Wednesday, December 18, 2013

The missing trillions

Researchers working with the African Development Bank say that African countries have lost as much as $1.4 trillion in cash leakages over the last 30 years. Much of the lost money is a result of illicit cash flows and corruption. Global Financial Integrity (GFI) say West and Central Africa have lost the greatest amount of money. An estimated $494 billion left those two regions between 1980 and 2009 as illicit cash flows.

 Ibrahim Aidara, the economic governance program manager for the Open Society Initiative of West Africa (OSIWA), says the amount of money flowing out of the continent both legally and illegally is now nearly equal to Africa’s current total gross domestic product:
"The amount flowing out in Africa is, according to the estimation, more than all the foreign direct investment we are getting from the outside and more than the African debt by about four times, and even more than all the official aid Africa is receiving from the rest of the world," he said. "Any time you take that kind of money out of economies, certain things don’t happen," he said. "Investment in plant equipment doesn’t happen, job creation doesn’t happen, the tax revenue you would have had from those activities doesn’t exist.  Governments don’t have money to put into social programs, like health, education, and clean water programs.  So many things don’t happen.  It’s the opportunity cost of the loss of that money." He added that “There’s a push to have governments begin to require country-by-country reporting by multinationals so that taxes are paid when they are supposed to, in the amount they are supposed to be, and where they are supposed to be paid.  This is critically important for developing countries because many times… it’s companies not paying their fair share basically and putting the burden on the individual tax payers." .
 Aidara said nearly all of the loss stems from corrupt practices, such as trade mispricing, money laundering and tax evasion. The most affected countries are the ones rich in natural resources, such as oil producers Nigeria and Angola, or diamond producer Zimbabwe.

With vast new reserves of oil and gas discovered in the Sub-Saharan region, its poverty level is poised to increase to 50 percent of the world's poor by 2030.

Nigeria, for example, said last week it cannot account for $50 billion in revenue from the sale of crude oil between January 2012 and July 2013 - an amount that exceeds the total annual foreign development aid to the region.
In Angola, the IMF has estimated that $32 billion in oil revenues went missing between 2007 and 2010, equivalent to one quarter of its GDP.

No comments: