Illicit financial flows out of Africa are no less a major concern than corruption in the continent given its scale and negative impact on the governments’ development agenda.
Some estimates say the region accounts for illicit flows worth USD 50 Bn per annum, a figure that is about double the official development assistance (ODA) that the continent receives. However, this estimate could be short of reality due to the lack of accurate data in most African countries.
Illicit flows are money earned illegally and transferred for use elsewhere. The funds are often generated from criminal activities, corruption, tax evasion, bribes and transactions from cross-border smuggling.
A just-released report by American research group Brookings Institution shows that Sub-Saharan Africa exported USD 1.3 Tn in illicit financial flows in a 38-year period that started from 1980 to 2018.
Meanwhile, within the same period, the region attracted nearly USD 2 Tn in foreign direct investment (FDI). According to the report, illicit financial flows saw a notable increase in the 2000s in correspondence to increased in trade from Africa.
Larger economies in the continent have higher amounts of such flows. The top 4 countries emitting the money are South Africa (over USD 441 Mn), the Democratic Republic of Congo (over 165 Mn), Ethiopia (over 84 Mn) and Nigeria (about USD 67 Mn).
These countries together emit more than 50 percent of total flows from Sub-Saharan Africa. The research says there is a relationship between higher trade activities, real gross domestic product and higher financial exports.
“Using trade misinvoicing and balance-of-payments discrepancies to estimate illicit financial flows, we find higher real GDP is associated with higher illicit financial flows due to the increased opportunities to channel illicit resources abroad generated by higher economic activity, suggesting a need for increased diligence as countries grow,”the report reads.
Some evidence reveals that taking action to stop these flows out of Africa can provide a major source of funds for development programs. African countries need to develop a prompting capacity to deter, track, stop and recover the amounts of money that leaves the continent every year.
This article was originally published on WeeTracker.