Addis Ababa — The Macroeconomics and Governance Division of the Economic Commission for Africa (ECA) this week held a two-day inception meeting for a project on strengthening the capacities of selected African countries to counter trade misinvoicing.
The meeting, which ran from 24-25 April, discussed the concept of trade misinvoicing; the definition; key features; the distinction between trade misinvoicing and other forms of illicit financial flows; key methods and channels; most affected commodities and key country destinations, among others.
Trade misinvoicing is a method for moving money illicitly across borders. It involves the deliberate falsification of the value, volume, and or type of commodity in an international commercial transaction of goods or services by at least one party to the transaction.
This project is one of the several ECA-led initiatives aiming to implement recommendations of the High Level Panel Report on Illicit Financial Flows (IFFs) which were endorsed by African leaders in 2015.
The High Level Panel Report underscored that trade misinvoicing was the largest component of IFFs on the continent.
The ECA's latest estimates indicate that Africa loses at least $73 billion annually through trade misinvoicing alone, posing a direct threat to Africa's sustainable and inclusive development by diverting resources from social spending and productive investment as well as undermining structural transformation.
In remarks to the meeting, Macroeconomics and Governance Division Director, Mr. Adam Elhiraika said between 2008 and 2010, Africa lost about 38 billion USD annually due to trade mispricing.
According to ECA's latest estimates, Africa lost about $84 billion annually in gross illicit financial outflows through trade misinvoicing alone between 2000-2016, making it a dominant channel for IFFs from Africa.
This project, Mr. Elhiraika said, reinforces a key component of ECA's advocacy work with African countries to scale-up domestic resource mobilization to support their efforts in pursuit of the sustainable development goals and Africa's Agenda 2063.
"The success of these two development agendas largely depends on Africa's ability to generate and mobilize sufficient, predictable and timely financial resources," he said, adding reliance on domestic resources would enhance African countries' ownership of public policy, strengthen accountability to their citizens and reduce vulnerabilities to volatilities associated with external funding.
"This project is part of our efforts to move the implementation of the IFF agenda to the national level. The outcomes of this project will greatly inform our plans to scale up on capacity building for stemming IFFs to the rest of the continent," said Mr. Elhiraika.
The rationale for selecting the pilot countries was based on demonstrated willingness to address IFFs and trade misinvoicing and the potential for country-level impact.
The project focuses on customs authorities and financial intelligence units because of their potential central role in the prevention of trade misinvoicing and also to enhance the implementation of the African Continental Free Trade Agreement.
For his part, Stephen Karingi, Director of the Regional Integration and Trade Division at the ECA, in a speech read on his behalf, said addressing trade misinvoicing was clearly a key component of the strategies that can be employed to stem illicit financial flows on the continent.
"We face a financing gap for achieving the sustainable development goals in Africa of over $600 billion each year. Much of our recent work here at ECA has considered the means through which African countries can mobilise domestic resources to address this shortfall, including through the Addis Ababa Action Agenda of 2015 which recognized that much of the increased public financing to achieve the SDGs needs to be generated domestically," he said.
Mr. Karingi added: "The project ahead of us is one which is inherently motivating; it provides us an opportunity to contribute to the development of this continent through addressing the challenges of illicit financial flows, and aspiring towards the sustainable development goals."
The ECA organized this meeting in collaboration with ESCAP, UNCTAD, UN-DESA and UNODC to initiate the development and implementation of a capacity building framework to address trade misinvoicing at country and regional levels.
Specifically, the meeting aimed to;
- gather perspectives and experiences from countries in order to define priorities, identify capacity gaps and needs in tackling trade misinvoicing
- gain insights on the efficiency and effectiveness of existing regional and global tools or solutions as well as customs administrative practices for detecting and controlling trade misinvoicing, and
- discuss the development of an appropriate capacity building framework, including software tools, for addressing trade misinvoicing at country and regional levels.
