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Africa Day 2017: Civil society calls for greater efforts in stemming illicit financial flows

54 years later, the continent has little to show by way of poverty eradication and economic progress

NAIROBI, 25 May 2017- As the world marks Africa Day, civil society organisations across the continent are calling for the adoption of more stringent measures to seal tax loopholes which facilitate illicit financial flows (IFFs). A recent report by the Global Financial Integrity (GFI) puts the amount of money lost by developing countries through IFFS at between USD2 and 3.5 trillion. These losses occurred between 2005 and 2014, with losses growing at an average annual rate of 9.3%.

These losses have mainly been attributed to trade misinvoicing and leakages in the balance of payments. Of the two, misinvoicing has been identified as the primary means through which funds, which would otherwise have been used to drive programmes aimed at sustainable development, were siphoned out of the continent. These capital outflows have been pointed out as having a corrosive impact on efforts to drive economic development and eradicate poverty particularly in the Global South.

While the issue of IFFs has been recognised as a global challenge, civil society reiterates that there is a lot that African governments can do to rein this problem. Speaking on the side-lines of the ECOSOC Forum on Financing for Development, Tax Justice Network Africa’s Deputy Executive Director Jason Braganza underscored these sentiments. “Illicit financial flows can’t be viewed as a developing-country problem. That said though, those countries, particularly African ones, have a big role to play in dealing with this issue,” he said. The meeting which ends today, brings together a mix of ministers, civil society, and high-level officials of various intergovernmental bodies in a follow-up to the 2015 Addis Ababa conference on Financing for Development. The Addis Ababa Action Agenda of the Third Financing for Development Conference highlighted the need to combat corruption and illicit financial flows as part of the global framework to finance development post-2015. The Agenda also indicated 2030 as the year by which IFFs should have ‘substantially reduced’ globally, with a mind to eliminate them altogether.

The 25th of May 2017 marks 54 years since African states came together to form the Organisation of African Unity (OAU), now known as African Union (AU). Over the years the Union has been at the forefront of various regional development initiatives, most notably in the setting out of Africa’s development blueprint, Agenda 2063, and the High Level Panel Report on Illicit Financial Flows from Africa on which it worked with the United Nations Economic Commission for Africa (UNECA). The report which was published in 2015 has formed the basis of many regional and national level efforts aimed at creating awareness about and combatting the IFFs menace.  It outlines a set of 15 recommendations that African governments should adopt to curb the illegal flow of capital from their economies.

With the bulk of capital outflows stemming from commercial activities, the report advocates for the enactment of clear and concise laws that make it illegal to shift of profits from one jurisdiction to another or misquote prices, quantities or quality of goods. The Thabo Mbeki-led Panel also calls for transparency of information on company ownership and nature of operations across borders as well as automatic exchange of information. While some countries have indicated a willingness to implement the recommendations concrete commitments are still hard to come by. For instance, of the 54 African states, only nine have ratified the OECD’s Convention on Mutual Administrative Assistance in Tax Matters.

As the continent takes stock of how far it’s come in the past decade, it is important that we move from mere statements to tangible actions that transform the lives of the ordinary African for the better,” said Alvin Mosioma, TJNA’s Executive Director.

For inquiries, contact:

Michelle Mbuthia

mmbuthia@taxjusticeafrica.net

25/05/2017

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  • Khanyisile Litchfield-Tshabala

    Thanks Michelle for the update and summary! If the bulk of IFFs is through trade misinvoicing, does it mean that we lack capacity to monitor trade transactions within our borders as a continent? Or is the problem, structural? Lack of laws or implementation of the laws?
    Your thought please.

About TJNA

The Tax Justice Network-Africa (TJN-A) is a Pan-African initiative and a member of the Global Alliance for Tax Justice. Launched in January 2007 during the World Social Forum (WSF) held in Nairobi, TJN-A promotes socially- just, accountable and progressive taxation systems in Africa. It advocates for tax policies with pro-poor outcomes and tax systems that curb public resource leakages and enhance domestic resource mobilisation.

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