Illicit financial flows in Africa: How big of a problem is it?

The issue of illicit financial flows in Africa continues to be a major concern, with statistics from the United Nations revealing that these illegal activities contribute to a staggering $88.6 billion of capital flight per year from the continent. However, some estimates suggest that the figure could be even higher, possibly reaching up to $100 billion annually. This massive outflow of funds poses a significant burden on African economies, especially in the context of post-COVID-19 recovery efforts. For more insights on this pressing issue, Alvin Mosioma, Executive Director of Tax Justice Network Africa, sheds light on the challenges and potential solutions. Mosioma emphasizes that the reported figures are just the tip of the iceberg, with the actual amounts likely to be even higher due to the opacity of the global financial system. He points out that reducing these illicit outflows is essential for bridging the financing gap faced by many African countries in achieving their sustainable development goals. The COVID-19 pandemic has further exacerbated the economic challenges in Africa, leading to increased debt distress levels as countries struggle to recover from the crisis. One of the key drivers of illicit financial flows is financial opacity, with many of the funds ending up in offshore accounts in rich countries, as revealed in events like the Pandora Papers and the Panama Papers. Mosioma highlights the urgent need for enhanced global financial integrity and transparency to curb this illicit activity. He underscores the importance of African countries exerting pressure on the international community to address the issue and prevent them from being complicit in facilitating these illegal flows. While acknowledging the need for internal reforms and accountability, Mosioma stresses that the onus also lies on developed countries to take responsibility and collaborate on effective solutions. One proposed measure is the global minimum tax, aimed at increasing transparency and combating tax evasion and avoidance. Despite some African countries expressing opposition to this initiative, Mosioma emphasizes the potential benefits of such reforms in capturing revenues from the growing digital economy in Africa. It is crucial for African leaders to push back against pressures and ensure that global efforts to address illicit financial flows are aligned with the interests of their countries and contribute to sustainable economic development. The battle against illicit financial flows in Africa requires a multi-faceted approach involving domestic reforms, international cooperation, and advocacy for fair and transparent financial systems.