Transfer Pricing Costs Africa $15 Billion Annually, Oxfam Report Finds

A comprehensive investigation by Oxfam International, published on April 23, has revealed that multinational mining companies operating in Africa use transfer pricing mechanisms to shift an estimated $15 billion in profits annually to low-tax jurisdictions, depriving African governments of critical revenue that could fund healthcare, education, and infrastructure. The report, titled "Extracting Profit: How Transfer Pricing Drains Africa's Mineral Wealth," is the most detailed analysis of transfer pricing practices in the African mining sector to date and calls for urgent reform of international tax rules.

Transfer pricing -- the practice of setting prices for transactions between related entities within the same multinational corporate group -- is a legitimate accounting mechanism that becomes problematic when used to artificially shift profits from high-tax to low-tax jurisdictions. In the mining context, this typically involves selling minerals extracted in Africa to affiliated trading companies in jurisdictions such as Switzerland, Mauritius, the Netherlands, or the UAE at below-market prices, thereby reducing the taxable profit reported in the African country of origin.

The Oxfam report analyzed financial data from 87 multinational mining companies operating in 28 African countries over the period 2018 to 2025. It found that companies consistently reported significantly lower profit margins in their African operations compared to their global averages, a pattern that the report's authors argue is inconsistent with normal commercial behavior and strongly indicative of profit shifting.

For example, the report found that multinational mining companies operating in Tanzania reported an average effective tax rate of 14.2 percent, well below the statutory corporate tax rate of 30 percent, and an average profit margin of 6.8 percent compared to a global average margin of 18.4 percent for the same companies. Applying the global average margin to Tanzania's mining revenue of $3.8 billion in 2025, Oxfam estimates that the country lost approximately $440 million in tax revenue due to transfer pricing -- equivalent to 60 percent of Tanzania's annual health budget.

Kenya was identified as another heavily affected jurisdiction. Despite having modest mineral production compared to major mining nations, Kenya lost an estimated $320 million annually from transfer pricing in its mining and extractive sectors, primarily related to titanium, soda ash, and fluorspar operations. The report attributed Kenya's vulnerability to its relatively underdeveloped transfer pricing regulations and the limited capacity of the Kenya Revenue Authority to conduct complex cross-border tax audits.

The DRC, Africa's largest mining economy by export value, was estimated to lose approximately $3.8 billion annually from transfer pricing across its cobalt, copper, diamond, and gold sectors. The report noted that the DRC's mining revenue of $10.2 billion in 2025 was disproportionately low relative to the value of minerals extracted, and that the country's tax administration lacked the technical capacity to challenge transfer pricing arrangements employed by sophisticated multinational firms.

Oxfam's report director, Ibrahima Kalil Guisse, called the findings "a devastating indictment of the international tax architecture." Speaking at the report's launch in Dakar, Guisse stated: "African countries are being systematically deprived of the revenues that are rightfully theirs. This is not tax avoidance in a grey area of the law -- this is the exploitation of regulatory asymmetries and capacity gaps to extract wealth from some of the world's poorest nations."

The report identified several specific mechanisms used to shift profits. The most common involved the use of marketing and trading intermediaries located in low-tax jurisdictions. Minerals extracted by African subsidiaries were typically sold to an affiliated trading company in Switzerland or Singapore at prices that were 15 to 30 percent below international spot prices. The trading company would then resell the minerals to end buyers at market prices, capturing the profit margin in the low-tax jurisdiction.

Other mechanisms included inflating management fees and royalty payments to parent companies, charging above-market interest rates on intercompany loans, and undervaluing minerals transferred between related entities for further processing. The report documented one case in which a multinational mining group charged its Zambian subsidiary a management fee of $85 million annually -- equivalent to 22 percent of the subsidiary's operating costs -- for services that Oxfam estimated had an actual value of no more than $15 million.

The response from mining companies has been dismissive. The International Council on Mining and Metals (ICMM), which represents 28 of the world's largest mining companies, issued a statement describing the Oxfam report as "methodologically flawed" and "based on assumptions that do not reflect the commercial realities of international mineral marketing." ICMM CEO Rohitesh Dhawan stated that ICMM member companies "are committed to transparent tax reporting and comply fully with the tax laws of every jurisdiction in which they operate."

Several countries have begun to strengthen their transfer pricing defenses. Tanzania enacted amendments to its Income Tax Act in 2025 that introduced stricter documentation requirements for related-party transactions, mandated the use of the arm's length principle in all intercompany mineral sales, and established a dedicated Transfer Pricing Unit within the Tanzania Revenue Authority with a budget of $12 million and a staff of 35 specialists.

Kenya's Finance Act of 2025 included similar provisions, including the introduction of country-by-country reporting requirements for multinational mining groups, the establishment of an Advance Pricing Agreement program, and enhanced penalties for non-compliance with transfer pricing documentation rules. The Kenya Revenue Authority has also entered into a partnership with the African Tax Administration Forum (ATAF) to build capacity for conducting transfer pricing audits, with technical support from the OECD.

At the international level, the OECD's Pillar Two framework, which establishes a global minimum tax rate of 15 percent for multinational enterprises with revenues exceeding $750 million, entered into force in 2024 and is being implemented by 138 jurisdictions. While the framework is expected to reduce the incentive for profit shifting to zero-tax jurisdictions, its impact on transfer pricing in the mining sector may be limited because most African mining jurisdictions already have statutory tax rates above 15 percent.

Professor Thabo Mosweu, a tax law expert at the University of Pretoria, argued that the Pillar Two framework does not go far enough for African countries. "The 15 percent minimum rate is still too low, and the framework does not address the fundamental issue of how transfer prices are set," Mosweu said. "What Africa needs is not just a minimum tax rate but a fundamental reform of the international tax rules that govern the allocation of taxing rights between countries. Currently, those rules are designed by and for wealthy nations, and they systematically disadvantage resource-rich developing countries."

The Oxfam report estimates that if transfer pricing were effectively eliminated and African countries could tax mining profits at their full statutory rates, the additional revenue generated would be sufficient to fund primary education for 40 million children, provide basic healthcare to 120 million people, and build 15,000 kilometers of paved roads annually across the continent. For a continent that loses more to illicit financial flows than it receives in foreign aid, closing the transfer pricing gap is not merely a technical tax reform -- it is a development imperative.