Where is the money?


IN a world where there is agreement on what good governance, drug trafficking and pornography is…why is there confusion on what constitutes Illicit Financial Flows (IFFs)?
The whole discussion around IFFs remains one of two worlds, where on one side are the victims of huge sums of money being illegally taken out from their countries, and on the other, those that benefit from this scheme.


The problem of IFFs is one that many ignored, and some still do, even after a damning report was released by a team headed by former South African President Thabo Mbeki.
The report indicates that Africa losses in excess of US$50 billion annually through various schemes designed to deprive the various countries of their rightful share of the benefits from their resources.
It is said in some quarters however, that this problem is not as serious as some circles have made it out to be.


Others yet still insist that it is because this is a serious problem, especially Africa, those that thrive on this vice are now more than ever attempting to blind Africa into ignoring the issue as trivia and irrelevant to the African development agenda.
However, experts and governments alike, are waking up to this reality now that the problem is real and deeply entrenched to a level where drastic steps need to be taken to ensure no more billions of money are lost every year.


Understanding IFFs
Illicit financial flows can be defined as money illegally earned, transferred or used.
This money has various sources and generally we can trace the origins from a number of areas.
Some of them are laundering proceeds of crime, Abuse of power, market/regulatory abuse and tax abuse.
Dereje Alemayehu, Chairperson of the Global Alliance for Tax Justice and senior economic policy advisor of Tax Justice Network Africa (TJNA) notes three IFFs fallacies that have mostly been raised by those seeking to put a lid on the growing awareness on their significance.


In his presentation at the 2015 International Tax Justice Academy in Machakos County in Kenya recently, he pointed out that one such fallacy is that IFFs are not significant and are confined only to resource rich countries like Sudan, Angola and Nigeria.
Another is that there is no universal agreement on key concepts such as IFF, invoicing, transfer pricing, etc.


Finally that Foreign Direct Investment (FDI) comes with some IFFs.
However, IFFs are significant and there are several facts to prove this.
Apart from Africa’s estimated loss of more than $50 billion annually in IFFs, they are a huge drain on Africa’s resources and of serious concern given, the inadequate economic growth of five per cent on average annually.



The high levels of poverty – number of people living on less than $1.25 a day increased from 290 million in 1990 to 414 million people in 2010.
The significance also makes realistic sense given that Africa’s resources are best utilized by the growing number of unemployed youths.



Changing global landscape of Official Development Assistance (ODA) resources are stagnating due to domestic fiscal challenges of partners and as such the rising demand for developing countries to harness their own resources for development.
During the tax academy, that drew participation from various civil society organisations, media and tax justice experts, the gathering was in agreement that there was significant reason for organisations and countries to be concerned with the amounts of money leaving countries illegally, which would otherwise have gone towards development.



Unlike the notion by certain quarters, the IFFs problem is not for only three countries but for the entire African continent and beyond.
In terms of regions, West Africa suffers the greatest losses at 38 per cent, North Africa at 28 per cent, Southern Africa at 13 per cent, Eastern at 11 per cent and Central Africa at 10 per cent.
More specifically, Nigeria has suffered the most losses cumulatively from 1970 to 2008 with a staggering figure of $217.7 billion, followed by Egypt with $105.2 billion and South Africa at $81.8 billion.
Other countries on the top ten list are Morocco on $33.9 billion, Angola $29.5 billion, Algeria $26.1 billion, Ivory Coast $21.6 billion and Sudan $16.6 billion.
The rest are Ethiopia at $16.5 billion and Democratic Republic of Congo at $16.2 billion.
Zambia, though not among the top ten countries in terms of IFFs, still has its own challenges with many investors reportedly engaged in tax avoidance through under declaration of production and sales figures to their benefit.
According to a latest study by the TJNA on Zambia’s double tax agreements, there is much more that the country can and in some instances already doing to ensure that these agreements do not disadvantage the country in eliciting maximum revenue.
So how then should the continent act to cut down on continued illegal outflow of resources?
United Nations Economic Commission for Africa (UNECA)’s regional integration and infrastructure cluster capacity development division senior advisor Adeyinka Adeyemi simply put it: ‘Stop stealing Africa’s money’.
Mr Adeyemi further echoes the campaign slogan, ‘Track it, Stop it, Get it’, as further action to ensure that countries get back even what has already been lost.
Ultimately, there is need to continually unpack or clarify the fallacies and ensuring that everyone is aware of the importance to fight IFFs.
At the Third International Conference on Financing for Development of heads of State in Addis Ababa in July, the leaders committed to redoubling efforts to substantially reduce IFFs by 2030, with a view to eventually eliminating them.
This is all well and good, but by the time 2030 comes along, Africa would have lost a further $1 trillion through IFF if no immediate action is taken.
This then calls for immediate and decisive action that will begin to stump out the vice and ensure that the much needed resource remains in Africa and is utilised to develop various sector of the economy.
In more commercial aspects of IFFs such as Trade Mispricing, African countries should ensure they have clear and concise laws against mis-stating the price, quantity, quality or other aspect of trade in goods and services in order to move capital to another jurisdiction or avoid taxation.
African countries should establish or strengthen transfer pricing units of their countries of operation to halt Transfer Pricing. States should establish arrangements for exchange of tax information between them as well as with global partners to curb Base Erosion and Profit Shifting.
Dr Alemayehu also insists that training and empowerment of investigators responsible for identifying the criminals engaged in illicit (criminal) activities by African governments is critical.
Each African country’s financial intelligence unit should share information with other African financial intelligence units.
Request that the United Nations Office on Drugs and Crime (UNODC) extend its work on transnational organised crime in West and Central Africa to the rest of the continent must be pursued vigorously.
Instead of African countries spending so much time lobbying for development assistance from western countries and Asia, it seems much more effort should be spent on ensuring resources are not stolen from Africa.
As Mr Adeyemi put it it, Africa loses more money through IFFs than it receives in development assistance.
So it’s quite simple, Stop stealing our money!!