Some civil society groups in and outside Africa have hailed the presentation of the Thabo Mbeki High Level Panel report on Illicit Financial Flows from Africa.
The groups said while they welcomed the African Union’s, AU, focus on the menace of illicit financial flows, African leaders must move quickly to implement the recommendations in the report, particularly on the growing threat to their economies.
The report was presented on Saturday at the ongoing summit of the AU leaders holding in Addis Ababa to discuss growing threats from extremist groups, instability, and poverty.
The panel was constituted at the 4th Joint African Union Commission/United Nations Economic, AUC/ECA, Conference of African Ministers of Finance, Planning and Economic Development in 2011 to review the underlying issues that stalled Africa’s accelerated and sustained development objectives.
The decision was informed by the concern that most African countries faced the threat of failure to meet the Millennium Development Goals, MDGs, before the 2015 deadline.
The report looked at the dire consequences of illicit financial outflows from Africa, estimated at $50 billion per year, according to Global Financial Integrity, GFI, and the African Development Bank.
The report, which contained about 15 findings, noted that illicit financial flows from Africa were huge and increasing, particularly on the merchandise trade sector, which increased from about $20billion in 2001 to $60billion in 2010.
The findings and recommendations of the panel would be reviewed by the AU Heads of State and Government after a formal presentation on Sunday.
In his reaction to the presentation of the report, Savior Mwambwa, Policy and Advocacy Manager for the Tax Justice Network-Africa noted: “The fact that our leaders are devoting a portion of their very full session to illicit financial flows underlines just how serious this issue is.
“Illicit financial flows are not only an extreme hindrance to Africa’s development, they are growing rapidly every year.”
A new study from GFI has noted that illicit financial flows were growing at an average rate of 9.4 per cent per annum, with sub-Saharan Africa alone accounting for about 5.5 per cent of the region’s total gross domestic product.
Tigere Chagutah of Oxfam said, “The AU High Level Panel report will add African regional details to the global problem of illicit financial flows, and how best to fix it.”
Mr. Chagutah urged the AU leaders to move quickly to adopt the recommendations contained in the report, to reap the benefits of new-found tax revenue that could address poverty and economic stagnation.
Henry Malumo of Action Aid International noted that it was important to note that illicit financial flows were not just an African problem, as much of the money that leave the continent illegally via corporate tax evasion or corruption end up in banks in Europe and the United States.
“It’s vital that global accounting and tax enforcement policies being established by the G20 and other international bodies fully encompass the needs and context of Africa,” he said.
In its reaction, ActionAid Nigeria commended the adoption of the report, saying, “This will open the door for sustainable and increased funding for better education, gender responsive public services, agriculture services, health care and all other progressive services that people of Africa have right, human right for.”
In a statement, Henry Malumo, who is the Africa Advocacy Coordinator, ActionAid, said, “This is the culmination of public pressure and the perseverance of the Mbeki panel. African leaders are sending a clear signal that they plan to clamp down on the loss of more than $50billion per year from Africa.
“Africa’s leaders must now ensure that the recommendations are promptly implemented to stem the flight of cash and that the money is spent for the benefit of all its people.
“Multinational companies are identified as the biggest culprits largely through tax dodging. These companies are depriving Africa of vitally needed funds to pay for schools and hospitals, and are undermining the continent’s ability to reduce poverty and increase growth.”
The Country Director, ActionAid Nigeria, Hussaini Abdu, noted: “Following the adoption of this report, African leaders and governments need to put in place mechanism for implementation of the recommendation of the panel.
“There is an urgent need to prioritise a common system on the continent to track, stop and repatriate illicit financial outflows from Africa,” Mr. Abdu said, pointing out that “some of these priorities should include investment in training lawyers, accountants and tax experts to carry out the oversight functions to prevent or punish perpetrators of illicit financial outflows.
“Creation of relevant agencies, such as revenue authorities, transfer pricing units, customs services, anti-corruption agencies, financial intelligence units and, setting up of mechanisms for viable inter-governmental agencies and information sharing on corporates, financial transactions, digital economy and funds transfer by multinational companies.”
The adoption of the report on illicit financial flows is coming at a time when Africa is looking for sustainable ways to fund development, including the implementation of the Sustainable Development Goals to be approved by the United Nations in September.
Curbing the menace of illicit financial flows could jumpstart the ability of African nations to recoup tax revenue, and enable governments to better fund programmes of sustainable development.