Former President of South Africa Thabo Mbeki visited the United Nations to address the developmental challenges posed by illicit financial trade flows (IFF) from Africa and what can be done to stop these billions of dollars illegally leaving the continent each year.
Speaking at a Feb. 6 press briefing Mbeki, who chairs the UN's High Level Panel on Illicit Financial Flows From Africa, explained that at least $50 billion is lost annually to these outflows.
This number "is in fact larger than the amount of overseas development assistance that the continent receives. This is capital generated in the continent belongs within the continent," Mbeki said.
The former President said that two-thirds of these funds originate from multinational corporations. About one-third of IFFs are run through criminal activities, including drug and and trading, and human trafficking.
Only 5 percent are the result of corruption or bribery. Between 1970-2008, the UN Economic Commission for Africa (UNECA), found that $854 billion, or on average $22 billion per year, was lost in this time period. The bulk of IFFs originate in West and North Africa, which account for two-thirds of all illegally moved transactions.
Abdalla Hamdock, Deputy Executive Secretary of UNECA, tells MediaGlobal News that most IFFs are destined for the United States and Europe. "From all the studies, most of it is going to the developed world," he says.
"We hope [illicit finance] is linked to one individual ... it's not. We're talking about billions of monies moving in a very sophisticated fashion across the globe," Hamdock said at the briefing.
As a way to address the problem, two years ago UNECA and the African Union (AU) established the High Level Panel, led by Mbeki. The 10-member panel includes representatives from Benin, Guinea-Bissau, Sudan, and Uganda.
Mbeki explained they have seen a "keen interest on the continent to attend to this problem" after traveling to Algeria, Nigeria, Congo, Mozambique, Mauritius, Kenya, Democratic Republic of Congo, and South Africa to assess the problem on the ground.
Several of the Panel recently visited Washington, DC and met with US government officials and representatives of the International Monetary Fund (IMF) and the World Bank to discuss the willingness and readiness of developed countries to prevent illicit flows from reaching their shores or offloaded in tax havens.
"It has to be both ways," Hamdock says to MediaGlobal News. "It takes two to tango."
The major issues the Panel must contend with are transparency, institutional capacity, and creating a strong legal framework to ebb the flow of cash. Mbeki stressed that partnerships with international bodies including the UN, IMF, G8, G20, OECD, and the World Bank will be key.
Mbeki added, "You need technical capacity to be able to deal with sophisticated companies with lots of resources who are able to hire the best lawyers in the world, the best accountants in the world, and then you have this African government that must contend with this practical reality."
Prior to the briefing, Mbeki met with Deputy Secretary-General Jan Eliasson on how the HLP's work relates to the UN process. "This is a matter that relates to resources, to the Post-2015 goals, therefore financing for development becomes relevant in that context," Mbeki said.
"The United Nations is looking at this issue globally. We are examining how our Post-2015 Development Agenda can address illicit flows and tax evasion while increasing the recovery of stolen assets. In this regard, I thank the UN Economic Commission for Africa for the technical support it is providing the Panel," Eliasson said in a statement.
The Panel is expected to present a report of recommendations by June or July this year.
"Because of the size of the problem, the volumes of this outflow, it will be important that the continent have a specific examination of this matter with a view to make recommendations and decisions," Mbeki said.
He added, "We're not at a stage to make recommendations."