http://www.aljazeera.com/indepth/features/2014/04/africa-hobbled-capital-flight-20144296537621865.html
Out of Africa: The great money migration
Almost $2 trillion has left Africa illicitly since 1970, thwarting poverty
reduction and economic growth.
Mohammed Adow <
http://www.aljazeera.com/profile/mohammed-adow.html> Last
updated: 30 Apr 2014 13:13
*Bahar Dar, Ethiopia -* The figures are staggering: At least $1.8 trillion
illicitly flowed out of Africa between 1970 and 2009.
This is far more than the external aid the continent received over the same
period, and almost five times its current external debt. According to
researchers, the continent also loses at least $100bn a year in this
financial haemorrhage.
African leaders convened this week in the Ethiopian city of Bahar Dar to
discuss illicit financial flows and what can be done to staunch them. A
study commissioned by the Tana High Level Forum on African Security, which
organised the conference, found that illicit flows from Africa grew at an
average rate of 12.1 percent per year since 1970, and that capital flight
from West and Central African countries accounted for most of the illicit
flows from sub-Saharan Africa.
Illicit financial flows consist of money earned illegally and then
transferred for use elsewhere. The money is usually generated from criminal
activities, corruption, tax evasion, bribes and smuggling. Yet the numbers
tell only part of the story - a story that exposes how these highly complex
and deeply entrenched practises have flourished, with a devastating impact
on Africans' efforts to extricate themselves from grinding poverty.
This scourge eats into the gross domestic products of African countries,
draining foreign exchange reserves, reducing tax collection and investment
inflows and worsening poverty.
"The costs of this financial haemorrhage have been significant for African
countries. It has heightened income inequality and jeopardised employment
prospects. In the majority of countries in the continent, unemployment
rates have remained exceedingly high in the absence of investment and
industrial expansion," said Kenya's Central Bank Governor Dr Njuguna Ndungu.
*Worse than expected*
And some believe that the estimates of illicit financial flows
underestimate the problem. "These figures do not capture money lost through
drug trafficking and the loss of Africa's marine resources through illegal
fishing," said Abdiweli Mohammed Ali, the new president of Somalia's
semi-autonomous Puntland region.
"Somalia loses between $800m and $1bn through illegal fishing every year.
This is money we cannot afford to lose. Something must be done about the
illegal international fishing cartels looting our marine resources," said
Abdiweli, who is also a former prime minister of Somalia.
It's shameful that Nigeria leads in such an unsavoury trend. But it must be
pointed out that we are also leaders in trying to repatriate some of the
stolen funds.
- Nuhu Ribadu, former chairman of Nigeria's Economic and Financial Crimes
Commission
The study also found a significant link between increases in the price of
oil and capital flight from Nigeria - Africa's largest oil producer, which
also accounted for the highest amount of illicit outflows.
"Some of the acceleration in illicit outflows was undoubtedly driven by oil
price increases and increased opportunities to misprice trade that
typically accompany increasing trading volumes due to globalisation," the
report noted.
For instance, Nigeria lost at least $250bn between 2000 and 2009. South
Africa, which was the continent's biggest economy until it was recently
overtaken by Nigeria, came second with a loss of at least $170bn over the
same period. Egypt, Algeria, Libya, Morocco, Angola, Sudan and Cameroon are
also high on the list.
Nuhu Ribadu, a former chairman of Nigeria's Economic and Financial Crimes
Commission (EFCC), said: "It's shameful that Nigeria leads in such an
unsavoury trend. But it must be pointed out that we are also leaders in
trying to repatriate some of the stolen funds. We managed to recover
billions that former military dictator Sani Abacha stashed in banks abroad."
Ribadu said Africa needs honest and committed leaders who will set examples
by eschewing corruption and closing avenues of illicit financial flow. "It
is the seriousness and commitment showed by African leaders that would
convince foreign countries to work with them towards recovering looted
monies stashed abroad."
*Skewing income distribution*
Experts say the enormity of the outflow explains why donor-driven efforts
to spur economic development and reduce poverty have not achieved their
full potential in Africa. Sustained illicit outflows have also turned the
continent into a net creditor to the rest of the world.
"Policy measures must be taken to address the causes of illicit outflows
and also to impress upon the international community the need for better
transparency and tighter oversight of banks and offshore financial centres
that absorb these flows," said former South African President Thabo Mbeki.
Mbeki is also the chair of the Commission on Illicit Finances established
by the UN Economic Commission on Africa.
As long as illicit capital continues to pour out of impoverished African
countries at this pace, efforts to reduce poverty and boost economic growth
will be thwarted, and income distribution will become more skewed, leading
to economic and political instability.
Yet there is a glimmer of hope, now that African leaders and governments
are increasingly understanding - and coming to terms with - the dangers
posed by illicit financial flows.
*Follow Mohammed Adow on Twitter: _at_Moadow <
https://twitter.com/Moadow>*
Received on Wed Apr 30 2014 - 11:01:34 EDT