Illicit Financial Flows and the development agenda in Africa

The African continent is at a critical stage in its developmental agenda – the fast rising entrepreneurial and middle class, the youth bulge, and rapid globalisation means that the continent is ready for unprecedented growth and technological progress in the coming years. In fact, the African Union’s ‘Agenda 2063’ calls on all stakeholders in Africa’s development to remain focused and committed to the ideals and goals of a prosperous, inclusive continent in the next half century because it believes that most African economies now have in place sound macro-economic and market-oriented economies which have spurred growth, trade and investment expansion.

However, it has become increasingly apparent that the illicit flow of much needed finances out of the continent, which by some estimates is as much as USD50 billion year on year, is taking its toll on our economies. Money that could be used towards socio-economic development is being lost to a variety of factors that need to be stopped.
Some methods of illicit financial outflows are facilitated by around 60 international tax havens and secrecy jurisdictions that are enabling the creation and operation of millions of disguised corporations, shell companies, anonymous trust accounts, and fake charitable foundations.

At the recent United Nations Economic Commission for Africa (UNECA) workshop held in Nairobi, participants agreed that the work done to stem these IFFs must include addressing tax avoidance. This is not always included in the definition of IFFS by our partners outside of Africa, but we are determined to tackle this as it’s a great source of loss for the continent, especially through transfer pricing practices.

This workshop follows on from the endorsement of the High Level Panel (HLP) Report on IFFs from Africa and the passing of a special declaration by the African Union Heads of States at the 24th African Union Summit in January 2015, and it was important that the next steps to be taken in stemming illicit outflows from the continent were decisive.

Participants agreed that the work to fight IFFs from the continent must be driven by Africans and African priorities. This is very much in line with the central vision of the African Capacity Development Foundation (ACBF), which is an Africa capable of achieving its own development.

The ACBF was established by African Governments and their development partners to help build sustainable human and institutional capacity for good governance and development management. Building the capacity of financial intelligence units and other financial institutions across the continent and strengthening their collaboration with anti-corruption agencies and complementary institutions and partners will be critical to stemming these IFFs.

Our CEO, Professor Emmanuel Nnadozie, is confident that we will be able to win this fight. Our aim is stop the bleeding. “In order to stop the bleeding you have to understand the problem. So we (ACBF) are going to build human capacity and we are going to strengthen institutions in order to achieve our goals,” he said on the sidelines at the inaugural meeting of the Consortium to Stem Illicit Financial Flows from Africa in Johannesburg earlier this year. The Consortium is headed by former South African President, Thabo Mbeki.

At the ACBF, we believe that capacity is central to the development process in Africa. There is a critical role of partnership and demand driven approaches in addressing capacity problems on the continent. African ownership and leadership is essential in the capacity building process, which is why we believe strongly in the outcomes of the workshop on Nairobi.

There is much work to be done, and we have a busy timeline which includes the establishment of an IFF Unit, which is expected to evolve into an African Financial Transparency Centre.We at the ACBF have supported capacity development on the continent through such investments for the last 25 years.
We fully believe that building capacity for the implementation of policies such as those relating to IFFs will translate them into demonstrable value for the continent, and create wealth and economic independence for all.

– About the African Capacity Building Foundation –

Established in 1991, ACBF builds human and institutional capacity for good governance andeconomic development in Africa. To date the Foundation has empowered people and institutions in governments,parliaments, civil society, private sector and higher education institutions in more than 45 countriesand 6 regional economic communities. ACBF supports capacity development with grants, technicalassistance and knowledge across Africa.

The establishment of ACBF was in response to the severity of Africa’s capacity needs, and thechallenges of investing in indigenous human capital and institutions in Africa. ACBF interventions arepremised on four principles: the centrality of capacity to the development process in Africa; thecritical role of a partnership and demand driven approach in tackling capacity challenges; Africanownership and leadership in the capacity development process; and a systematic, sequenced andcoordinated approach to the capacity development process.

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Illicit Financial Flows (IFFs) out of Africa are costing the continent up to USD50 billion annually, with devastating consequences that only us as Africans can fix, says Dr Roger Atindehou, Manager for Eastern and Southern Africa Operations Department at the African Capacity Building Foundation.

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