Last year, we launched the Trillion Dollar Scandal campaign – highlighting how corruption, money laundering and illegal tax evasion are costing developing countries massive amounts of money that could be invested in health, education and lifesaving interventions. So we were delighted that the Heads of Government at the African Union endorsed a report on illicit financial flows in Africa; a report drafted by eminent African’s and, chaired by former South African President Mr Thabo Mbeki.
The High Level Panel report highlights how illicit financial flows are a major driver in Africa’s failure to turn economic growth into human development; the fuel behind unending conflicts in the region financed by money coming for illicit dealings. So while African countries have registered an average growth rate of 5%, yet they currently are a net creditor to the rest of the world and heavily dependent on aid. In fact, Africa loses an estimated amount of US$ 50 billion annually to illicit financial flows; a figure which could well be an underestimate given that the majority illicit dealings are done in secret and leave no paper trail.
The High Level Panel came up with several recommendations which seek to reduce the illicit financial flows many of which were highlighted in ONE’s Trillion Dollar Scandal report:
- African countries should adopt a normative instrument in the form of a declaration to commit to ending and combating illicit financial flows;
- African countries need to have clear and concise laws and regulations to make it illegal to intentionally misprice good and services;
- Multinational companies operating in Africa should be requested by law to provide transfer pricing units of their countries of operation with a comprehensive report showing their disaggregated financial reporting on a country-by-country or subsidiary-by-subsidiary basis;
- African countries should establish an automatic exchange of tax information between themselves as well as with global partners;
- Multinational companies and trusts operating in Africa should be requested by contracts to disclose partnership owners and controls as well as benefactors;
- African countries need to review their current status on double taxation;
- There is a need for African governments to establish and strengthen the independent institutions and agencies of government responsible for preventing illicit financial flows;
- Exchange of information on financial crimes need to take place between African financial intelligence units.
What does this mean for African citizens?
Poverty, hunger and starvation remain the biggest problems facing Africa today with the number of people living on less than US$1.25 per day in estimated to have increased from 290 million in 1990 to 414 million in 2010, with limited access to education, health facilities, water and sanitation as well as basic services.
The report was launched at a time when Africa and the world are negotiating for a new development agenda- with both new Sustainable Development Goals and Financing for Development being agreed in 2015. This call for the world to address illicit outflows through transparency measures is a welcome one. In the coming months, we will be pushing leaders across the world to ensure transparent financing and cracking down on corruption is a critical part of any new agreement on development.
Addressing this challenge could change the fortunes of the continent and eradicate poverty and hunger solely on domestic resources.