Sunday, February 25, 2018

AFRICA: Costs of corruption to the continent

There is so much written about the impact of corruption and illegal activity in Africa, it’s easy for one’s eyes to glaze over when yet another report on the topic lands in your inbox.

Yet, an OECD report looking into the impact of illegal financial flows in West Africa tries to provide some nuance to the issue by attempting to understand both the ongoing causes and the long-term and wider impact of IFFs on both the economies and ordinary people.

The report goes with the UN Economic Commission for Africa’s estimate of $50 billion a year lost to IFFs a year for the entire continent, though that number is often disputed with ranges between $30 billion and $70 billion a year.

Criminal economies generate illicit flows which “undermine country capacities to finance their development,” according to the report. “West Africa arguably experiences the negative impacts of illicit flows most acutely.”

IFFs are typically broken into three broad areas: corruption, such as theft and bribery by government officials; commerce, including tax evasion, mis-invoicing and money laundering through commercial transactions; and crime, everything from drug trafficking and smuggling to counterfeiting and terrorist financing.

Of the many insights from the research, the disadvantage of a predominantly informal economy stood out. Depending on the country, informal enterprise in West Africa is estimated to be anywhere between 40% to 75% of GDP and employs some 50% to 80% of the available workforce.

“It is often hard to draw the line at where livelihoods end and criminality begins,” say the authors. Of course, it’s not that informal transactions automatically equate to illicit activity, but it is less straightforward to decide who is involved in a licit versus illicit transaction. For example, the reliance on cash or absence of bank accounts makes it much easier for illicit dealings when there’s no electronic trail. The report goes as far as to link this to an increased risk of money laundering and terrorist financing.

Ultimately, these countries will still need better leadership to have any chance of slowing, much less stopping, the type of illegal behavior for which impunity reigns at the highest levels. “Politics, governance and illicit activity are often interconnected, and public officials often wear multiple hats—as public officials but also as private individuals connected to local networks, and sometimes linked to criminal or illegal activity. Loose lines and affiliations cause the licit and illicit to become blurred.”

Yinka Adegoke, Quartz Africa editor

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