Over 60 delegates comprising key stakeholders from East and Southern Africa are meeting in the Zambian capital, Lusaka, for two days from Monday to discuss the issue of illicit financial flows from Africa and its impact on the continent’s development.
Former South African President Thabo Mbeki will chair the high-level meeting that follows similar consultations held recently in Kenya, Tunisia, Liberia and Nigeria, according to the UN Economic Commission for Africa (ECA).
The High Level Panel on Illicit Financial Flows from Africa, established by the ECA and the African Union (AU), was inaugurated in February 2012 to address the debilitating problem of illicit financial outflows from Africa, estimated at US$50 billion a year.
The Panel is composed of nine other distinguished personalities from within and outside Africa.
“While illicit financial flows are a global problem, their impact on the continent is monumental thereby representing a significant threat to Africa’s governance and economic development,” the ECA said.
Illicit financial flows constitute, among others, undocumented commercial transactions and criminal activities characterised by over pricing, tax evasion and false declarations.
Such activities, the Commission pointed out, are facilitated by some 60 international tax havens and secrecy jurisdictions that enable creating and operating of millions of disguised corporations, shell companies, anonymous trust accounts, and fake charitable foundations.
Other techniques used include money laundering, transfer pricing and corruption.
Current evidence shows that Africa lost over US$854 billion in illicit financial flows between 1970 and 2008, corresponding to a yearly average of about US$22 billion.
The trend has been increasing over time and especially in the last decade, with an annual average illicit financial flow of US$50 billion between 2000 and 2008.
“However, these estimates may well be short of reality as they exclude such other forms of illicit financial flows as proceeds from smuggling and mispricing of services,” ECA said, noting that the level of illicit financial outflows from Africa exceeded the official development assistance to the continent, which stood at US$46.1 billion in 2012.
Some of the effects of illicit financial outflows are the draining of foreign exchange reserves, reduced tax collection, cancelling out of investment inflows and a worsening of poverty.
Such outflows also undermine the rule of law, stifle trade and worsen macroeconomic conditions.
“Preliminary evidence shows that taking prompt action to curtail illicit financial outflows from Africa will provide a major source of funds for development programmes on the continent in the near future,” ECA added in a statement on the meeting.