Nairobi — A new report says that capital flight from sub Saharan Africa reached an astonishing $607 billion between 1970 and 2004 and that total is continuing to the present day to the tune of between $20 billion and $28 billion a year.
The report published by James Boyce and Léonce Ndikumana of the University of Massachusetts, Amherst, estimate that capital flight from 40 sub Saharan African countries from 1970-2004 stood at $607 billion in 2004 (including interest earnings), compared with a total $227 billion external debt owed by those countries in 2004.
In other words, sub-Saharan Africa is a net creditor to the rest of the world in the sense that external assets, as measured by the stock of capital flight, exceed external liabilities, as measured by the stock of external debt.
"The difference is that while the assets are in private hands, the liabilities are the public debts of African governments," the report says.
"The real counterpart of many assets on the balance sheets of creditor banks is private deposits in many of the same banks by individuals belonging to Africa's political and economic elites."
If the figures published are accurate, it would mean that annual capital flight is roughly equivalent to the entire aid flow to the region and that tackling the crisis would in effect double development assistance to Africa.
Another report, "Catching up with corruption" by Raymond Baker, John Christensen and Nicholas Shaxson, mentions some former presidents as among the elites involved.
"Two jurisdictions that happily soaked up the embezzled wealth of such regimes are worth highlighting: Switzerland and the United Kingdom."
The corruption report says that UK and Swiss authorities, particularly those in the City of London, have done little or nothing to assist investigations into capital flight, and in some cases have actively hindered it.
It also notes that Transparency International's Corruption Perception Index "ranks the countries of Africa as the primary locus of corruption but it ignores the global infrastructure of international financial secrecy that has helped bleed trillions of dollars in illicitly generated money not only out of Africa but also out of the Middle East, Latin America and Russia into the financial centres of the richest countries in the world."
But with the financial crisis that is dominating the world headlines, experts are predicting that things must and will change, with increasing powers being given to police to work across borders to track down illegal capital flight.
The World Bank's own Stolen Asset Recovery initiative estimates the cross-border flow of proceeds from criminal activities, corruption and tax evasion at between $1 trillion and $1.6 trillion per year, about half of which comes from developing and transitional economies in Eastern Europe.
The movement of such large amounts of capital is seriously hindering all countries' ability to raise much needed taxation, with the loss to governments across the world estimated at least $250 billion annually.
The corruption report says that the world has been slow to wake up to the problem of corruption in developing countries and that the World Bank and world governments "have yet to accept the full and very inconvenient implications of this shift in thinking.
"The task is not just to recognise the importance of a 'supply side' to corruption, involving bribe-givers as well as bribe-takers; it is also about dramatically expanding our understanding of what the supply side has come to include in a rapidly changing globalised world.
Only after our understanding has caught up with reality will be able to adequately answer a question that has long puzzled economists: Why does so much money flow from poor countries to rich ones, when, for both rational and ethical reasons, it ought to flow the other way?"
"We now know more or less how relatives and associates of former president Moi diverted hundreds of millions of dollars into their pockets through a web of shell companies, secret trusts and other evasive structures," the report says.