Extractive industries in Africa cited for illicit financial outflows

dollars-money-illicit-financial-flowsA sub-regional workshop on illicit financial flows has cited the extractive industry in Africa as a significant source of illicit financial flows from the continent.

While African economies are still largely commodity driven and dependent on extractive industries, Dr Adeyemi Dipeolu, Director of the ECA’s Capacity Development Division, says the continent’s extractive industries are plagued with under-invoicing, poorly negotiated contracts and overly generous tax incentives that are not guided by cost-benefit analyses.

The workshop by the United Nations Economic Commission for Africa (ECA) which is ongoing in Accra, is aimed at fostering dialogue on the findings and recommendations of a high level panel on curbing illicit financial flows (IFFs) from the continent.

Dr Dipeolu said in the midst of emerging new and innovative methods for capital flight and barefaced methods such as transporting cash on aircraft and boats, there is weak national and regional capacity for dealing with IFFs from Africa, compounded by corruption and abuse of entrusted power, and poorly coordinated efforts by multiple actors.

Relative to GDP, sub-Saharan Africa’s illicit financial outflows – about 5.3 per cent of GDP – is the largest, compared to other world regions.

Additionally, the IFFs from Africa, estimated at above $528 billion, outweighs the annual Official Development Assistance to the continent which is about $348.2 billion.

Worryingly, former South African President Thabo Mbeki, Chair of the High Level Panel on Curbing Illicit Financial Flows from Africa present at the workshop, said a lot of the IFFs out of Africa are done to finance criminal activities.

Among the recommendations of the high level panel are increased regional collaboration in financial intelligence and clear and concise laws on trade mispricing: African countries are urged to develop clear penalties for misstating price, quantity, quality and other details of trade.

The panel has also recommended that the AU integrates IFFs as a specific component of the AU Convention on Preventing and Combating Corruption, the African Peer Review Mechanism should include IFFs in its questionnaires, and the UN Office on Drugs and Crime (UNODC) should expand its area of operations from West and Central Africa, to include other sub-regions.

By Emmanuel Odonkor

Leave A Reply

Your email address will not be published.