $5bn – about 20% of GDP – vanished offshore, just as Zambia was defaulting on its debt. This was in addition to profit remittances of $1.2bn. In contrast, US annual grant aid amounted to just $250m, or 1% of Zambia’s GDP. It’s a sobering difference between a trickle of assistance against a torrent of extraction.
Prof Fischer links the outflows to mining giants dominating Zambia’s economy. These firms invested billions from abroad to fund operations, but the money left almost as soon as it arrived. What looked like foreign direct investment during last decade’s mining boom masked a deeper drain: profits repatriated through financial outflows. The numbers are extraordinarily large for Zambia: more than $5bn in 2012, $3bn in 2015, and nearly $2bn in 2017. These private sector flows were beyond public scrutiny.
Mining companies have long been accused of dodging taxes in Zambia. In 2018 the tax authorities slapped an $8bn tax bill on the Canadian mining company First Quantum Minerals, which later reportedly settled for $23m. Glencore, an Anglo-Swiss giant, left the country in 2021 after falling out with the authorities. Yet in 2023 half of Zambia’s copper was exported to Switzerland – that is, bought and sold by Swiss commodity traders like Glencore. Academics Rita Kesselring and Gregor Dobler noted in 2019 that such firms exploit transfer pricing and a lack of transparency to shift profits abroad.
Prof Fischer’s research similarly points to legal mechanisms embedded in world commerce. He concedes that some outflows may involve wealthy Zambians, but questions whether they could move funds on this scale and complexity. His research exposes a form of wilful blindness. If transnational corporations can legally strip Zambia of its wealth while donors look the other way, then the real scandal isn’t theft. It’s the global economic system itself.
