Curbing Illicit Financing: The Next Assignment of Africa

In a speech before the UN General Assembly last December, Nigeria’s Finance Minister, Ngozi Okonjo-Iweala, said that “this is the right time for pursuing intensive international action against illicit financing in developing countries, which undermines the domestic resource mobilisation effort and become a matter of major concern due to the scale and negative impact on Africa’s development and governance agenda.”

Indeed, illicit financial flows are depriving Africa billions of dollars each year, which amounts to more than the continent received in overseas development aid or foreign direct investment combined. This money is usually generated from criminal activities, corruption, tax evasion, bribes and transactions from cross-border smuggling. 

The figures regarding illicit financing in Africa are shocking. Between 2002 and 2012, USD589 billion has left Africa in illicit financial flows. The figure becomes even bigger when considering the illicit financial flows from Africa since 1980, which reached upwards of USD1.4 trillion. That’s roughly the equivalent of Africa’s current Gross Domestic Product (GDP), according to a report published in December 2013 by Global Financial Integrity, a research and advocacy organization.

This is why illicit capital outflows in Africa became the main topic during two regional meetings held last month in Ethiopia. The 3rd Tana High-Level Forum, held in Bahir Dar, was attended by Ethiopian Prime Minister Hailemariam Desalegn, Sudanese President Omar al Bashir, South Sudanese President Salva Kiir and Puntland’s President Abdiweli Mohammed Ali (PhD). Senior African policymakers also gathered in Addis Ababa last month to debate one of Africa’s most pressing topics: Capital Flight. In both meetings, African leaders referred to the illegal migration of money from Africa as a security threat and called for measures to curb the menace.

 “Weak states have turned Africa’s wealth of natural resources from a golden avenue [towards] economic growth to a curse and source of conflict,’’ said Carlos Lopes (PhD), Executive Secretary of the Economic Commission for Africa, during the Tana Forum. 

Currently, seven of the top ten African states with the highest yearly average of capital flight — including Nigeria (USD11.9 billion) and Egypt (USD3.4 billion) — are categorized as relatively unstable countries. However, Africa’s fairly stable states are also not spared by hemorrhaging capital outflows. South Africa and Ethiopia, relatively stable states in Africa, hold the second and seventh rank in the top ten list with USD3.01 billion, and USD2.01 billion capital flight, respectively.

Africa's illicit outflowsThe high yearly average volume of illicit capital outflow from Ethiopia, which stood 39th out of 144 developing countries, according to the report, affected the economy in the form of undermining its effort to finance its own mega projects currently being undertaken. The USD2 billion annual average illicit financing flow from Ethiopia can cover 40Pct of the cost of building the Grand Ethiopian Renaissance Dam.

Yet, at the international level, Africa has the smallest share of the USD589.9 billion annual average illicit financial out flows from developing countries between 2002 and 2012. Illicit outflows from Africa comprised just 7.7Pct of developing country outflows, while developing countries in Asia account for 39.6Pct of total illicit outflows. Developing counties in the western hemisphere, such as Mexico and Brazil, contribute 19.6Pct to the total illicit outflows from the developing world, while Illicit outflows from the Middle East region account for 11.2Pct of total outflows on average.

The figures, however, tell only part of the story. Illicit financial flows also affect income distribution as Africans face higher taxes and austerity measures designed to finance external debt obligations. Higher tax burdens disproportionately burden poorer citizens and impinge on the ability of the government to provide social services. The report states that “the illicit hemorrhage of resources from Africa is about four times Africa’s current external debt.” 

The composition of these outflows challenges the traditional thinking about illicit money. According to estimates by Global Financial Integrity, corrupt activities such as bribery and embezzlement constitute only about 3Pct of total illicit outflows from Africa, while criminal activities, such as drug trafficking and smuggling, make up 35Pct. Money stolen by corrupt governments, which constitute close to 2Pct, remains insignificant compared to the other forms of illicit outflow. Meanwhile, commercial transactions by multinational companies make up a whopping 65Pct.

At the Tana Forum, Prime Minister Hailemariam stressed the need to access information on deposits in foreign banks by corporations that avoid taxation in their African host countries: “It would not be possible to implement change if African governments continue to be known for corruption in their dealings with foreign countries and international companies.” 


2nd Year . June 2014 . No.15


29 comments

  • SteveGot

    cialis online cheap no prescription
    cialis online
    buy cialis cheap us pharmacy
    cialis online
    cialis professional 20 mg pills

    SteveGot Monday, 25 September 2017 11:19 Comment Link
  • MichaelbuH

    buy cialis uk next day delivery
    cialis online
    cheap cialis canada pharmacy
    cialis online pharmacy
    generic cialis online cheap

    MichaelbuH Monday, 25 September 2017 01:56 Comment Link
  • Rolandlom

    buy cialis manila
    buy cialis
    cheap cialis and levitra
    online cialis
    cialis film coated tablets tadalafil

    Rolandlom Saturday, 23 September 2017 10:48 Comment Link
  • Scotttob

    lloyds pharmacy viagra online
    viagra without a doctor prescription
    sildenafil 50 mg para jovenes
    viagra no prescription
    best prices for viagra 100mg

    Scotttob Wednesday, 20 September 2017 23:15 Comment Link
  • Kennithreuck

    generic viagra or cialis
    viagra no prescription
    viagra brand and generic
    viagra without prescription
    fake viagra pills

    Kennithreuck Wednesday, 20 September 2017 15:11 Comment Link
  • Williamsar

    Walgreens Pharmacy
    Canadian Online Pharmacies
    pharmacy direct
    Canadian Online Pharmacies
    discount pharmacy

    Williamsar Tuesday, 19 September 2017 12:06 Comment Link
  • Arthurmorry

    northwestpharmacy
    canadian pharmacies shipping to usa
    canadian pharmacy online
    canada drugs
    real canadian superstore flyer

    Arthurmorry Monday, 18 September 2017 18:21 Comment Link
  • Clintonden

    generic viagra good original
    viagra 100 mg
    how to cut viagra pill
    buy viagra 100mg
    viagra in mumbai where buy

    Clintonden Sunday, 17 September 2017 12:05 Comment Link
  • RickySpuct

    costo del viagra generico
    viagra 100
    viagra cheap online no prescription
    viagra 100
    can split viagra pill

    RickySpuct Saturday, 16 September 2017 18:57 Comment Link
  • Carlosvog

    viagra sales per year
    buy viagra online
    viagra online pharmacy
    illegal sell viagra online
    cialis buy
    cialis online pharmacy
    viagra online kaufen paypal

    Carlosvog Saturday, 16 September 2017 01:47 Comment Link

Leave a comment

Make sure you enter the (*) required information where indicated.Basic HTML code is allowed.

Latest News

Ethiopia to Host the 4th International Coffee Conference

Ethiopia to Host the 4th International Coffee Conference

Ethiopia is set to host the 4th International Coffee Conference from March 6 – 8, 2016 in Addis Ababa at the United Nations Conference Center. Previous conferences were held  in England in 2001, Brazil in 2005 and Guatemala in 2010. Read more

Most Popular

  • 1
  • 2
Prev Next

The White-Box of Ethiopian Agriculture

The agricultural sector remains our Achilles heel, nonetheless, we remain convinced that agricultural-based development remains the only source of hope ...

Read more

For Whoever Has, to Him Shall be Given …

As the Ethiopian government seeks to transform the economy into one that’s rooted in manufacturing, the simplicity for local investors to access finance...

Read more

Commentary

  • 1
  • 2
  • 3
Prev Next

Shooting in the Dark: The Anomalies of Headhunting

The war for ‘heads’ – also known as talent – has been raging for many years and the manner headhunters ‘poach’ people is getting tougher ...

Read more

Understanding Chinese Investment in Ethiopia A Critical Evaluation of the World Bank’s “Chinese FDI in Ethiopia” Survey

The World Bank country office in Ethiopia, apparently in response to the request by the government of Ethiopia, has conducted a survey of...

Read more

Mitigating Growing Income Inequality: What Needs to Be Done

Rising income and wealth inequality in many countries around the world has been a long-term trend for three decades or more. But the atte...

Read more

View Point

  • 1
  • 2
  • 3
Prev Next

Delivering Life Insurance: The Untapped Market in Ethiopia

Modern insurance transaction in Ethiopia was started by an Egyptian Bank in 1905. According to Ethiopian Chamber of Commerce there were 19, 33 and 40 insuran...

Read more

Headache When a Key Personnel leaves a Company in the Financial Sector

The financial sector in Ethiopia has undergone considerable changes in recent decades. The dramatic rise of new market players into the sector has vividly al...

Read more

Women and the World Economy

In many countries, public debate about gender equality focuses mainly on women’s access to top positions and high-powered career opportunities. But the “glas...

Read more