South Africa - Durban - 11 August 2020 - Trucks wait to get the Durban Harbour container terminals in the area. Picture Leon Lestrade/African News Agency(ANA)
South Africa - Durban - 11 August 2020 - Trucks wait to get the Durban Harbour container terminals in the area. Picture Leon Lestrade/African News Agency(ANA)

Illicit financial flows hurt continent

By Given Majola Time of article published Sep 30, 2020

Share this article:

JOHANNESBURG - The African continent loses about $88.6billion (about R1.5trillion) in illicit capital flight, tax and the misinvoicing of trade shipments annually.

This is according to the latest UN Conference on Trade and Development (Unctad) report, which said the losses amounted to 3.7percent of the continent’s gross domestic product.

Unctad said that illicit financial flows (IFFs) robbed Africa of its prospects, undermined transparency and accountability, and eroded trust in African institutions. It said Africa lost $836bn between 2000 and 2015.

Unctad secretary-general Mukhisa Kituyi said the IFFs included the export of extractive commodities. He said the findings offered new insights for researchers and policymakers studying how to identify and curb IFFs, and it was relevant to all gold-exporting countries in Africa, for example, despite their different local conditions.

“It calls for global efforts to promote international co-operation to combat IFFs,” Kituyi said. “It also advocates for strengthening good practices on the return of assets to foster sustainable development and the achievement of the 2030 Agenda for Sustainable Development.”

The report found that tackling capital flight and IFFs represented a large potential source of capital to finance much-needed investment into the continent’s infrastructure, education, health and productive capacity.

It said curbing IFFs could generate enough capital by 2030 to finance almost 50percent of the $2.4trillion needed by sub-Saharan countries for climate change adaptation and mitigation.

Unctad said IFFs represented a major drain on Africa’s capital and revenues, undermining productive capacity and the prospects for achieving the UN’s Sustainable Development Goals (SDGs). It said Africa would not be able to bridge the large financing gap required to achieve the SDGs - estimated at $200bn a year - with existing government revenues and development assistance.

The report said women and girls, who often have less access to healthcare and education, suffer the most from the negative fiscal effects of IFFs.

“Of the estimated $40bn of IFFs derived from extractive commodities in 2015, 77percent were concentrated in the gold supply chain, followed by diamonds at 12percent and platinum with 6percent,” it said.

Unctad said limitations affected efforts to estimate IFFs, because only 45 out of 53 African countries provided data to the UN International Trade Statistics Database in a continuous manner, allowing trade statistics to be compared over time.

The agency said solutions must involve international tax co-operation and anti-corruption measures, where the international community should devote more resources to tackle IFFs, including capacity-building for tax and customs authorities in developing countries.

“African countries need to strengthen engagement in international taxation reform, make tax competition consistent with protocols of the African Continental Free Trade Area and aim for more taxing rights,” the report said.

BUSINESS REPORT

Share this article: