Companies and government officials are illegally moving up to US$60bn out of Africa each year, a figure that has tripled since 2001 according to a newly-issued report.
The study, released by a joint panel of the United Nations economic commission for Africa (Uneca) and the African Union (AU) led by former South African president Thabo Mbeki, outlines various fraudulent schemes employed by multinational corporations (MNCs) to avoid tax. The resulting loss of revenue means lost development opportunities and reduced economic growth.
The report estimates that Africa lost about US$850bn to fraud and illegal schemes between 1970 and 2008. An estimated US$217.7bn was illegally transferred out of Nigeria over the period, while Egypt lost US$105.2bn and South Africa at least US$81.8bn.
“Illicit financial flows from Africa range from at least US$30bn to US$60bn a year,” the report states. “These lower-end figures indicated to us that in reality Africa is a net creditor to the world rather than a net debtor, as is often assumed.”
A regional breakdown showed that many of the continent’s illicit transfers originated from west Africa, where 38% of all outgoing funds leaving were generated. Profit-making activities in north Africa accounted for 28% of the flows, while southern Africa, central Africa and eastern Africa each made up about 10%.
“We are talking about large volumes of capital that could play a great role in addressing Africa’s development challenges,” Mbeki said in an interview.
He added that he was unable to name individual companies that were guilty; however “the information available to us has convinced our panel that large commercial corporations are by far the biggest culprits of illicit outflows, followed by organised crime. We are also convinced that corrupt practices in Africa are facilitating these outflows, apart from and in addition to the related problem of weak governance capacity.”
The study cited trade mispricing, payments between parent companies and their subsidiaries, and profit-shifting mechanisms designed to hide revenues as among the commonly-used practices by companies aiming to maximise profits
Rising interest rates, excitement around blockchain use cases and cross-border payments were all hot topics at this year's AFP conference in San Deigo.
The US dollar and debt yields falling on the North Korea missile test, treasury being a top target for cyber criminals and why treasurers aren't into real-time payments all hit the latest headlines in the world of treasury this week. Don't miss our ten top news stories from around the world.
Treasurers are being expected to do more work with fewer resources than ever before, so it is little wonder that the automation of day-to-day operations was highly discussed on the second day of EuroFinance, the annual treasury event held in Barcelona this week.
Chicago based Treasury Management System (TMS) vendor GTreasury and Sydney based risk and treasury management vendor Visual Risk have joined forces in a strategic alliance to ... read more