Friday , February 26 2021

'Africa must stop corruption or be swallowed'

The Chronicle

Patrick Chitumba recently in Mangochi, Malawi
If Africa failed to stop corruption, corruption is likely to stop Africa, wrote Professor Akin Oyebode in a report entitled "An Overview of Corruption in Nigeria" in 2001.

Seventeen years later – The African Development Bank (AfDB) estimates that US $ 1 trillion has been lost from Africa due to corporate tax evasion while the high level panel report on Illicit Financial Flows (IFF) chaired by former South Africa President Mr. Thabo Mbeki is Estimating that US $ 50 billion per year is lost from Africa through trade mis-invoicing.

Africa is providing a vast array of natural resources that, if properly governed, present the continent with a massive potential for harnessing the much needed financial resources for development and therefore the need to stop corruption, IFFs that have the potential to stop Africa's socio- economic development.

In this light, the African Forum and Network on Debt and Development (AFRODAD), a regional platform and organization that lobbies and advocates for debt relief and addressing other debt related issues in Africa held a summer school on "Raising the voice against Illicit Financial Flows , Corruption, Debt and Inequality in Africa: Tackling Existing and New Challenges "in Mangochi, Malawi recently – in an effort to contribute to the development and implementation of transparent, accountable and effective mechanisms for mobilizing and utilizing financial resources in Africa both domestic and external resources.

The summer school training for parliamentarians, civil society, faith leaders and the media was held as a innovative way of engaging with a core group of influencers and decision-makers to build their understanding and commitment to the key issues of concern, particularly related to IFFs, corruption, inequality, natural resource governance, debt management, the aid system in Africa and PPPs.

AFRODAD director Dr. Fanwell Kenala Bokosi said as a pan-African organization, AFRODAD supports and promotes initiatives of the African Union, especially Agenda 2063 and the Africa Mining Vision (AMV).

"Our work is guided by the vision of 'Africa We Want', an integrated, prosperous and peaceful Africa, driven by its own citizens, representing a dynamic force in the international arena," he said.

Dr. Bokosi said the Addis Ababa Action Agenda 1 (AAAA) outcome document identifies domestic public resources as one of the seven action areas under its global framework for financing development post-2015.

Furthermore, Agenda 2063 and Agenda 2030 all the countries to strengthen domestic resources mobilization (DRM) as a means for Africa to become self-reliant and finance their own development.

"DRM is meant to contribute 75 percent to 90 percent to the financing of Agenda 2063 per country, including through enhanced fiscal mobilization, maximization of natural resources rents – OGM and the curb of illicit financial flows (IFFs).

"While domestic resource mobilization is admittedly a more sustainable financing mechanism, Agenda 2063 Financing Strategic Plan recommends the harnessing of external resources for development such as Official Development Assistance (ODA) and Public Private Partnerships (PPPs). These are critical to Africa's development as they supplement to most publicly-owned public funds. "

"Agenda 2063 is a strategic framework for the socio-economic transformation of the African continent over the next 50 years. It seeks to accelerate the implementation of past and existing continental initiatives for growth and sustainable development. "

"Agenda 2030 also known as the Sustainable Development Agenda was adopted by world leaders at the UN Summit in September 2015. The Agenda 2030 consists of 17 Sustainable Development Goals (SDGs) and 169 targets to be achieved by 2030," he said.

Legal practitioner and academic at Cardiff University in the United Kingdom, Ms Layla Abdul Latiff said the problem of IFFs is of great concern to Africa as it has negative implications on mobilising resources domestically.

"As noted by the AU, Africa is losing US $ 50 billion a year through IFFs. IFFs reduce the size of potential domestic resources that countries can harness to finance their developmental programs. Poor domestic resource mobilization leads to poor social service delivery, huge debts, increased poverty and inequality. AfDB estimated that US $ 1 trillion was lost from Africa because of corporate tax evasion.

"The International Monetary Fund (IMF) suggests globally US $ 200 billion is lost through tax losses. If we come close to home, the high level panel report on Illicit Financial Flows (IFF) chaired by former South Africa president Mr. Thabo Mbeki estimated that US $ 50 billion per year is lost from Africa through trade mis-invoicing, "she said.

"This is the amount needed to eradicate poverty from Africa, to build hospitals, build infrastructure, provide social welfare, the amount needed to send our children to school, the amount needed to narrow the inequality gap between rich and poor in Africa. "

Ms Latiff said large companies are the largest culprits of illicit outflows from Africa, followed by organized crime, adding that corrupt practices and weak governance capacity have facilitated these illegitimate outflows.

"Commercial activities including transfer pricing abuses by multinationals, tax evasion, laundered commercial transactions, aggressive tax avoidance, duty waivers and mis-invoicing account for 65 percent of the global total of IFFs. Criminal activities are accounted for 30 percent and corruption for around five percent globally, "she said.

Corrupt practices play a key role in facilitating all aspects of illicit financial flows. Literature gives several examples of the role of corruption to fuel IFFs.
These include bribes paid to customs officers; inducements to tax inspectors, including job offers; and payments to security officers, bankers and judges.

Mr Raphael Kamoto – a director of strategic partnerships, planning, monitoring and evaluation at the African Tax Administration Forum (ATAF) said to counter corruption that stimulates economic growth and diverts desperately needed funds from education, healthcare and other public services African countries must share information on multinational companies operating in their jurisdictions.

"There is a need for African countries to start exchanging information on taxes with other African countries. That will be a curb tax evasion, corruption as well as transfer of profit or funds from one country to another – the funds that end up in Europe or America at the expense of the African country where it was made, "he said.

Mr Kamoto encouraged African countries not to seek to outshine each other on tax incentives offered to foreign investors saying they should rather work together for the benefit of their respective countries.

"Several countries including Zimbabwe and Lesotho have signed the ATAF which allows them to share tax information and we are moving in the right direction," he said.

AFRODAD argues that if illicit outflows are curbed, and the funds used domestically, the scale of the involved flows will have a significant positive impact on development and reduce Africa's reliance on aid and external borrowing to finance development.

It is in this view that combat IFFs remains a prerequisite for effective and efficient domestic mobilization and financing sustainable development.

Failure to effectively mobilize resources domestically to fund developmental projects and national budgets has resulted in governments borrowing externally.
Loan contraction presents a number of challenges to African countries considering that the absorptive capacities of many African countries are poor.
Countries end up failing to generate resources to repay the loans as the contracted loans are consumed and not invested in productive sectors of the economy.

The result is a burden on the tax payers who are greatly taxed by their governments in a bid to generate resources for loan repayment.

– @ pchitumba1

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