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Illicit cash flow from Africa near $100b

By People Daily
Wednesday, September 30th, 2020
Mukhisa Kituyi, of Kenya, became UNCTAD’s seventh Secretary-General. After serving an initial four-year term, he was reappointed by the General Assembly in July 2017. Photo/UN
In summary

Geneva, Tuesday

Africa has lost nearly $89 billion a year in illicit financial flows such as tax evasion and theft, amounting to more than it receives in development aid, a United Nations study has showed.

The estimate, in the United Nations Conference on Trade and Development’s (UNCTAD) 248-page report, is its most comprehensive to date for Africa. It shows an increasing trend over time and is higher than most previous estimates.

The report released on Monday calls Africa a “net creditor to the world”, echoing economists’ observations that the aid-reliant continent is actually a net exporter of capital because of these trends.

“Illicit financial flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions,” said UNCTAD Secretary-General Mukhisa Kituyi.

Junior Davis, head of policy and research at UNCTAD’s Africa division, told the Reuters news agency the figure was likely an underestimate, citing data limitations.

Nearly half of the total annual figure of $88.6 billion is accounted for by the export of commodities such as gold, diamonds and platinum, the report said. For example, gold accounted for 77 percent of the total under-invoiced exports worth $40 billion in 2015, it showed.

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Understating a commodity’s true value helps conceal trade profits abroad and deprives developing countries of foreign exchange and erodes their tax base, UNCTAD said.

Tackling illicit flows is a priority for the UN, whose General Assembly adopted a resolution on this in 2018, and the report urges African countries to draw on the report to present “renewed arguments” in international forums.

The largest component of illicit capital flights from Africa, totaling $40 billion in 2015, was related to “extractive commodities” — more than three-fourths of it in gold alone, followed by diamonds and platinum, UNCTAD said. It cautioned the data was incomplete and such figures were likely an underestimate of the true tally.

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Illegal capital outflows from three countries — Nigeria, Egypt and South Africa — accounted for more than four-fifths of the total annually during that three-year span, with Nigeria alone making up nearly half of that, according to UNCTAD calculations. 

Cracking down on such illegal outflows could help African countries retain capital for investment in roads, railways, schools, and healthcare, the agency said. 

UNCTAD said African countries generally aren’t doing enough to reform the international tax system in ways that could help, and said local judicial authorities often lack proper tools to combat tax evasion.

The report cautions that although the amounts of the illegal flows are large, the figures could underestimate the problem and its impact.

The report notes that the loss undermines African government’s ability to provide services like healthcare, education, and infrastructure. - Agencies

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