AU conference concludes that illicit financial flows are threat to achieving SDGs in Africa

African countries may not be able to achieve most of the SDGs if the continent continues to suffer illicit financial flows (IFFs) now estimated to be around $88.6 billion a year.

In June this year the African Union with other partners, including journalists convened the Pan-African Conference on Fighting IFFs in Africa In Tunis, Tunisia, to deliberate over the growing menace of illicit financial flows on the continent. It is estimated that approximately $88.6 billion is lost to the continent through illicit financial flows or what is described as “illicit capital flight”.

In a declaration after the conference, the participants came to the conclusion among other factors, that illicit financial flows pose an unprecedented threat to achieving the aspirations of Africa’s development framework Agenda 2063 and the Sustainable Development Goals (SDGs).

The approximately $88.6 billion lost annually from Africa as a result of IFFs or “Illicit Capital Flight”, was noted to be mainly through aggressive tax and commercial practices like mis-invoicing of trade shipments and criminal activities such as illegal markets, corruption or theft.

The meeting indicated that this figure constitutes about 3.7% of the total GDP of the continent.

“It is also nearly equal to the combined sum of the annual official development assistance and foreign direct investment that African countries receive,” the Declaration noted.

The meeting further expressed concern that the increasing scale and extent of Illicit financial flows from Africa, particularly from the extractive industries, constitute a drain on the resources required for Africa’s development.

The meeting therefore is calling for, among other things, decisive action from countries that allow wealthy individuals and multinational companies to shift and hide their profits illicitly, while acknowledging that IFFs are complex and multifaceted, the meeting deliberated on the significant advances and persistent challenges in African tax policy to curb them.

“We discussed strengthening the global financial architecture to better serve Africa’s development needs. We explored the nexus between IFFs and intra-African trade dynamics, particularly under the AfCFTA. Further, we examined the intricate linkages between IFF practices and burgeoning debt burdens across the continent, focusing on how IFFs exacerbate debt vulnerabilities,” the Declaration said.

Present at the conference were African Union Member States Representatives, Public Policymakers and Private Sector, International Organisations, Development partners working on Illicit Financial Flows (IFFs), NGOs, Civil Societies, Journalists and Philanthropists, under the auspices of the African Union and in collaboration with the African Tax Administration Forum, Tax Justice Network Africa and other key partners.

By Emmanuel K Dogbevi

See full declaration here.