News / Economy

Illicit Cash Flows Hurting African Economies

FILE - A Somali man counts his money at a Dahabshiil money transfer office in
FILE - A Somali man counts his money at a Dahabshiil money transfer office in "Kilometer Five" street of Soobe village, southern Mogadishu, May 8, 2013.
Jennifer Lazuta
Researchers working with the African Development Bank say that African countries have lost as much as $1.4 trillion in cash leakages over the last 30 years.  Much of the lost money is a result of illicit cash flows and corruption, and continues to hinder development in the region.

The amount of illicit cash flowing out of Africa has nearly doubled over the past three decades.

Illicit cash flows refer to funds leaving a country through irregular means, often to skirt local taxes. This can range from a foreign business underreporting its earnings in an African country and then funneling revenue into offshore accounts, corrupt officials embezzling state funds and tucking them away overseas, or organized crime groups just carrying cash out in suitcases.

Experts from the African Development Bank and advocacy group Global Financial Integrity (GFI) say West and Central Africa have lost the greatest amount of money.  An estimated $494 billion left those two regions between 1980 and 2009 as illicit cash flows.

Ibrahim Aidara, the economic governance program manager for the Open Society Initiative of West Africa (OSIWA), says the amount of money flowing out of the continent both legally and illegally is now nearly equal to Africa’s current total gross domestic product (GDP).

"The amount flowing out in Africa is, according to the estimation, more than all the foreign direct investment we are getting from the outside and more than the African debt by about four times, and even more than all the official aid Africa is receiving from the rest of the world," he said.

Aidara said nearly all of the loss stems from corrupt practices, such as trade mispricing, money laundering and tax evasion. The most affected countries are the ones rich in natural resources, such as oil producers Nigeria and Angola, or diamond producer Zimbabwe.

The managing director of GFI, Tom Cardamone, said that such practices undercut African economies.

"Any time you take that kind of money out of economies, certain things don’t happen," he said. "Investment in plant equipment doesn’t happen, job creation doesn’t happen, the tax revenue you would have had from those activities doesn’t exist.  Governments don’t have money to put into social programs, [like] health, education, and clean water programs.  So many things don’t happen.  It’s the opportunity cost of the loss of that money."

Cardamone says multi-national corporations should be required to report the profits they earn in each country where they work, but existing laws vary and enforcement can be nonexistent.

"There’s a push to have governments begin to require country-by-country reporting by multinationals so that taxes are paid when they are supposed to, in the amount they are supposed to be, and where they are supposed to be paid.  This is critically important for developing countries because many times… it’s companies not paying their fair share basically and putting the burden on the individual tax payers," he said.

Cardamome says a global system is necessary to tackle the problem.  That system would include public registries to track tax information, company ownership and double tax avoidance agreements to give African countries the information they need to crack down on misbehaving companies.

He says such a system is possible, but acknowledges it will take extensive effort, time and cooperation before it can be put in place, and the leakage of cash from the African continent can be stopped.

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs

World Currencies

EUR
USD
0.9009
JPY
USD
123.09
GBP
USD
0.6387
CAD
USD
1.2524
INR
USD
63.605

Rates may not be current.