The former South African President, Thabo Mbeki on Wednesday said the African continent lost about $50 billion through illegal financial outflow of funds from the continent.
Mbeki said this at a High Level meeting on “Tackling Illicit Financial Flows and Inequality in Africa”, on the sideline of the World Economic Forum (WEF) on Africa in Abuja.
According to him, the main channel through which money is being syphoned out of Africa, is through the commercial companies operating in the continent.
“Annually, the continent is thought to lose about $50 billion. This is about the same amount the continent receives in terms of annual foreign direct investments.
“While it is often assumed that these outflows are linked to practises such as bribery, corruption or money laundering, studies have shown that it is not criminal activities but tax evasion that is responsible.
“Commercial tax evasion most commonly takes the form of trade wrong pricing, which means a company manipulates the exports and imports to artificially depress profits and dodge tax,” he said.
Mbeki said that tax havens, trade pricing and miss-invoicing were other strategies through which the continent loses money.
“I have visited many African countries to see how this is being handled. Some of them already have institutions in place to tackle this.
“However, they are not doing a great job. There is no cooperation but only disconnect. So, it is necessary for legislation to be put in place to deal with these illicit financial outflows, while the global community is also important to solving this.
“This is why we have interacted with the U.S., the IMF and other organisations to see what they can do and what they are already doing to solve this problem,’’ he said.
Mbeki expressed hope that when all these foreign institutions worked together, along with governments of different states and civil societies on the continent, “it is possible to recover and stop these illegal outflows,”
Also speaking, Winnie Byanyima, the Executive Director, Oxfam International, a non-profit organisation, decried the level of poverty recorded on the continent, in spite of all its economic development.
“How can it be that only a few are rich despite the economic development in the continent. More than 80 per cent of its population is still leaving on less than one dollar a day, which is disheartening.
“I believe that when Africa’s growth translate to health and free social services for the poor, inclusive growth will be achieved,” she said.
Byanyima said that when Africa reduced its current level of raw material exportation to other continent, and focused on industrialisation, inequality would be reduced.
According to her, this will also translate to creation of more jobs for the youths on the continent.
Meanwhile, Guinea’s Minister of State for Mines and Geology, Kerfalla Yansane, said Africa needed to take proper account of its natural resources.
“Proper records on the mining of natural resources are not kept. There is also no knowledge of how most private companies are run, which has resulted in most of them having offshore accounts to cheat government of tax,” Yansane said.
Abdalla Hamdok, the Deputy Executive Secretary, UN Economic Commission for Africa said that the $50 billion alleged to be missing yearly from the continent was a conservative figure.
Hamdok said that the real amount missing was enough to increase Africa’s Gross Domestic Product by 16 per cent, increase its savings and address all its infrastructure problems.
The Chief Executive Officer, The Mara Group, Africa, Ashish Thakkar, talking on behalf of the private sectors, said responsible investors were needed on the continent.
“There is need for companies to stop influencing contracts and promoting corruption in Africa. They can do the right thing and do well,” he said.
The Executive Director, Tax Justice Network, Africa, Alvin Mosioma, said that the civil societies could only raise awareness on societal ills but that the political leaders on the continent held the key to its solution.