3 June 2013


"The traditional thinking has always been that the west is pouring money into Africa through foreign aid and other private-sector flows, without receiving much in return. Our report turns that logic upside down – Africa has been a net creditor to the rest of the world for decades," said Raymond Baker, president of Global Financial Integrity stated recently following the release of a joint report from the African Development Bank (AfDB) and Global Financial Integrity (GFI).

Africa lost up to $1.4tn in illicit financial flows in 1980-2009, far exceeding money coming in over the same period and seriously undermining the continent's development, the report said.

Illicit financial flows involve the transfer of money earned through corruption, bribes, tax evasion, criminal activities and transactions involving contraband goods. Tax evasion and illicit financial flows will be on the agenda of the G8 summit in Northern Ireland next month, chaired by David Cameron, amid increasing impatience in the UK and the US at companies such as Google and Apple as they manipulate the system to their maximum advantage.

But most African countries, with weak tax regimes, are by far the biggest losers. Even the estimates of illicit financial flows – large as they are – are likely to understate the problem as they do not capture money lost through drug trafficking and smuggling. But the huge financial transfers out of Africa – dwarfing money coming into the continent – deprive Africa of resources for development.

"The resource drain from Africa over the last 30 years – almost equivalent to Africa's current GDP – is holding back Africa's lift-off," said Professor Mthuli Ncube, chief economist and vice-president of the AfDB. "The African continent is resource-rich. With good resource husbandry, Africa could be in a position to finance much of its own development."

The report which can be viewed on the Global Financial Integrity (GFI) website urges a range of reforms to address this issue.

Comments: Post a Comment

This page is powered by Blogger. Isn't yours?