15 April 2010 | Helen Gilbert
Illicit spending has cost African countries a staggering US$854 billion and could top $1.8 trillion, a report has revealed.
Illicit Financial Flows from Africa: Hidden Resource for Development also calls on richer nations to improve the scrutiny of global banks and offshore financial centres to help plug the leaks.
Global Financial Integrity, part of the Center for International Policy, examined data over a 39-year period and found illegal spending has drained billions of dollars out of the continent. Tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing and money laundering were all behind the “massive flow” of illicit money, the study found. Nigeria fared the worst, at $89.5 billion, followed by Egypt ($70.5 billion), Algeria ($25.7 billion), Morocco ($25 billion) and South Africa ($24.9 billion).
But, the report warns, the figure may be as high as $1.8 trillion, as the findings do not include money generated from smuggling, narcotics and contraband, human trafficking, the sex trade and other illegal activities.
The researchers compared their findings with a similar analysis carried out in 2008 (see bar chart). Despite a difference in sample and data issues, it found that 15 of the top 20 countries with cumulative illicit spending were the same as identified in their study.
These were: Angola, South Africa, Cameroon, Republic of Congo, Ivory Coast, Ethiopia, Gabon, Ghana, Madagascar, Mozambique, Nigeria, Sudan, Tanzania, Zambia and Zimbabwe.
Raymond Baker, director of Global Financial Integrity, described the impact on Africa as staggering. “It drains hard currency reserves, heightens inflation, reduces tax collection, cancels investment and undermines free trade,” he wrote.
“It has its greatest impact on those at the bottom of the income scales in their countries, removing resources that could otherwise be used for poverty alleviation and economic growth.”
He called for the issue to be top of the G20 agenda in Canada in June.
“Transparency in the global financial system would curtail outflow by making it harder for money to disappear once it exits the country,” he added.