Prof. Mithuli Ncube, Chief Economist and Vice-President of the African Development Bank, has stated that the resource drain in Africa over the last 30 years, which is almost equivalent to Africa?s current GDP, is holding back the continent?s lift-off.
Citing a new report by his outfit titled, ?Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009,? he said Africa lost between US$597 billion and US$1.4 trillion in net outflows between 1980 and 2009 after adjusting net recorded transfers for illicit financial outflows, adding that the African continent has been a long-term net creditor to the rest of the world.
Prepared by a joint team consisting of GFI Chief Economist Dev Kar, GFI Economist Sarah Freitas, AfDB Senior Economist Jennifer Mbabazi Moyo, and AfDB Economist Guirane Samba Ndiaye, and officially launched yesterday in Morocco, the study finds that cumulative illicit financial outflows from the African continent over the 30-year time span ranged from US$1.2 trillion to US$1.3 trillion in real terms.
These unrecorded illicit outflows considerably swamped cumulative net recorded flows over the same period. As such, cumulative net resource outflows from Africa ranged from US$597 billion to US$1.4 trillion between 1980 and 2009.
?The traditional thinking has always been that the West is pouring money into Africa through foreign aid and other private sector flows, without receiving much in return. Our report turns that logic upside down?Africa has been a net creditor to the rest of the world for decades,? said Raymond Baker, President of GFI, a Washington-based research and advocacy organization.
The report does not consider the drivers behind the illicit financial outflows, noting that country-specific case studies would have to be performed to determine the underlying causes, which likely vary between African nations. Also, much of the proceeds of drug trafficking, human smuggling, and other criminal activities, which are often settled in cash, are not included in this work.
However, the AfDB and GFI noted that such significant transfers of capital out of the continent are likely to have a negative effect on economic development.
?More than one trillion dollars flowed illicitly out of Africa over the past 30 years, dwarfing capital inflows, and stifling economic development,? noted GFI Chief Economist Dev Kar, who previously served as a senior economist at the IMF.
?Curtailing these outflows should be paramount to policymakers in Africa and in the West because they drive and are, in turn, driven by a poor business climate and poor overall governance, both of which hamper economic growth. The slower growth rate results in more aid dependency with foreign taxpayer funds filling the shortfall in domestic revenue?to the extent that tax evasion is a part of illicit flows.?
A business desk report
