Illicit Financial Flows, Obstacle to African Development- CISLAC

Illicit Financial Flows, Obstacle to African Development- CISLAC

By Aviashima Toom, Abuja

Illicit financial flows and corruption are inhibiting African development by draining foreign exchange, reducing domestic resources, stifling trade and macroeconomic 

stability and worsening poverty and inequality. 

These illicit flows rob Africa and its people of their prospects, 

undermining transparency and accountability and eroding 

trust in African institutions. Faced with high capital flight, tax 

avoidance and a marked dependence on corporate income 

taxes, African Governments face significant constraints to widening their tax base. 

The UNCTAD Economic Development in Africa Report 2020 shows that the large financing gap for the Sustainable Development Goals cannot be closed solely through government revenues. 

Tackling illicit financial flows, however, will open the door to releasing much needed investments in education, health 

and productive sectors.

African Governments in concert 

with Africa’s private sector actors  should take the lead in 

strengthening stolen asset recovery, setting new standards 

for avoiding illicit flows and committing to more concerted 

actions to combat the negative impact of illicit financial flows on African economies.

It is on these premise that the Civil Society Legislative Advocacy Center, (CISLAC) in Collaboration with the West African Tax Administration Forum (WATAF) with support from Oxfam, on Wednesday organised a one day dialogue on the status of high level panel report on illicit financial flows to tackle outflows in the ECOWAS member states in Abuja.

In his remarks, Executive Director, of CISLAC Ibrahim Musa (Rafsanjani) noted that, the report echoed civil society voices from across the continent in highlighting illicit financial flows as a serious threat to inclusive development in Africa and calling for urgent practical policy action to stop the haemorrhage.

According to the HLP report, the ED said that the illicit outflows increased at an alarming rate of 20.2% per year from 2002 to 2011(Global Financial Integrity calculations). 

"The panel noted that the dependence of African economies on natural resources extraction makes them particularly vulnerable to IFFs, but also that the digital economy and new technologies are making it easier, adding a troubling new dimension to the problem. The report singles out the issue of weak national and regional capacities as a major obstacle in efforts to curb IFFs, making it clear it is ultimately a political issue. 

"The last few years has seen a notable emergence of civil society groups across the continent who have joined together to rally against IFFs. 

"Indeed, IFFs have become a key part of Agenda 2063 conversations on Africas development as well as in ongoing processes such as the Financing for Development and the post-2015 Sustainable Development Goals". He stated

He assert that the HLP report presented an opportunity for African CSOs and partners to forge a coherent continental architecture for tackling IFFs. According to him past responses have borrowed, sometimes uncritically, the concepts and proposed solutions from initiatives advanced by the G20 and the OECD  responses based largely on the problem as experienced by global North economies.

"The challenge will be to instead root the work in the specificities of the African context and experience.

Therefore, a crucial task for African CSOs and partners is to properly problematise IFFs and develop distinctly African policy responses. 

"It is in view of all the above, as well as the emergence of the COVID-19 pandemic which has exacerbated the fiscal deficit situation in most African countries-Nigeria inclusive, equally bringing to the fore, the urgency to address the vice of the illicit outflows, as well as the instrumentality of a modernized and effective tax system and a tax administration, which effectively engages in regional cooperation efforts, as essential fiscal policy tools for raising revenues for sustainable development. 

"By this, the Civil Society Legislative Advocacy Centre/Transparency International-Nigeria in collaboration with the West African Tax Administration forum (WATAF) and with support from Oxfam in Nigeria, envisioned this engagement.

"Thus, it is our hope that this engagement will provide the platform for robust deliberations and an opportunity to harvest an agenda towards strengthening sub-regional coordination in the effective and sustainable implementation of recommendations of the HLP report within member states in the sub-region". He said.

Executive Secretary, West African Tax Administration Forum, (WATAF) BABATUNDE OLADAPO, in his presentation, "Status of Adoption of the Report of the High Level Panel on IFFs from Africa" said that the High Level Panel on Illicit Financial Flows (IFFs) was aimed to ensure

significant reliance on domestic resources to sustainably finance development in

 Africa.

According to him, the panel adopted a framework of action plan to jumpstart its activities and

place illicit financial flows on the forefront of policy discourse on the continent, Presided over by former South African President, Thabo Mbeki.

He informed that, adoption of an AML framework that

collectively create the legal structure for

identifying, prosecuting, and dealing with the

proceeds of crime, terrorist financing, and

corruption and other means are efforts at curbing IFFs

He said HLP recommendation reached was to

Institutionalising prudent legal and

regulatory regimes, including fiscal

policies that disallow financial

secrecy;

Also, dentifying and returning resources

lost through illicit financial flows to

finance Africa’s development

agenda.