An agency of the African Union estimates that Africa loses nearly $1 billion every week through illicit financial flows out of the continent chiefly through transactions involving multinational companies.
The New Partnership for Africa’s Development, NEPAD, an AU policy wing, said in a statement on Friday that the region lost $900 billion in illegal financial flows between 1970 and 2008.
Commercial transactions by multinationals accounted for 60 per cent of the unlawful flows, followed by criminal activities such as trade in drugs, weapons and people which all accounted for 35 per cent.
Bribery and embezzlement made up five per cent.
Channels for the illegal flows were trade mispricing, investment-related transactions and offshore tax havens, a report commissioned by NEPAD and the UN’s Economic Commission for Africa said.
For example, a company or official could say a piece of imported equipment costs $100 million when in fact it was exported with an $80 million price tag, NEPAD said in the statement.
The difference can be discreetly deposited in an offshore bank account.
“The development impact of these illicit flows has resulted in loss of tax revenues, damage to economic potential and weakening of governance,” it said.
A report by the African Development Bank, AfDB, earlier this year also showed that Africa was a net creditor to the world through illegal outflows worth between $597 billion and $1.4 trillion in the three decades to 2009.