Feb 21, 2021 News
Kaieteur News – Africa lost US$40 billion in 2015 from illicit financial flows (IFFs), related to exports from extractive industries. This is according to a report by the United Nations Conference on Trade and Development (UNCTAD).
Titled Tackling illicit financial flows for sustainable development in Africa, the report defines IFFs as movements of money and assets across borders, which are illegal in source, transfer or use.
Most of the loss was calculated in the gold supply chain (77 percent), with diamonds and platinum making up the rest.
(IFFs) from exports of extractives commodities account for a significant portion of IFFs in Africa, the report said. Yearly IFFs from Africa in all industries stand at US$88.6 billion, equivalent to 3.7 percent of Africa’s Gross Domestic Product (GDP).
The aim of the report is to equip governments of Africa with the knowledge to identify and evaluate the risks associated with illicit financial flows, and curb them, then to redirect the finances to the achievement of their national priorities and meeting the Sustainable Development Goals (SDGs).
UNCTAD Secretary-General, Mukhisa Kituyi, is quoted saying “Illicit financial flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions.”
UNCTAD said that though the IFFs are large, they likely understate the gravity of this issue and its impact.
The illicit financial flows include capital flight, tax and commercial practice and criminal activities like illegal markets, corruption and theft.
According to UNCTAD, Africa’s total illicit capital flight from 2000 to 2015 amounted to US$836 billion, more than the continent’s total debt stock of US$770 billion, making Africa “a net creditor to the world.”
The report complains of the issue undermining productive capacity and prospects for achieving the Sustainable Development Goals (SDGs), so much that in those countries with high illicit flows, the governments spend 25 percent less on health and 58 percent less on education. It stated that Africa would not be able to bridge the financing gaps with current government revenues and development assistance.
If illicit capital flight is moved, this report said that Africa would generate enough capital to finance almost 50 percent of the US$2.4 trillion sub-Saharan Africa needs to fight climate change.
It recommends the improvement of regional cooperation on IFFs and taxes.
“Solutions to the problem must involve international tax cooperation and anti-corruption measures. The international community should devote more resources to tackle IFFs, including capacity-building for tax and customs authorities in developing countries,” it stated.
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