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Africa Must Look Inward To Stem Illicit Finance, Panelists Say

By Kevin Pinner · 2022-09-28 20:10:42 -0400 ·

African nations must look inward, across the continent and toward cooperation among fellow developing nations to stem illicit finance as multiple crises blossom, since powerful corporations and countries benefit from keeping the status quo, speakers said Wednesday during a conference.

Corporate tax abuse by multinational firms causes around $25 billion in lost revenue each year — an issue structurally embedded into the continent's extractives-centered participation in global trade, according to Charles Abugre, executive director of IDEA Africa, a nonprofit based in Ghana. Abugre and others spoke at a conference in Lusaka, Zambia, that addressed how Africa's economy has been impacted by multiple overlapping crises including the COVID-19 pandemic, the war in Ukraine, a looming debt crisis, rising inflation and mounting effects of climate change.

Many at the event, hosted by Tax Justice Network Africa and the African Tax Administration Forum, cited the need for domestic resource mobilization.

"Our problem today is that we are strongly relying on others," said Patrick N'Dzana Olomo, a policy officer at the African Union.

Africa will need $432 billion to address COVID-19's effects, while the climate finance gap — which measures the difference between pledged contributions in the Paris Agreement and actual contributions delivered — is around $127.2 billion annually, according to a news release published Wednesday.

Commercial interests drive around 65% of illicit financial flows from Africa — which largely manifest in tax abuse and trade abuse, according to Irene Ovonji-Odida, who serves on the United Nations' High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda.

"There is a misperception quite often when we talk about tax havens and financial secrecy that these are located in exotic, Caribbean locations; it is the Global North," said Ovonji-Odida, who's also a lawyer and women's rights activist.

The U.S. ranked at the top of the financial secrecy index compiled by the Tax Justice Network in May, while the U.K. has a global network of offshore secrecy jurisdictions, according to Ovonji-Odida.

"Those are the countries that are benefiting from the status quo, so they are not about to change it, "Ovonji-Odida said. "We must look inward."

The African continent loses $88.6 billion per year from Illicit financial flows — 3.7% of the continent's GDP, based on data from 2020 published by the U.N. Conference on Trade and Development, according to the news release.

Over the past several decades, the fight for tax justice has become increasingly technical, but the problem is ultimately political, according to Ovonji-Odida.

"Policymakers and decision-makers respond to power, ultimately," Ovonji-Odida said.

Alvin Mosioma, executive director of Tax Justice Network Africa, said the Organization for Economic Cooperation and Development has dominated rule setting around international tax reform, such that outcomes reflect the interests of wealthier countries and large multinational corporations headquartered there.

"We cannot afford to rely on the largess and the generosity of rich countries," Mosioma said.

Titus Gwemende, division director for opportunity and equity at the Open Society Foundation, said massive financing is required for African countries to pull out of this spiraling global recession, adding no amount of fiscal discipline will be sufficient by itself.

"Pension funds are at the core of Africa's transformation project," Gwemende said.

Scandinavian countries have proved the impact social welfare funds can have on mobilizing domestic resources that fund transformative infrastructure projects, according to Gwemende.

"That is where we get revenue to invest in long-term projects — whether it's clean energy, infrastructure or health," Gwemende said.

According to Mosioma, "While the rhetoric of international development speaks of leaving no one behind, African countries have been left behind."

In the 1960s, Africa's prospects for development were judged to be higher than China's and South Korea's, according to Olomo, who mentioned recently overhearing a Chinese official telling one from the U.S. that Americans were no longer powerful enough to dictate terms. Gwemende said there wouldn't have been an industrial revolution in the U.S. and the U.K. without the fossil fuels that caused the climate crisis currently felt disproportionately in Africa.

"It is true that it is a power problem," said Olomo, agreeing with Ovonji-Odida. "We need to make sure that we strengthen Africa's capacity to speak."

--Editing by Khalid Adad.

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