Extra TVUN

Africa Loses $50 Billion Annually on Illicit Financial Flows

United Nations, Feb 10 2014 (IPS) - Africa is losing some 50 billion dollars every year due to illicit financial flows (IFFs), an amount that is much higher than the development aid  the continent receives from international donors, said former South African President Thabo Mbeki.

“If we can stop Africa from losing resources in illicit outflows, then these funds can be directed to meeting the needs of the continent’s people and allowing them to build a better future,” said Mbeki, chair of the High Level Panel on Illicit Financial Flows.

Data from United Nations Economic Commission for Africa (ECA) shows  money leaves the continent mostly via tax evasions and commercial transactions by multinational companies (60 percent). Criminal activities including drug trading, racketeering, counterfeiting, contraband and terrorist financing take up 35 percent while the rest is due to theft, bribery and other forms of corruption by government officials.

According to ECA, money that has been drained out of Africa diverts domestic savings from real domestic investment, which could deepen income gaps, stimulate inflation and then weaken governance. It has been estimated that without the illicit outflow, GDP per capita in Africa would have been 16 percent higher.

The cumulative IFFs were unequally distributed in Africa from 1997 to 2008 with two thirds of them attributed to two regions, West Africa (38 percent) and North Africa (28 percent).

According to a report released by the African Development Bank  last year, the problem is most acute in Nigeria and South Africa, the continent’s two largest economies and hubs to oil, precious metals and minerals.

“The direct and indirect consequences of illicit financial flows– including reduced investment and revenues for health, education, employment, income – are major constraints for Africa’s transformation,” said the report.

In order to stop illicit financial flows out of Africa, Mbeki believes there will have to be a “shared responsibility.”

He said the main destinations and also the beneficiaries of IFFs are usually Africa’s major trading partners, including both developed countries and tax havens.

“We’ve got to try and understand this matter of this illicit capital outflows out of the continent, both from the point of view of we, the exporting continent, and then the receiving countries so that our recommendations will have to address both ends of this.”

Mbeki’s panel has already visited Washington DC and had discussions with the World Bank, International Monetary Fund and the U.S. government. The panel members are currently visiting several African countries, including Kenya and South Africa, to investigate the issue. It is expected to release a final report with recommendations by July this year.

 
Republish | | Print |

Related Tags