From Juliana Taiwo-Obalonye, Pretoria, South Africa
Tax Justice Network Africa (TJNA), a group promoting progressive taxation systems in Africa, has warned that the continent losing almost $90 billion annually to Illicit Financial Flows (IFFs) is hurting its development.
It warned that failing to implement measures to stop IFFs will deprive Africa and Nigeria in particular of the resources necessary for the much-needed revenue for health, education, roads and other development projects and programmes.
The warning was issued at the 2023 summer school, themed ‘Enhancing the Capacity of Civil Society Organizations and Journalists in Efforts to Curb Illicit Financial Flows’ organised by Tax Justice Network Africa, WU Global Tax Policy Centre (WU GTPC) and the African Tax Institute, hosted at the Future Africa Campus at the University of Pretoria, South Africa.
The event had 30 participants comprising experts, representatives from civil society organizations and the media.
According to the 2020 United Nations Conference on Trade and Development (UNCTAD), Africa is losing USD $ 89 billion annually through illicit financial flows, with $40 billion of that loss coming from the extractive sector alone.
The Nigeria Extractive Industry Transparent Initiative (NEITI), had disclosed earlier in the year that the country loses about $9 billion to illegal mining and smuggling of gold. Nigeria’s Independent Corrupt Practices and Other Related Offences Commission (ICPC) in 2021, estimated that the country loses $10 billion to illicit financial flow, while 20 per cent of the $50 billion lost to illicit financial flow in Africa is from Nigeria.
Mukupa Nsenduluka, Tax Justice Network Africa’s policy officer on tax natural resources governance, during a session “Taxation for development financing in Africa”, said: “Africa is losing the much-needed resources through illicit financial flows. These are resources that could be channelled to address Africa’s poverty and inequality challenges.
“Africa, it is estimated by UNCTAD 2021 report that Africa is losing $89 billion annually through illicit financial flows. And the report further reveals that $40 billion of this $89 billion is lost from the extractive sector.
“Now, this is very significant, because most of the economic activities that happen on the continent are in the extractive sector. As such, the more we mined, the more African countries are prone to illicit financial flows. “Putting it in context, we need to talk about the human cost of illicit financial flows because the monies are resources that could be used for development, health, education, schools, and roads.
“For instance, in the DRC (Democratic Republic of Congo), the 2021 State of Tax Justice Report reveals that about USD $600 million is lost annually, through corporate tax abuse and it’s estimated that this amount of money could take about 7.2 million children to school. So that what we’re saying here is that the human cost of illicit financial flows is too high.”
Nsenduluka further noted that the more the extractive sector is dominated by foreign players, the more the sector on the continent is prone to illicit financial flows, “because illicit financial flows happen within the international system beyond Nigeria, beyond the DRC.”
She called on experts, CSOs and the media to calculate the cost and the impact of IFFs on Africa’s development and begin to advocate for African leaders to address the disadvantages of not bridging the financing gaps.
Speaking about the solutions, Nsenduluka said, “African countries cannot do it alone. We need more international and national cooperation and politics to address the challenge of illicit financial flows. Political will from African leaders first as well as leaders from the global north is needed as a first solution.
“For solution number two, when it comes to the extractive sector, domesticating frameworks like the African Mining Vision (AMV) is important because it’s a blueprint for how mining should be done in Africa. It promotes the localization of mining value chains for Africa. We need more Africans actively participating in mining and also ensure that the sector unlocks opportunities for locals to be employed as well as for business opportunities in other sectors such as agriculture, manufacturing, banking and insurance.
“Number three, investing more in the administrative capacity of revenue authorities is key. “African Governments need to invest more in providing the necessary technological tools and skills of revenue authorities.
“The fourth solution is to design laws and policies that are not prone to manipulation by multinational corporations.”
She further recommended that CSOs and Journalists need to remain vigilant to hold leaders and multinational companies accountable for tax policy reform, tax transparency and corruption. She added that “If these key solutions and more are implemented, IFFs can be tackled to ensure more revenue is available for Africa’s development.”