Almost $2 trillion has left Africa illicitly since 1970, thwarting poverty reduction and economic growth.
This is far more than the external aid the continent received over the same period, and almost five times its current external debt. According to researchers, the continent also loses at least $100bn a year in this financial haemorrhage.
African leaders convened this week in the Ethiopian city of Bahar Dar to discuss illicit financial flows and what can be done to staunch them. A study commissioned by the Tana High Level Forum on African Security, which organised the conference, found that illicit flows from Africa grew at an average rate of 12.1 percent per year since 1970, and that capital flight from West and Central African countries accounted for most of the illicit flows from sub-Saharan Africa.
Illicit financial flows consist of money earned illegally and then transferred for use elsewhere. The money is usually generated from criminal activities, corruption, tax evasion, bribes and smuggling. Yet the numbers tell only part of the story – a story that exposes how these highly complex and deeply entrenched practises have flourished, with a devastating impact on Africans' efforts to extricate themselves from grinding poverty.
This scourge eats into the gross domestic products of African countries, draining foreign exchange reserves, reducing tax collection and investment inflows and worsening poverty.
“The costs of this financial haemorrhage have been significant for African countries. It has heightened income inequality and jeopardised employment prospects. In the majority of countries in the continent, unemployment rates have remained exceedingly high in the absence of investment and industrial expansion,” said Kenya's Central Bank Governor Dr Njuguna Ndungu.
Worse than expected