Study: Endemic Corruption Costing Africa $89 Billion a Year

Africa is experiencing losses of nearly $89 billion a year because of "illicit financial flows" such as corruption and tax evasion, amounting to more than what it receives in foreign aid, a United Nations study found this week.
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Africa is experiencing losses of nearly $89 billion a year because of “illicit financial flows” such as corruption and tax evasion, amounting to more than what it receives in foreign aid, a United Nations study found this week.

The estimate was published within the United Nations Conference on Trade and Development’s (UNCTAD) Economic Development in Africa Report 2020. The 248-page report, which is the most comprehensive analysis ever of Africa, found that crime and corruption has worsened over the past decade.

A summary of the report explained:

Illicit financial flows (IFFs) are movements of money and assets across borders which are illegal in source, transfer or use, according to the report entitled “Tackling illicit financial flows for sustainable development in Africa.”

It shows that these outflows are nearly as much as the combined total annual inflows of official development assistance, valued at $48 billion, and yearly foreign direct investment, pegged at $54 billion, received by African countries – the average for 2013 to 2015.

“Illicit financial flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions,” noted UNCTAD Secretary-General Mukhisa Kituyi on the report’s release.

Between 2000 and 2015, Africa’s total illicit capital flight amounted to $836 billion, while its total external debt amounts to $770 billion in 2018, thus making the continent a “net creditor to the world,” the report stated.

Around half of the total annual loss of $88.6 billion is the result of commodity exports such as gold, diamonds, and platinum. In the year 2015, gold alone represented $40 billion, equivalent to 77 percent, of the continent’s total illicit exports.

High levels of IFF appear to be correlated with reduced spending on public services, spending an average of 25 percent less on healthcare and 58 percent less on education than countries with low IFF’s.

Over the past three years, Nigeria, Egypt, and South Africa have accounted for over 80 percent of the total annual IFF losses during that. Nigeria alone making up nearly 50 percent of losses, although President Muhammadu Buhari insists it is a transnational issue.

“Illicit financial flows are multidimensional and transnational in character,” he said on the report’s release. “Like the concept of migration, they have countries of origin and destination, and there are several transit locations. The whole process of mitigating illicit financial flows, therefore, cuts across several jurisdictions.”

The report argues that in a country such as Sierra Leone, which has an infant mortality rate of over 10 percent, cracking down on IFF’s could save the lives of an additional 2,322 of the 258,000 children born every year.

Another major aspect of IFF’s is tax evasion, with the continent reportedly losing around $9.6 billion annually to tax havens, equivalent to 2.5 percent of their total tax revenue.

“Solutions to the problem must involve international tax cooperation and anti-corruption measures,” the report’s summary noted. “The international community should devote more resources to tackle IFFs, including capacity-building for tax and customs authorities in developing countries.”

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