How committed are African countries to stemming illicit financial flows?
While some African institutions like the Economic Commission for Africa (ECA), the African Union (AU) and the African Development Bank (AfDB) are making clear their stand on illicit financial flows (IFFs) from Africa, individual countries on the continent don’t seem to be showing enough commitment.
As part of the continent’s practical steps to dealing with illicit financial flows, a High Level Panel on Curbing Illicit Financial Flows from Africa has been formed. The panel headed by former South African President Thabo Mbeki is working with other institutions on the continent to throw light on the problem, build capacity and tackle it in the most efficient way.
The ECA and AU established Panel was commissioned by the ECA to do background studies on the status of illicit financial flows in Africa and created the advocacy slogan: “IFF: Track it; Stop it; Get it” in support of the work of the panel.
Meanwhile, global volumes of illicit financial flows have reportedly reached $1.1 trillion in 2013. The developing world lost $7.8 trillion between 2004 and 2013, the last year for which data are available, according to the Global Financial Integrity (GFI), a Washington DC-based research and advisory organization.
According to the GFI even though large amounts of aid money have been pumped into developing countries, the amount of money these countries lose to illicit financial flows makes the impact of aid insignificant.
“Despite these substantial recorded inflows, the continued growth of unrecorded, illicit outflows has a pernicious impact on development aspirations in many countries. For example: for every dollar of ODA that entered the developing world in 2012, ten dollars flowed out illicitly,” the GFI has said.
The GFI report also discovered that taken together, growth of ODA and FDI (6.8 per cent a year) just barely outpaced the change in IFFs (6.5 per cent a year) between 2004 and 2013. Most of that growth came from increased FDI, as ODA to developing countries has stagnated over the period.
The report also found that sub-Sahara Africa is the hardest hit region suffering the largest illicit financial outflows—averaging 6.1 per cent of GDP.
The AU argues that, by many accounts; about $50 billion is taken away from Africa yearly due to trade mispricing. (Estimates by the ECA place this figure at $60 billion based on a different data set and approach). These constitute funds that would otherwise be used for development.
A study published last week by the United Nations Conference on Trade and Development (UNCTAD), says Africa lost an estimated amount of $854 billion in illicit financial flows from 1970 to 2008.
The report said the amount was nearly equivalent to all official development assistance received by the continent during that time and only one third would have been sufficient to cover its external debt.
These evidences, however, are not eliciting the required urgency and response from African countries in general.
At the 51st Annual Meetings of the AfDB in Lusaka in May 2016, a side event to launch national plans of the Partnership on Illicit Finance was called off, because two years after its formation, only seven out of the 54 African countries have signed up to the initiative with the US, and only two countries have their plans ready. The two countries are Senegal and the US. The initiative was started after the US-Africa Leaders’ Summit in July 2014.
The lack of commitment from the bulk of African countries points to a certain amount of complicity.
The Panama Papers, according to recent publications show that politicians and their associates make the highest number of individuals found in the documents.
One report by the ICIJ says Mossack Fonseca’s files reveal offshore companies that were established to own, hold or do business with petroleum, natural gas and mining operations in 44 of Africa’s 54 countries.
“Many of them are controlled by politicians, their family members and business associates. Often, the oil, gas, gold and diamonds formed beneath the earth’s surface over millions – even billions – of years are traded by shadow companies that have existed for months,” it said.
The road to recovery is steep and hard, as the evidences reveal, but if African countries would live up to expectation and show commitment to stop the bleeding, some $60 billion or part of it could be saved, and used to make life better for citizens, 500 million of them living in poverty.
Some of the money could also go into providing clean cooking facilities for households in Africa. There is an estimated 600,000 Africans – half of them children who die every year from air pollution resulting from household cooking fuels.
By Emmanuel K. Dogbevi
Email: [email protected]
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