One bane of Africa’s Underdevelopment: Illicit financial outflows

GFI Infographic

GFI Infographic

Though the beneficiary of many development programs, sub-Saharan Africa still hosts some of the world’s poorest UNDP Human Development Indicies (HDIs). Qustion is why?

One answer may lie in the fact that Sub-Saharan Africa looses more than double what it gains through development assistance because of illicit financial outflows from the continent via multinational and trans-national entities. That’s the info to be gleaned from the GFI infographic.

The amount of money developing countries loose through transfer mispricing which is one form of tax avoidance that entails shifting profits to low-tax jurisdictions is in excess of US$550bn annually according to Kevin Watkins, Executive Director of ODI. This is five times more what is received in aid. It was estimated by the AU that 30 per cent of sub-Saharan Africa’s annual GDP is siphoned to tax havens. Between 1970 and 2008 the continent lost US$1.8 trillion through illicit outflows according to Global Financial Integrity report.

The G8 and G20 have it in their power to stop this massive injustice but time and again they have not shown the political will to do so. Why? Because many of them are themselves homes to the flourishing tax haven industry plus some of their current leaders have their political campaigns sponsored by big business using such dubious funds.

How much longer can the globe stand by and watch this injustice take place? It is true that illicit outflows occur in almost all nations on earth but truth is developing nations such as are found in Africa feel its bite the most because they are bled of the very little capital they could have had to make ends meet. It’s easy to point fingers at petty corruption by petty politicians in Africa but it can be argued that the type of corruption being discussed here has done way more harm to Africa and most developing regions than any petty corruption ever has.

Having been bled of such colossal sums of capital, is it any wonder that development aid alone has not been able to make a dent in the drive to spur development on the African continent? The globe must rectify this injustice.

As Jeffery Sachs put it, it’s about “stopping the abuse itself by letting very-very rich people from the US or Europe or mega companies like Apple or Google take their profits, and instead of paying the taxes that they should pay as decent citizens, put them tax free into these tax havens with the approval of the politicians of course, who use this to pay campaign contributions.”