Southern Africa is prejudiced of a staggering US$30 billion annually as a result of illicit financial flows, with Zimbabwe losing US$34 million every year due to trade under-invoicing while also losing substantial revenue through servicing "illegitimate debt", a new by a regional anti-corruption watchdog shows.
Released by Action for Southern Africa and titled The Money Drain: How Trade Misinvoicing and Unjust Debt Undermine Economic and Social Rights in Southern Africa, the report comes at a time the Zimbabwean government has mugged its domestic creditors a staggering US$7 billion after it unexpectedly banned the multi-currency regime, paving way for the return of its sovereign currency, Zimdollar.
In June, without warning, the government resuscitated the Zimbabwean dollar, which was abandoned a decade ago at the height of hyperinflation and the economic meltdown in favour of a basket of currencies. After the sweeping changes were announced, Zimbabwe's domestic debt now dramatically stands at ZWL$8,8 billion, translating to US$800 million from US$9,6 billion before the fresh reforms were instituted.
Commenting on Zimbabwe, the report suggests that part of the country's gargantuan US$21,2 billion debt is illegal, as a result of irregular government borrowings from the central bank and illegal firearms purchases dating back to the Rhodesian era.
"A portion of Zimbabwe's debt is illegal. For example, some of the loans to the country in the 1970s were used to buy weapons in violation of United Nations (UN) sanctions," reads the report.
"More recently, the Government of Zimbabwe's borrowing and debt management has regularly violated limits and procedures imposed by the Constitution of Zimbabwe (2013) and the Public Debt Management Act (2015)."
The report notes that countries in the region cumulatively lose US$21,1 billion every year through settlement of "illegitimate, odious and illegal debts", while the bloc is prejudiced US$8,8 billion through illicit trade flows.
According to the report, Zimbabwe and other countries in the region could plug financial haemorrhaging by undertaking robust public debt audit, among a host of measures designed to curtail the illicit flow of money.
The report shows that South Africa, the continent's most industrialised nation, loses US$5,9 billion annually as a result of "illicit trade outflows" with oil-rich Angola losing US$12,1 billion every year in principal and interest for servicing an odious debt.
"The external debts of southern African governments are owed to international financial institutions, other governments and the private sector. These debts tend to be owed in foreign currency, which makes them vulnerable to exchange rate volatility," it says.
"First, some of the debt is illegal. A recent example of this is the US$2 billion of secret loans to Mozambique by the UK branches of Credit Suisse and VTB Capital in 2013 and 2014 (two of these three loans only came to light in 2016). Based on the latest data, ACTSA calculates that external government debt payments from Southern Africa amounted to at least US$21,1 billion in 2018 alone .The true figure is likely to be slightly higher, as there is a lack of data for Namibia and Seychelles."
The reports further recommends that the region further "support the establishment of an independent and well-resourced international commission on debt, in order to definitively determine which loans are odious or illegitimate, and cancel such debts without conditions".
Angola loses an additional US$1,2 billion annually, Botswana US$26 million, Mozambique US$201 million and Namibia US$121 million as a result of trade-related illicit outflows, it says.
he report also recommends that the bloc ensure that all bilateral, multilateral and private loans to governments are recorded in a "comprehensive and publicly accessible registry, compliant with all relevant laws and unable to be exploited by vulture funds that seek profits out of debt crises".