Africa loses over $1tn in illegal flow.

A recently released report on the High Level Panel on Illicit Financial Flows from Africa has indicated that the continent has lost more than $1tn worth illegal capital.

 

The report published in January this year defines Illicit Financial Flows (IFFs) as the money illegally earned, transferred or used in violation of laws in their origin or during their movement and the use that is connected to laundering, corruption, tax and market abuses.

 

The study that was conducted using case studies of six African countries namely Kenya, Algeria, Nigeria, Liberia, Mozambique and the Democratic Republic of Congo (DRC) discovered that IFFs has caused them huge loss of funds.

 

It was revealed that Kenya lost $1.51bn in IFFs between 2002 and 2011 to trade misinvoicing, with Algeria losing about $25.7bn of its national revenue through IFFs in 38 years from 1970, while other African countries were also facing challenges in trade and tax related malpractices.

 

According to the report, the IFFs is worth the official development assistance received by African countries in the past 50 years.  “Africa is estimated to be losing more than $50bn annually in IFFs, the rate that may well fall short of the reality because accurate data do not exist for all African countries and these estimates often exclude some forms of IFFs such as bribery, trafficking of drugs, people and fire arms, ” the report says.

 

It says that the outflows raise serious concern to African countries given inadequate growth, high levels of poverty, resource needs and the changing global landscape of official development assistance.

 

Local media reported last year that Development Partners (DPs) barred donors from releasing $558m (Sh937bn) that had been pledged to boost Tanzania’s economy in 2014/15 fiscal year, due to corruption.

 

Financial analysts say commitments in donor aid and loans in the country dwindled to 15 per cent last year from 21 per cent in 2013/14, likely to have affected development of infrastructure, agriculture, manufacturing and tourism sectors. 

 

An analysis by Policy Forum group, a nonprofit organisation which investigates governance issues has suggested that Tanzania could boost its revenues by borrowing more money from domestic sources and slashing investors' tax incentives, saying the tax exemption costs the nation a minimum of Sh381bn annually, apparently halting foreign aid reliance on construction projects.

 

However, the High Level Panel report says although African economies have been growing at an annual average of about 5per cent, the superficially encouraging growth should be regarded as inadequate given its confinement within the folds of high income earners. 

 

Therefore, with such equity issues being raised, the report says, the growth may not be sustainable due to possible social unrest.

 

“Poverty remains one of the serious concerns in Africa with people living on less than $1.25 a day increasing to 414 million by 2010 from 290 million in 1990, according to 2013 United Nations report,” says the report, adding; “this situation results from the fact that the population growth outweighs the number of people rising out of poverty.”

 

It suggests that African countries need social services, infrastructure and investment while making sure they root out IFFs.

SOURCE: THE GUARDIAN