Capital flight from Africa continues to be a major thorn in the continent’s side following a new progress report that says up to $60 billion is leaked through illicit financial flows every year.
The new amount exceeds the official development assistance to the continent, which stood at $46.1bn in 2012.
it takes a combination of actors and set of conditions to enable them to happen
A High Level Panel on Illicit Financial Flows from Africa (HLP), chaired by former South African President Thabo Mbeki, says illicit financial flows (IFF) from Africa range from at least $30 billion to $60 billion a year.
The panel believes that these estimates of illicit financial outflows tell only part of the story.
This is “in the sense that it takes a combination of actors and set of conditions to enable them to happen,” the panel’s report says.
The effects of illicit financial outflows is now negating the current economic development of the continent and draining foreign exchange reserves, reducing tax collection, canceling out investment inflows and worsening of poverty.
Theft, bribery and criminal activities, including drug trading and tax evasion, are said to be the main forms of illicit financial flows on the continent.
“Commercial money (tax evasion and trade and service mispricing) through multinational companies constitute the largest component of financials flow, followed by proceeds from criminal activities and corruption” the report says.
Activists say the panel reconfirms that billions of funds are flowing out of Africa.
“Its findings should strengthen calls to tackle lax trade regulation, inconsistent tax policy and enforcement, collusion, and corporate greed,” said Oxfam South Africa executive director, Sipho Mthathi, urging African countries to act fast.
“These billions should be put back onto the balance sheet of African nations to pay for healthcare, schools, and protecting the environment,” he said.
Mbeki and the Economic Commission for Africa’s secretary general, Carlos Lopes launched the report on Sunday in Addis Ababa, Ethiopia.