Windhoek-A 2014 report titled ‘One Trillion Dollar Scandal’, by an organization called the One Campaign, claims that developing countries lose US$1 trillion annually to corporate transgressions, most of which, it says, is traceable to the activities of companies with secret ownership. Another report in 2015 on Illicit Financial Flows from Africa, chaired by former South African president Thabo Mbeki, stated that Africa had lost an additional US$1 trillion over a 50-year period and that the continent loses more than US$50 billion annually to illicit financial flows.
The reports concur that most of these illicit flows are perpetrated in the extractive sector and through companies with hidden ownership. To support this claim, the coordinator of the African Minerals Development Centre (AMDC) in West Africa, Dr Kojo Busia, disclosed that Africa loses in excess of US$80 billion annually through illicit financial flows (IFF) and while being used as a tax haven by the mining industry alone. Busia warned that tax avoidance by some multinational companies is undermining domestic resource mobilisation efforts in most African countries, leading to loss of nearly US$50 billion over the last decade.
To address the perpetuation of IFF from the continent, Tom Alweendo, Minister of Economic Planning, recently told a ministerial meeting in Washington D.C (USA) on Trade, Security, and Governance in Africa, that the economic development of Africa has been impeded by illicit flow of funds from the continent.
Alweendo also warned that Africa is estimated to be losing more than US$50 billion annually through illicit capital outflows and stressed that this equates to about two percent of the continent’s total GDP in nominal terms. In a report titled “Illicit Financial Flows from Developing Countries: Measuring OECD Responses”, the Organisation for Economic Co-operation and Development (OECD) estimated that the illicit financial flows originating in developing countries, “from money laundering, tax evasion and bribery, often reach OECD countries. Recognizing these risks, OECD countries are taking action to avoid being safe havens for illegal money.” There are 35 OECD countries that include most industrialised nations such as the United States, United Kingdom, Japan, Italy, etc. Alweendo added that the illicit flow of funds from the continent hampers service delivery, and diverts resources away from building much needed infrastructure such as schools, and training teachers and law enforcement officers.
“It is here where we need the assistance of the United States of America (U.S.) to help us stem this outflow,” Alweendo emphasised.
The ministerial meeting was hosted by Secretary of State Rex Tillerson and was aimed at refocusing US relationships with Africa squarely on trade and investment promotion.
In his remarks, Tillerson noted that the refocus on trade was geared towards helping “unlock the tremendous potential of what is expected to become the world’s most populous continent in coming decades.”
Tillerson said “Africa is a growing market with vast potential. Five of the world’s 10 fastest-growing economies are in Africa, and consumer spending there is projected to exceed $2 trillion by the year 2025.”
Alweendo added that “for Africa’s industrialisation to be successful we will need to trade in international markets.” However, as of 2016, Africa’s share of global trade was less than three percent. “We thus also need to look at how the current international trading system is arranged. Our experience shows that the system is tilted in favour of the developed economies. There is therefore a need for our developed trading partners to show some willingness to re-look at how best to level the playing field when it comes to international trade.”