AFRICA: Profiling Cash Drains
The April edition of AfricaFocus Bulletin is carrying a summary of recent estimates by Global Financial Integrity of illicit financial outflows from that continent, with further analysis by James Boyce and Leonce Ndikumana in which they suggest that where . As the Editor's Note explains:"Estimates [for the period 1970-2008] show that over the 39-year period Africa lost an astonishing US$854 billion in cumulative capital flight--enough to not only wipe out the region's total external debt outstanding of around US$250 billion (at end-December, 2008) but potentially leave US$600 billion for poverty alleviation and economic growth. Instead, cumulative illicit flows from the continent increased from about US$57 billion in the decade of the 1970s to US$437 billion over the nine years 2000-2008." - report by Global Financial Integrity
These estimates based on available data, the report authors also note, are without doubt conservative underestimates. Adjusting for some of the known data flaws, they suggest the figure might be more than double, at $1.8 trillion. And even this larger figure, they note, does not include proceeds that are never recorded, such as from drug trafficking and smuggling.
Strikingly, the report argues that explicit corruption, such as bribes, account for only a small portion of capital flight. By far the largest component is, instead, generated by commercial tax evasion through trade misinvoicing.
This AfricaFocus Bulletin contains excerpts from the study "Illicit Financial Flows from Africa: Hidden Resource for Development." released by Global Financial Integrity on March 26. Also included is a short article by Leonce Ndikumana and James K. Boyce, authors of a 2008 report on the same subject. Ndikumana and Boyce argue that those who owe Africa's debt are actually those who have illegally transferred wealth overseas, and that African countries should identify debts as "odious" and refuse payment unless the creditors are able to prove that the loans were actually spent for the intended purpose instead of siphoned overseas.