Two years after the formation of the Partnership on Illicit Finance, an initiative formed during the US-Africa Leaders’ Summit in July 2014, only seven African countries, including the United States have joined.
Considering the fact that there are 54 countries in Africa, and collectively, they lose some $60 billion to illicit financial flows, it is curious that only seven countries have joined the initiative two years after it was started.
The information came to light during panel discussions at a side event to launch national action plans on illicit financial flows at the just-ended 51st Annual Meetings of the African Development Bank in Lusaka, Zambia, held from May 23 to 27, 2016.
The eight countries that have signed up to the initiative are Burkina Faso, Kenya, Liberia, Mauritius, Niger, Senegal, Sierra Leone and the United States.
The launch of national plans outlining what the countries in the Partnership would do to combat illicit financial flows was put off because only two countries have their plans ready – Senegal and the US.
Illicit financial outflows from Africa are a major source of financial loss to the continent. The activities of multinational corporations are responsible for 60 per cent of the outflows, criminal activities such as human trafficking and money laundering are said to drive 35 per cent and corruption plays a five per cent role in shifting all these money out of the continent.
According to a report by the Global Financial Integrity (GFI), a Washington DC-based research and advisory organization, global volumes of illicit financial flows reached $1.1 trillion in 2013, and the developing world lost $7.8 trillion between 2004 and 2013, the last year for which data are available.
The report also found that sub-Sahara Africa is the hardest hit region suffering the largest illicit financial outflows—averaging 6.1 per cent of GDP.
Ghana for instance lost a cumulative $4 billion to illicit financial flows in 10 years between 2004 and 2013. What that means is that every year $401 million leave the shores of Ghana illicitly, but Ghana hasn’t signed up to the initiative yet.
The enormity of the financial loss to African countries, requires urgent and decisive action – there is no telling what that money can do for development and the about 500 million African citizens living in poverty.
The GFI found that over the ten-year time period of its study, an average of 83.4 per cent of illicit financial outflows were due to the fraudulent misinvoicing of trade.
The report also compared illicit financial flows to official development assistance (ODA) and foreign direct investment (FDI) and found that illicit financial flows have exceeded those measures—combined—for seven of the ten years of the study.
“Despite these substantial recorded inflows, the continued growth of unrecorded, illicit outflows has a pernicious impact on development aspirations in many countries. For example: for every dollar of ODA that entered the developing world in 2012, ten dollars flowed out illicitly,” it says.
The report discovered that taken together, growth of ODA and FDI (6.8 per cent a year) just barely outpaced the change in illicit financial flows (6.5 per cent a year) between 2004 and 2013. Most of that growth came from increased FDI, as ODA to developing countries has stagnated over the period.
According to the report, while $1.1 trillion flowed illicitly out of developing countries in 2013, those countries received $99.3 billion in ODA. For every development-targeted dollar entering the developing world in 2013, over $10 exited illicitly, it added.
Meanwhile, after African leaders and President Obama agreed to establish the Partnership on Illicit Finance to combat the menace through the initiative and followed it up with a re-affirmation of commitment to the partnership during the Financing for Development conference in July 2015, in Addis Ababa, Ethiopia, national action plans are still being prepared.
By Emmanuel K Dogbevi, back from Lusaka, Zambia
Email: [email protected]
Copyright © 2015 by Creative Imaginations Publicity
All rights reserved. This article or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in reviews.