Africa Development Bank offers help to fight IFFs

By Francis Kokutse, in Accra, Ghana 

Francis Kokutse is a journalist based in Accra and writes for Associated Press (AP), University World News, as well as Science and Development.Net. He was a Staff Writer of African Concord and Africa Economic Digest in London, UK.

Thanks to the Africa Development Bank (AfDB), Illicit Financial Flows (IFFs) that continue to plague Africa, have received some push. And hopefully, something will be done before it is too late. If not, the continent will be doomed, as we see economies faltering all over.

The World Bank says the IFF “emerged in the 1990s and was initially associated with capital flight. It now generally refers to cross-border movement of capital associated with illegal activity or more explicitly, money that is illegally earned, transferred, or used that crosses borders.” It falls into three main areas: An illegal act of corruption and tax evasion. The funds are the results of illegal acts, smuggling and trafficking of minerals, drugs as well as people who use these for illegal purposes like financing organised crime.

“Regardless of how IFFs are precisely defined, it’s clear that the flows are an impediment to development. What’s most important is to understand how and why money flows out of developing countries and to devise strategies to stem these flows,” the Bank said.

Though everyone knows IFFs are destroying the continent, nothing much is being done to fight it. It is almost eight years after South Africa’s former President, Thabo Mbeki, and his colleagues on the High-Level Panel (HLP) on IFFs from Africa, discussed the issue and the harm it was causing to the continent. Since then, nothing concrete has been done. That is why, the efforts by the African Development Bank and the Coalition for Dialogue on Africa (CoDA), must be highly commended for launching the $5.9 million project to stem the tide of the canker. A drop in the ocean, it may sound, considering the harm that the IFF has done to Africa, however, it is one move that should start something instead of the talks that have been going on.

CoDA is a joint special initiative of the African Union Commission (AUC), United Nations Economic Commission for Africa (UNECA), Africa Development Bank (AfDB), and African Export-Import Bank (AFREXIMBANK). It currently hosts the Secretariat of the AU-HLP which was established in 2016 from the AU Special Declaration on IFFs and is part of the Joint Secretariat of the Consortium to Stem IFFs from Africa, together with the Department of Economic Development, Trade, Industry and Mining of the AUC (AUC-ETIM), and Political Affairs and Peace & Security of the AUC. In addition, CoDA works closely with AU organs, namely Africa Peer Review Mechanism (APRM), Pan African Parliament (PAP), and the African Union Advisory Board against Corruption (AUABC).

The report by the HLF found that the continent lost on average $50 billion annually through IFFs. It said commercial activities by the private sector were by far the largest contributor to it, followed by organised crime, then public sector activities.

“Corrupt practices play a key role in facilitating these outflows,” the HLF said, adding that, “multinational corporations shift profits to subsidiaries in low tax or secrecy jurisdictions where in many cases, those subsidiaries exist on paper only, mostly with one or two employees, while the bulk of the activities of the company occur in another country.”

Since the HLP report, there had been very little work on IFFs,  until January 30, 2023 , when Ghana’s President, Nana Addo Danquah Akufo-Addo, mentioned it in a speech to delegates attending the launch of the Africa Prosperity Network (APN) and said, “we need to pay serious attention to, and arrest illicit financial flows out of the continent, which are estimated at about some eighty-eight billion United States dollars ($88 billion) annually.”

This means that within the eight years, the amount has increased from the $50 billion that HLP mentioned to $88 billion. Again, nothing was being done, because President Akufo-Addo said it was “depriving Africa of significant resources that could be used to support her development agenda. We must urgently and collectively institute comprehensive and unambiguous tax policies to combat tax-motivated illicit financial flows, strengthen legal and law enforcement systems, and bring together national agencies to stem such flows.”

President Akufo-Addo drew attention to the fact that, “we need concrete measures to stop the systemic impoverishment of our continent, and the theft of its resources.” But these talks are like wishing it will go away just by mentioning it.

The African Financial Integrity and Accountability Support Project (AFIAP)  is a three-year support project to “improve regional coherent and coordinated response to illicit financial flows. It will help African stakeholders actively engage in stemming such flows to improve domestic revenue mobilisation in African countries,” the group said. For those of us who are impatient, within the three years, we expect to see a drop in the flows that are leaving Africa.

Coming as it is a response to the challenges posed by IFFs on the one hand, and accountability in public financial management on the other hand, which are key elements of several AfDB policies and strategies, the AfDB said it has been developed as a regional operation to ensure enhanced coordination of anti-IFFs and pro-accountability initiatives through a continental approach.

“This is an institutional support project under the Regional Public Goods Envelope. It involves the creation of the requisite environment for the improvement of revenue mobilisation and management in selected countries in Central, East, West, and Southern Africa through the support to regional collaboration and coordination in combating IFFs and enhancing oversight and accountability of public finances,” the AfDB said.

It said the project will contribute to the enhancement of capacities regarding coordination and implementation of anti IFFs initiatives through a continental approach and will be executed over a 44-month (three and a half years) period by the two distinct executing agencies.

The overall development objective of this project is to improve the regional coordination in combating IFFs and provide an  oversight and accountability of public finances, for optimal revenue mobilisation and management in African countries.

The project will provide among others, assistance to CoDA secretariat for a coordinated implementation of HLP recommendations on IFFs at national, regional and continental levels, including examining the implications of inequalities in taxing rights and enabling peer reviews using existing AU frameworks, instruments and processes. It will also give support to AUC-ETIM department for the implementation of joint strategies and initiatives related to international taxation; contribution to  the English speaking subgroup of the African branch of Supreme Audit Institutions (AFROSAI-E) work to strengthen oversight and accountability capacities through support to supreme audit institutions.

The main beneficiaries are the CoDA Secretariat, the AUC-ETIM, and African Organisation of English-speaking Supreme Audit Institutions (AFROSAI-E), which is the Anglophone and Lusophone subgroup of AFROSAI, made up of Auditors-General/Supreme Audit Institutions (SAIs) of 26 member countries. The overall goal of AFROSAI-E is to foster cooperation, enhance institutional capacity and optimise audit performance of SAIs in the region to enable them to fulfil their audit mandates, enhance accountability, improve public resource management and good governance, and contribute towards development  and effectiveness of their respective governments.

In addition , the project  will directly support countering IFFs activities in 38 African Development Fund (ADF) and blended countries, with special emphasis on countries in transition. This will be done through support to inform fiscal policy and support to nationally owned and informed decision making for a holistic government approach, focusing on tax administration authorities, financial intelligence units, and other regulatory and law enforcement agencies responsible for combating IFFs, as well as SAIs.

business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com