Curbing illicit outflows, a growing imperative

HAVING already been ravaged by Covid-19, Namibian authorities must now move to curb illicit outflows that may rise owing to investments that will be injected into reviving the ailing economy.

Indeed, illicit outflows are not just a problem in Namibia but Africa at large particularly in countries like ours that are dependent on capital projects funded by government to drive both development and employment.

UNCTAD Economic Development in Africa Report 2020 says stopping illicit capital flight could almost cut in half the annual financing gap of US$200 billion that the continent faces to achieve the Sustainable Development Goals.

Every year, an estimated US$88.6 billion, equivalent to 3.7 percent of Africa’s GDP leaves the continent as illicit capital flight, according to UNCTAD.

Illicit financial flows (IFFs) are movements of money and assets across borders which are illegal in source, transfer or use, according to the report entitled ‘Tackling illicit financial flows for sustainable development in Africa’.

It shows that these outflows are nearly as much as the combined total annual inflows of official development assistance valued at US$48 billion, and yearly foreign direct investment, pegged at US$54 billion, received by African countries – the average for 2013 to 2015.

Without doubt, illicit financial flows rob Namibia and her people of their prospects, undermining transparency and accountability and eroding a substantial revenue base that could be used to alleviate poverty.

These outflows include illicit capital flight, tax and commercial practices like mis-invoicing of trade shipments and criminal activities such as illegal markets, corruption or theft.

It is worth noting that IFFs related to the export of extractive commodities (US$40 billion in 2015) -a primary concern for Namibia- is the largest component of illicit capital flight from Africa. Although estimates of IFFs are large, they likely understate the problem and its impact.

There is no arguing that IFFs represent a major drain on capital and revenues in Africa (Namibia included), undermining productive capacity and prospects for achieving the SDGs.

For example, the UNCTAD report finds that in African countries with high IFFs, governments spend 25 percent less than countries with low IFFs on health and 58 percent less on education. Since women and girls often have less access to health and education, they suffer most from the negative fiscal effects of IFFs.

Although IFFs are a major constraint to domestic resource mobilisation on the continent, Namibia is not yet sufficiently engaging in the reform of the international taxation system.

Transparency and cooperation between tax administrations globally and within the continent are key to the fight against tax evasion and tax avoidance.

Regarding regional cooperation on taxation within the continent, the African Tax Administration Forum can provide a platform for regional cooperation among countries.

Regional knowledge networks to enhance national capacities to tackle proceeds of money laundering and recover stolen assets, including within the context of the African Continental Free Trade Area (AfCFTA), are therefore at this stage also crucial in the fight against corruption and crime-related IFFs.