AFRICA is losing about $150 billion annually due to illegal financial flows through corruption, financial embezzlement and tax incentives to conglomerates.
Illicit financial flows refer to the movement of money out of the formal government channels. These are mainly in the form of corruption, tax evasion and illegal exploitation.
Speaking at a Financing Africa’s Structural Transformation Pan –African Conference, titled “Curbing illicit financial flows and mobilising domestic resources”, organised by African Forum and Network on debt and development (Afrodad) in Victoria Falls yesterday, Afrodad policy director Tafadzwa Chikumbu said Africa would not need any external financial aid if it curbs illicit financial flows.
Zimbabwe is one of the country that is also suffering from elicit financial flows. Diamond trade had been done clandestinely since its discovering in Marange in 2007. Former Finance minister Tendai Biti complained during the tenure of the inclusive government that diamond revenue was not reaching treasury.
Chikumbu said curbing of illicit financial flows would help debt-ridden Africa survive on internally mobilised resources so that governments take a leading role in social transformation.
Illicit financial flows affect, Chikumbu said, was affecting developing countries more and undermining African states in their effort to mobilise domestic resources and transform the lives of its citizens.
“Illicit financial flows undermines the role of the states in mobilising internal resources and therefor take a leading role in social transformation,” Chikumbu said.
He said most government would end up on relying on external sources of finance. This, he said, would weaken the country’s political institutions. He said most countries with high illicit finance inflows have high poverty levels.
Speaking at the same event, Briggs Bomba, Trust Africa, a foundation based in Senegal said: “Why are we so poor and yet the continent is very rich. We cannot underestimate the impact of illicit financial inflows. We end up mortgaging minerals resources and getting very expensive loans yet we can avoid it if we stop capital flight.”
Illustrating how illicit financial flows was affecting African countries, Bomba said Nigeria needs about $50 billion to fix its electricity challenges but have lost over $150 billion in the past 10 years to illicit financial inflows.
He said debate in Africa should seek to provide answers on why people are poor yet the continent is so rich.
Executive director of the Economic Justice Network, Malcolm Damon said due Africa was this situation because of debt. He said the Western powers have created a trap to Africa in the form of debt so that they would interfere with the continents’ sovereignty.
“These power games have created traps for us and are making it difficult for us. Because of dept., Africa is prescribed what it should be doing,” Damon said.
Delegates said Africa was being creamed of by powerful nations due when they offer tax incentives and tax holidays to attract foreign investment. They called for Africa governments to be more objective and ring fence its resources, particularly in the extractive industry which generates about US$3,5 trillion in global annual gross revenue.
Financial flows in the mining industry are rampant due to declared revenue. The industries are affected by bribes, undervalued royalties, corruption, tax evasion and financial embezzlement.
South African top investigative journalist who has written several books on corruption Khadija Sharife said Africa had a single largest story of corruption that was behind the illicit financial flows.
Afrodad board member, Obert Gutu, who is also MDC-T national spokesperson, said there was need for civil society to engage MPs so that countries would come up with laws that protect the continent’s resources.