Between 1980 and 2018 Sub-Saharan Africa attracted almost US$2 trillion in Foreign Direct Investment (FDI) and aid. During the same period, however, an estimated US$1.3 trillion left the region in the form of illicit financial flows. These figures come from a recently published report by Brookings that takes a closer looker at the scale and nature of illicit flows from Africa. The illegal movement of money or capital from one country to another acts as a significant barrier to growth, starving countries of resources that could be deployed to further development. It is an urgent matter of national and international importance. It takes many forms but, as the report notes, trade misinvoicing is particularly prevalent in the region. This is the process by which money is moved across borders using the falsification of commodity values or volumes as part of international transactions. Certain sectors and countries are more susceptible than others. In several countries the extractives sector has been a major source of the problem and past research has pointed to a significant relationship between oil exports and illicit financial flows. One source cited in the report, from a 2011 paper by Boyce and Ndikumana, estimates that for every $1 in oil exports countries have, there is an illicit flow of between 11 and 26 cents. The worst affected countries in Sub-Saharan Africa are South Africa, the Democratic Republic of Congo, Ethiopia and Nigeria, which together account for 50 percent of the estimated $1.3 trillion. In the East Africa region Ethiopia is the top emitter of illicit flows, with $84,316 million emitted over the 38-year period under review. The figure represents 33.5 percent of total trade. However, Burundi and Rwanda are also among the high scores recorded when countries are ranked according to illicit flows as a percent of trade, emitting 26.7 percent and 21.5 percent respectively. The top destination for flows were identified as being China at $226,425 million, followed by the US at $129,460. The report notes a recent increase in the flow towards emerging and developing economies, particularly in the Middle East and Asia. The analysis provided by Brookings offers some hope that things could already be heading in the right direction, albeit very slowly. Illicit flows as a percent of GDP fell from 8 percent in 2012 to 5 percent in 2018, they also fell as a share of trade from 14 percent in 2008 to 11 percent in 2018. However, it is difficult to be sure that these figures represent a permanent shift. Finally, the report looks at what can be done both in terms of preventing future outflows and repatriating some of the missing $1.3 trillion. The answer lies in collaborative and cooperative efforts that cross borders; the strengthening of international initiatives and drives to track down and hone in on the destination of these flows. At the same time judicial capacity must be developed and expanded in order to support efforts to recover funds and prosecute those who are guilty of engineering their diversion.
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