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Africa loses $50bn yearly to illegal financial outflow

08 May 2014, 20:16

Abuja - Former South African President, Thabo Mbeki has 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.

“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’’.

-   NAN

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