Today, former South African President Thabo Mbeki will present upsetting statistics before the Pan-African Parliament in South Africa indicating that the continent currently loses US$50 billion annually through tax avoidance and fraud.
Mbeki is the current chairperson of the High Level Panel (HLP) on Illicit Financial Flows from Africa, a set-up of high profile personalities that was established to explore the problem and find solution on how African governments can surmount the challenge.
At the centre of this resource draining machinery, Mbeki’s panel found, are multi-national organisations that African governments are keen on attracting to boost their Foreign Direct Investment (FDI) portfolio and reportedly better their people’s lives.
But apparently, multinational investors seem to be handing the continent the dirty end of the stick, avoiding taxes, repatriating resources and leaving millions still in poverty with investments unable to result in tangible benefits.
“The estimate that we have is something like 60 per cent of the outflows originating from the activities of large commercial companies that operate from Africa,” Mbeki told South African press.
Apparently, in the past three decades, according to the report, such activities have cost Africa an estimated $1.4 trillion in illicit financial outflows which is about $50 billion to $80billion yearly.
The report, which was commissioned by African governments under the auspices of the African Union Commission (AUC) and the United Nations Economic commission for Africa (UNECA), also named other factors responsible for huge sums of illicit outflows.
These include money-laundering proceeds, power and market abuse with a considerable portion emanating from tax fraud from commercial and criminal activities as well as corruption.
Previously, it was thought that corruption was the leading cause of illicit financial out flow of the continent where the thinking was that corrupt public officials hide their stolen wealth abroad, in countries far from home to avoid being detected.
But today, Mbeki’s report will reveal to the pan-African parliament that there are other areas that African governments should keep a wary eye on.
EAC on alert
This is a continental challenge and as Mbeki presents the HLP report in South Africa, a two-day conference on the same subject organised by the East Africa Tax and Governance Network (EATGN) will be opening in Nairobi, Kenya.
The conference will bring together experts and activists who will discuss how the East African governments can implement the recommendations of the Mbeki report to address the challenge of illicit financial outflows.
EATGN is a member of the Tax Justice Network-Africa (TJN-A), a Pan-African research and advocacy initiative established in 2007 and a member of the Global Alliance for Tax Justice with a network of 29 members in 16 African countries.
According to the report, the East African region only accounts for 11 per cent of the rogue financial outflows, with West Africa and North Africa taking the lead, at 38 and 28 per cent, respectively. Southern Africa and Central Africa account for 13 and 10 per cent, respectively.
Global economy commentators say that Africa is currently raising but the billions of dollars that the continent is losing could, halt that rise, if not stopped.
Experts say there’s a good reason to be worried because the amount of outflows of revenue from Africa are higher than the amounts received by the continent, annually in development aid and much greater than amounts raised annually by most African governments in taxes.
That, for instance, leaves the continent’s protracted war against poverty at stake, as the report notes.
“Considering the rapid population growth of the past two decades resulting in the largest youth population in the world, and that in 2010 about 414 million people compared to 290 million in 1990, lived on less than $1.25 a day, these IFFs are a huge drain and a hindrance in addressing the developmental needs of the African people.”