Econostrum | Economic News in the Mediterranean

According to UNCTAD, the fight against financial flows in Africa could save $89 billion a year

Written by Frédéric Dubessy on Tuesday, September 29th 2020 à 17:13 | Read 318 times

Illegal financial flows undermine development on the African continent (photo: World Bank/Dominic Chavez)
Illegal financial flows undermine development on the African continent (photo: World Bank/Dominic Chavez)
AFRICA. According to the UNCTAD (United Nations Conference on Trade and Development) 2020 report on development in Africa, the fight against capital flight and illicit financial flows (FFI) in the continent could generate new funds to respond to the Covid-19 crisis. But also strengthen the future resilience of African economies.

Released on Monday 28 September 2020, the document estimates that African countries will need to raise at least $200bn (€171bn) to meet the economic and social costs of the pandemic, in addition to emergency health spending. However, $88.6 billion (€75.9 billion) per year would leave the African continent in the form of illicit capital flight (wealth sent and held abroad), including $40 billion (€34.2 billion) linked to the export of extractive products. A sum equivalent to 3.7% of Africa's Gross Domestic Product (GDP). $88.6bn is also, more or less, the sum of $48bn (€41.1bn) of total annual official development assistance inflows and $54bn (€46.2bn) of annual foreign direct investment (FDI) received by African countries (average for the period 2013-2015).

From 2000 to 2015, total FFI reached $836 bn. This is close to the $770 bn (€659.6 bn) of Africa's total external debt stock in 2018.


9.6bn lost to tax havens

"These illicit financial flows include capital flight, illicit tax and trade practices such as the misbilling of commercial shipments and criminal activities such as illegal markets, corruption or theft," the report says. According to Mukhisa Kituyi, Secretary-General of UNCTAD, they "deprive Africa and its people of their opportunities, undermining transparency and accountability and eroding confidence in African institutions".

The paper also notes that in African countries where FFIs are high, governments spend 25% less on health and 58% less on education than in countries where they are low.

Africa is estimated to have lost $9.6bn (€8.2bn) to tax havens, or 2.5% of total tax revenues.

"Solutions to the problem must include international tax cooperation and anti-corruption measures. The international community should devote more resources to the fight against FFIs, including by strengthening the capacity of tax and customs authorities in developing countries," the report concludes.

Read the full report

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