Africa is losing more than US$50 billion every year in illicit financial outflows as governments and multinational companies engage in fraudulent schemes aimed at avoiding tax payments to some of the world’s poorest countries, impeding development projects and denying poor people access to crucial services.
Illegal transfers from African countries have tripled since 2001, when US$20 billion was siphoned off, according to a report released by the African Union’s (AU) High Level Panel on Illicit Financial Flows and the UN Economic Commission for Africa (UNECA).
The report was praised by civil groups as the first African initiative to address illicit outflows from the continent.
In total, the continent lost about US$850 billion between 1970 and 2008, the report said. An estimated US$217.7 billion was illegally transferred out of Nigeria over that period, while Egypt lost US$105.2 billion and South Africa more than US$81.8 billion.
Trade mispricing, payments between parent companies and their subsidiaries and mechanisms designed to hide revenues are all common practices by companies hoping to maximize profits, the study said.
Nigeria’s crude oil exports, mineral production in the Democratic Republic of the Congo and South Africa, and timber sales from Liberia and Mozambique are all sectors where trade mispricing occurs.
“The information available to us has convinced our panel that large commercial corporations are by far the biggest culprits of illicit outflows, followed by organized crime. We are also convinced that corrupt practices in Africa are facilitating these outflows, apart from and in addition to the related problem of weak governance capacity,” said former South African president Thabo Mbeki, who chairs the panel.
Criminal networks engaged in drugs and human trafficking, animal poaching, and theft of oil and minerals also contributed to money leaving the continent.
Reducing these losses requires urgent and coordinated action, the report said, calling for renewed political interest in fighting corruption, increased transparency in extractive sector transactions and a crackdown on banks that aid fraudulent transfers.
African and non-African governments and the private sector — including oil, mining, banking, legal and accountancy firms — were all involved in schemes designed to launder money and avoid paying corporate tax, the study said.
More than US$1 trillion was siphoned off globally through illegal schemes from 2007 to 2009, the report said, adding that lost African revenues comprised 6 percent of that total. However, the authors cautioned that poor data and complicated laundering networks could make the amount much higher.
“Illicit financial flows from Africa range from at least US$30 billion to US$60 billion a year,” the report said. “These lower-end figures indicated to us that in reality Africa is a net creditor to the world rather than a net debtor, as is often assumed.”
“Oxfam estimates that Africa alone is losing almost half of the global US$100 billion of annual illicit financial flows,” Oxfam executive director for South Africa Sipho Mthathi said.
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