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There is more money leaving Africa in the form of illicit financial flows (IFFs) than there is in development aid entering the continent.
If we stopped just half of this money leaving South Africa, no other child would ever have to drown in a pit toilet, the Thabo Mbeki Foundation’s Mojanku Gumbi said. She was part of a panel discussion entitled Illicit Financial Flows: A Helping Hand to Poverty, held at the Gordon Institute of Business Science (Gibs) on Wednesday evening.
Gumbi was referencing the tragic cases of Michael Komape and Lumko Mkhethwa.
Gumbi quoted the figure of $50 billion (R620.7 billion) leaving Africa annually. She said this is a conservative figure that doesn’t include criminal cash leaving the continent and the money siphoned out by the corrupt practices of those in government.
This estimate comes from a 2015 study by a UN high-level panel headed by Thabo Mbeki.
This $50 billion is double what is officially sent to Africa in development aid annually.
Gumbi said: “This society can take care of every single South African if we deal with corruption. I believe we aren’t even a quarter of the way there.”
Joining Gumbi on the panel was Economic Freedom Fighters’ MP Floyd Shivambu, who is an expert on the subject of illicit money flows, and he added some much-needed spice to an important debate.
Though curbing illicit financial flows is critical to Africa’s development, it is a subject that can easily become dry and difficult for regular folks to get their heads around.
“There is radical incapacity of the state to prosecute,” said Shivambu.
He pointed out that the SA Revenue Service had said in a briefing that it had put forward 400 cases to be prosecuted, but that nothing had come of these as the National Prosecuting Authority didn’t have the capacity to do the work.
He was scathing of the EU too, one of the co-hosts of the event, saying that the countries in the union were party to stealing Africa’s money – and had been since colonialism – by providing tax havens and backing multinational corporations that “bullied” African governments into doing business with them on terms that didn’t benefit Africa.
Shivambu pointed out that corporates only contribute 18% of the tax collected in South Africa, while 38% is contributed by personal taxpayers and 25% comes from value-added tax. He called out the mining sector, which only contributes $20 billion in corporate taxes a year.
Shivambu made the point that although his party wasn’t in government – yet – it had a coherent policy for dealing with illicit financial flows. This included a cross-agency task team.
“We need a strong state that is independent of these narrow capitalist interests, but we have an embedded state,” he said.
Also on the panel was Varsha Singh of the Organisation for Economic Cooperation and Development (OECD), who talked about how countries in Africa are coming together to share information as part of the Africa Initiative.
“Africa has the tools to combat the problem, but we need the political will to implement them,” she said.
Ping Liu, a director at the World Customs Organisation, pointed out that the majority of these illicit financial flows were in the form of incorrect trade invoicing (for example, putting R10 000 on an export invoice, when the actual value is R20 000 and the missing R10 000 is not taxed). One of the organisation’s focuses is to build capacity so that those who manage goods across borders are trained to pick up inconsistencies, which they can share with their counterparts.
“What we need is action. We must move from the numbers to real actions and cooperation,” said Lui.
The panel closed a day of discussions that brought together interested parties including the African Tax Administration Forum, TrustAfrica, the SA Reserve Bank, the OECD, Southern African Development Community, Chamber of Mines and the Public Affairs Research Institute.
Gibs founding director Nick Binedell, who moderated the panel, pointed out that China and India have lifted 800 million people out of poverty in 30 years.
“We are a continent of one billion people and too many of these people have been left behind. Illicit financial flows is a strategic issue,” he said.
Yvonne Chaka Chaka, who was part of the audience, asked: “What has Africa done wrong to still be in this development phase when we have all the resources?”
Listen to the full debate below:
City Press partnered with the EU’s Inspiring Thinkers for this event
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