* Switzerland has big but opaque influence on Africa
* Opacity in commodity trade may cost Africa billions
* NGOs say Africa victim of Swiss mispricing
* Swiss government says making efforts at transparency
By Ed Stoddard
JOHANNESBURG, June 27 Are mispricing and the
opacity of commodities trading in Switzerland contributing to
The world's poorest continent remains heavily dependent on
natural resources and so is extremely vulnerable to
manipulations in the price of the commodities it extracts and
exports, with very real consequences for its economies.
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.
The Swiss government this week took steps that it says will
bring more transparency to its lucrative commodities trading
sector, but the problem is deep-seated.
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.
That report analysed 244 jurisdictions, including virtually
all sub-Saharan countries, and almost 2,600 commodity
categories, and found that the average price of commodity
exports to Switzerland was lower than to other jurisdictions.
The difference here cost developing countries about $8
billion annually, according to the report.
But it found Switzerland also declared higher re-export
prices for those same commodities and this difference was as
high as $120 billion.
The Swiss impact varies from commodity to commodity.
As for platinum, it looks to be a case of depressing prices
that has consequences for the continent's most advanced economy,
South Africa, which accounts for 70 percent of global supplies
of the precious metal.
Reuters reported this week that vaults in the Zurich
Freilager, or freezone, may hold around 20 percent of the total
stocks of platinum in London and Zurich, the world's two main
storage centres for the metal.
This may explain the muted reaction of spot prices to
a five-month platinum mining strike in South Africa. That
stoppage, which ended this week, hit 40 percent of global
production of the precious metal.
"A platinum price rise would have benefited South Africa's
economy ultimately, at least to the extent that South Africa's
export prices - and related declarations for profit tax and
royalties - reflect actual market prices," said Alex Cobham of
the Centre for Global Development.
He said there were two ways in which prices might have been
depressed during the strike.
"If Switzerland's freezones contain major but uncertain
platinum holdings then the market price may not reflect the true
nature of supply and demand," he said.
"And second, if as we have shown, commodity exporters appear
to receive systematically lower prices when trading with
Switzerland than other partners, which Swiss opacity
facilitates," he said.
Tracking the Swiss connections is not always easy.
Metals sent to the freezones, for example, are not recorded
by Swiss customs because of their tax-exempt status.
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
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.
Having been on the losing end of battles over bank secrecy
and tax avoidance, Switzerland has tried to reassure critics
that its lucrative commodities trading sector is above board.
Earlier this week Switzerland's cabinet published a proposal
for greater transparency in the commodities sector, which would
apply to listed firms and large unlisted companies, and proposed
a consultative process for the rest of 2014.
The proposal examined other countries' rules and said it was
important not to disadvantage Swiss firms by overburdening them
with regulations, so Switzerland would keep track of what other
countries were doing.
The Geneva Trading & Shipping Association, representing
commodity trading firms, said this was "useful and
But Berne Declaration, an NGO that campaigns for
transparency, called the proposal "window dressing" because it
did not say whether trade with state entities should be subject
to any new rules, even though Switzerland had a "particular
responsibility" as the leading trading hub.
One thing is clear: Switzerland needs to make the same kind
of effort in the commodities trading sphere that it has in
banking. Such a drive could show where some of the "missing
billions" have been going and help African countries get proper
financial compensation for their resources.
(Additional reporting by Tom Miles in Geneva; Editing by Dale