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Africa loses US$88.6bn yearly through corruption, money laundering, tax evasion – Report



According to the Economic Development in Africa Report 2020 by the UN Conference on Trade and Development (UNCTAD), Africa loses about US$88.6 billion, 3.7 per cent of its gross domestic product (GDP), annually, in illicit financial flows.

Even the lower estimates are on par with current global military spending, the report added.

It said recovering IFFs is often unsuccessful because it is complicated and time consuming: The UN estimates that less than 1 per cent of IFFs are actually seized.

EUROPOL data supports this assessment.

“Hence, unlawful businesses are highly profitable compared to typical legal businesses, which paid an average worldwide corporate income tax of 26 per cent in 2018”, the report said.

It noted that despite the challenges involved, “following the money” can pay off, noting: “As of early 2021, countries have recouped more than $1.36 billion in unpaid taxes, fines, and penalties as a result of the 2016 Panama Papers investigation into off-shore financing schemes shows”.

IFFs also undermine development efforts and exacerbate state fragility, OriginAll said.

For example, it explained that according to a 2018 report by the United Nations Conference on Trade and Development (UNCTAD), the African continent lost an estimated average of USD73 billion.

Illicit financial flows, the report emphasised, “have hamstrung progress and created poverty, insecurity, and financial challenges that today impede implementing the 2030 UN Agenda for Sustainable Development and the AU Agenda 2063: The Africa We Want”.

IFFs have also driven the African continent toward indebtedness, the report asserts.

The United Nations Economic Commission for Africa (ECA) estimates that these losses are equivalent to a proportion of three-quarters of the amount required to make progress on Sustainable Development Goal 3 (SDG 3) (Health and Well-being); a quarter of the amount needed for SDG 4 (Education); and a third of the additional amount needed for SDG 9 (Infrastructure).

It said commercial practices related to trade and tax abuse, including tax avoidance and BEPS practices by multinational corporations that are not necessarily illegal, account for 65% of IFFs from Africa.

Criminal practices such as money laundering, trafficking, smuggling, and tax evasion account for 30% of IFFs from Africa.

Corruption involving government officials, including bribery and abuse of public office, is estimated at 5% of IFFs from Africa.

In 2018, during International Anti Corruption Day, the United Nations Secretary-General, Mr Antonio Guterres, estimated that corruption costs the global economy more than $3.6 trillion annually.

Estimates from the African Development Bank have suggested that Africa annually loses about $148 billion to corruption.

The UNODC suggests that about 3.6% of global GDP, or approximately $1.6 trillion, is laundered.

The IMF has similarly reported that laundered proceeds could be anywhere between 2 and 5 per cent of the global GDP.

The 2020 ECA Economic Governance Report identified five key institutions and 9 legal frameworks that can collectively strengthen governance systems and prevent IFFs.

These institutions and laws are necessary for preventing IFFs.

Thus far, only 23 African countries have established the five institutions and only one country has put in place all nine legal frameworks.

Until these institutions and laws are put in place by all African countries, there is a likelihood that corruption and money laundering could continue to be a risk and filter through economies, the report diagnosed.



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