₦airaland Forum

By
Patrick McGroarty

JOHANNESBURG—Companies and government officials are illegally moving as much as $60 billion out of Africa each year, according to a report released Sunday, depriving the world’s poorest continent of capital and tax revenue that could spur faster economic growth.

A joint panel run by the United Nations and the African Union and led by former South African President Thabo Mbeki released a report describing the methods some companies use to send money out of the continent illicitly. The losses are staggering not only in terms of dollars but development opportunities lost, Mr. Mbeki said.

“We are talking about large volumes of capital that could play a great role in addressing Africa’s development challenges,” he said in an interview.

The scams range from loggers in Mozambique understating the value of the timber to Nigerian officials who send abroad suitcases of illegally earned cash.

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The panel estimated illicit outflows in part by adding up discrepancies between the reported value of African exports and the higher value those same goods sometimes receive when they arrive as imports to Africa’s trading partners. That investigation showed that most African governments were victims of companies or officials secreting profits and cash out of countries.

Mr. Mbeki said he couldn’t name particular companies that may be at fault because their dealings with tax authorities are confidential. But he did say “large commercial corporations are by far the biggest culprits of illicit outflows, followed by organized crime.”

The problem isn’t unique to Africa. Taken together, developing nations lost nearly $1 trillion through illicit channels in 2012, according to the Washington-based research and advocacy group Global Financial Integrity.

But economists say Africa suffers most because its governments lack the institutions and expertise to spot and stop capital flight. In some countries, regulation is too decentralized—Nigeria alone has 12 agencies with some responsibility for stemming illicit flows— offering wide regulatory and enforcement cracks for those who want to exploit them.

And Africa’s 54 countries have little capacity to exchange information or help each other pursue potential tax dodgers. “There should be an automatic exchange of tax information among African countries,” the report concludes.

The loss of capital is particularly painful because Africa’s development needs are so acute. Even as 300 million Africans entered what the African Development Bank calls a nascent middle class in the past 25 years, rapid population growth pushed the number of people living on less than $1.25 a day to 414 million from 290 million.

While Africa’s economic growth of around 5% annually in the past decade has outpaced most other regions, Mr. Mbeki’s group said it won’t be enough to guarantee a better life for those hundreds of millions of poor Africans.

“The benefits of this growth have mostly been confined to those at the top of the income distribution and it has not been accompanied by an increase in jobs,” wrote the group, officially called the High Level Panel on Illicit Financial Flows from Africa.

In Mozambique, the panel found, total declared exports of 260,000 cubic meters of logs were only about half of the amount China reported to have imported from the southern African country. That suggests that logging and shipping companies are intentionally underreporting the amount of wood they handle to pay lower taxes, the report argues.

In Nigeria, some companies and officials were colluding to secretly sell about 100,000 barrels of oil a day, a cottage industry the report described as “looting on an industrial scale.”

And Ghana, Kenya and a half-dozen other African countries are believed to be losing tens of millions of dollars each year to a scheme mobile service providers use to make international calls appear to regulators as local calls, which are taxed at lower rates.

Taken together, the panel said, illicit flows “are negating the expected positive impact of increased growth on the continent.”

Even as African countries work to stem the illicit flows, Mr. Mbeki said rich donors and trading partners must make their corporations pay the appropriate taxes for pursuing new customers and rich mineral deposits in Africa’s fast-growing markets.

“This is a common problem,” Mr. Mbeki said. “All of us need to act in concert.”

- WSJ

Tos87:
OK...which have you?

Uchan4u:
This is hilarious. black magic...in the land of myth and the time of magic

carefreewannabe:
Nigerians should learn from any other country that is better developed, there are many of them and from each a lesson or two can be learned.

carefreewannabe:
Don't compare yourself with countries that are even worse off, your standards should be higher, have good role-models instead of consoling yourself with other developing countries.