On matters pertaining to Africa’s socioeconomic and political development, former South African president Thabo Mbeki’s voice, tempered by age and experience, continues to be heard.
Seven years since leaving office, Mr. Mbeki doesn’t hide his impatience with Africa’s failure to fulfill its great potential. At the moment Mr. Mbeki is leading a war against illicit financial flows (IFFs) from Africa, as the head of African Union’s 10-member High-Level Panel on IFFs.
Africa is losing at least $50 billion annually to illegal transactions. Some reports suggest the continent may have lost up to $1 trillion in the past 50 years.
Global Financial Integrity, a Washington, D.C based nonprofit research and advisory organization heavily involved in the IFF fight, lists the main channels for IFFs as: nefarious commercial activities of multinational companies, drug trafficking and smuggling, and bribery and embezzlement. Some companies also engage in over-invoicing or underpricing trade deals, transfer pricing (avoiding taxes by setting prices in trading between their divisions), offshore banking and the use of tax havens.
In view of the scale of IFFs from Africa, isn’t Mr. Mbeki swimming against the current?
“Illicit financial flows are a challenge to us as Africans, but clearly the solution is global. We couldn’t resolve this thing by just acting on our own as Africans,” Mr. Mbeki began, in an interview with Africa Renewal in New York.
The former president has laid bare his sharp criticisms in a provocative foreword written for a report published in 2015 by his panel.
“Africa is a net creditor to the rest of the world,” he maintains, implying that illicit financial outflows from the continent far outstrip official development aid.
In February, Mr. Mbeki led his panel to the United States to promote its report and consequently raise global awareness about IFFs from Africa. A recurring theme in his speeches at the various forums in New York and Washington, D.C. was the urgent need to tackle these IFFs.
As billions are earned and extracted from the continent, more than 400 million Africans live on less than $1.25 a day (the threshold for absolute poverty), and the gross domestic product per person on the continent is just $2,000, which is a fifth of the global average, according to Mr. Mbeki’s panel’s report, titled Track It! Stop It! Get It!
Is the West ready to cooperate with Africa to fight IFFs? “Yes,” Mr. Mbeki responded, because “[cooperation] is of material relevance to the West; not so much that they have suddenly fallen in love with the Africans or the developing world, but because there is a shared interest between the developed and developing countries to deal with this matter.”
His panel has twice met with officials of the US government (in 2014 and in 2016), including Vice President Joe Biden. “The US government gave us their own reports regarding what they are doing about tax issues, corruption, and domestic legislation. So we agreed to work together in a structured way to pursue these issues and work is going on.”
In its advocacy for a global alliance to combat IFFs, the success of Mr. Mbeki’s panel will depend on how effectively it can communicate that a victory concerning IFFs is potentially a win-win for everybody. The former president is upbeat about progress made in enlisting the support of international institutions such as the United Nations, the World Bank, the International Monetary Fund, the Organisation for Economic Co-operation and Development (OECD) and so on.
In addition, “The G7 and the G20 have been discussing how to deal with the illicit financial flows because it is a matter of concern to everybody,” Mr. Mbeki said.
Picking up the gauntlet
While in the United States, Mr. Mbeki and his team held talks with the World Bank and IMF in Washington, D.C. They met with United Nations officials in New York, including Secretary-General Ban Ki-moon and the UN Economic and Social Council (ECOSOC).
Earlier they had been in Paris, France, to meet with the OECD, and to the European Parliament in Brussels to engage with the World Customs Organization. The results of their outreach are impressive. The World Bank is currently preparing a programme of action on IFFs, the IMF has expressed its commitment to fighting IFFs, and the UN is ready to help.
“The UN Secretary-General Ban Ki-moon indicated the commitment of the whole UN system, not just ECOSOC, to make sure that at various levels they have a practical focus on this matter,” Mr. Mbeki confirmed.
The panel is soliciting global support, but Africans are also picking up the gauntlet, he said. “We have interacted with African civil society and there is a great enthusiasm to act on IFFs.” He referred to the “Stop the Bleeding” campaign to end IFFs, led by Trust Africa Foundation, as an example of civil society’s commitment to the cause.
“It’s not that the African continent is saying to the rest of the world, ‘You do this about illicit financial flows.’ What we are saying is, ‘We as a whole have to act on this.'”
The former president said that Africa’s customs authorities, the police, central banks, the banking system, and financial intelligence units must step up, although he did not deny that a lack of capacity in these institutions will inhibit overall efforts.
“The capacity of these institutions is insufficient. The action agenda that came out of the Financing for Development Conference in Addis Ababa [in July 2015] calls on the rest of the world to assist the African continent to deal with this capacity issue,” he said, adding that tax information exchanged within the global financial system “may become of very little use without the capacity to process it.”
Notwithstanding this insufficiency of capacity, African leaders are determined to confront IFFs, Mr. Mbeki said. The establishment of his panel demonstrates a political will. “We are convinced that there is a keenness on the part of the African governments to act on this matter.”
How to safeguard recovered funds
An undeniable perception of corruption afflicts many governments and institutions in Africa. What would Mr. Mbeki say to critics who argue that monies tracked and recovered could be embezzled once back in Africa?
“What drove this whole initiative was how to generate more resources to address development challenges,” he argued. Given that his panel is expected to submit to the AU an annual report on IFFs, in the future such reports could include information regarding the use of recovered funds.
“Let’s say that the continent is able to recover $25 billion. It would be natural to say that from that $25 billion, two bridges were constructed and 20,000 km of road were built,” he says.
Mr. Mbeki’s panel understands the enormity of the task ahead. Before the interview with Africa Renewal ended, he sought to highlight the relationship between IFFs and natural resources.
“Natural resources are important sources of these illicit outflows. Remember that during the war in Liberia, illegal logging was one of the sources of funds to perpetuate the war. So the elected government hired an international firm to mark every log exported from Liberia and follow such a log until it is offloaded in Rotterdam [in Holland] or somewhere in Europe.
“It’s more challenging with other resources. For example, a country that produces copper may refine it to a certain degree, not completely, and then export it to somewhere else for final processing,” he said.
“Such a country cannot know how much copper has been exported because it had not been completely processed locally. So we need a similar tracking system so that the country of origin knows exactly the quantity of exported copper.”
Despite such difficulties, Mr. Mbeki’s bottom-line message is that Africa cannot afford any further depletion of its resources through IFFs.
SOURCE: Africa Renewal