Africa's "lift-off" held back by illicit finance drain - AfDB

Fri May 10, 2013 10:39am EDT

* AfDB says resource drain "holding back Africa's lift-off"

* Illicit transfers behind most of $1.4 trillion outflow

* Urges strengthening of tax, regulation, customs systems

By Pascal Fletcher

JOHANNESBURG, May 10 (Reuters) - Africa's economic development is being held back by a "hemorrhage" of illicit financial flows, which may be getting worse, the African Development Bank said on Friday, calling for reforms to stem the losses.

A draft report to be presented at the AfDB's annual meeting in Morocco later this month shows net resource outflows from Africa totalling up to $1.4 trillion over the 30-year period to 2009, far exceeding inflows to the continent.

Illicit financial flows were "the main driving force" behind $1.2-1.3 trillion of the three-decade net drain, it said.

This is about four times Africa's current external debt and almost equivalent to its current GDP.

"The trend is continuing, it could even be increasing," AfDB Chief Economist Mthuli Ncube said in a phone interview. Figures for the period since 2009 were not yet fully available.

"We need to block the leakage ... It is holding back Africa's lift-off," he added.

The report, by the AfDB and the Washington-based advocacy group Global Financial Integrity and made available to Reuters, called for anti-corruption agencies and laws, and mechanisms to combat money-laundering, to be reinforced and for government budget processes to be made more transparent.

The illicit outflows between 1980 and 2009 were often linked to the extraction of oil and minerals and covered criminal activities like money-laundering, tax evasion and transfers from corruption, kickbacks and contraband, the report said.

But they also included what the report called "mispricing of trade" - for example, opaque business deals negotiated with local authorities which flout or ignore existing legislation.

The study on illicit transfers comes as the world's least developed continent experiences an economic growth surge, outpacing global averages. The World Bank and IMF see Sub-Saharan Africa's GDP accelerating to over 5 percent in coming years, driven by investment and high commodity prices.

"This is the poorest region in the world and that is why we are shining a torch on this ... Africa needs these resources more than any other region," Ncube said, adding, "There is a lot to lose if nothing is done."

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (1)
I believe it is important that aid agencies diversify their aid programs and funding. Start up companies and venture capital firms would be able to capitalize more effectively on aid funding than any government in office. It is evident from economic theory that the life expectancy of a corporation is far longer than that of any government. Hence it make economic sense if one want to achieve long term economic development to seek to support private enterprises operating in developing countries instead of these countries different government departments. It is arguably the best option for job creation and sustainable development to establish what I would call aid-partnerships and joint ventures with corporations rather than government departments.

HSH Prince Leopold Donchield Zu Leone II, Sierra Leone

May 12, 2013 9:07pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.