x Abu Dhabi, UAEMonday 18 December 2017

Rising illegal outflows stoke anger across Africa

Money siphoned off from resource contracts prompts political action 

Nigeria's president Muhammadu Buhari has promised action against corruption. Reuters
Nigeria's president Muhammadu Buhari has promised action against corruption. Reuters

By some estimates African economies lose a colossal US$50 billion a year in illicit outflows, a number that steadily increases as investment in oil, gas and minerals grows.

According to the African Union’s (AU) high-level panel on illicit financial flows, the amount of money spirited out of the continent has tripled since 2000, largely because of the growth in resource extraction.

Altogether Africa lost about $850bn between 1970 and 2008, AU figures show. About $217.7bn was illegally transferred out of Nigeria over that period, while Egypt lost $105.2bn and South Africa more than $81.8bn.

Much of this is in the form of commodity revenue that finds its way into offshore accounts. However, it is becoming harder for governments to ignore objections from citizens and activist groups over the issue. Consequently, ambitious political leaders are using the issue to bolster support.

Nigeria’s president Muhammadu Buhari has put an anti-corruption campaign as the pillar of his administration. So, too, has the president of Tanzania, John Magufuli. In Malawi, the ex-president Joyce Banda is wanted for arrest over alleged abuse of office and money-laundering offences, while more than 70 senior officials associated with her administration have been put on trial for corruption.

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In South Africa, president Jacob Zuma is fighting for his political life after being attached to multiple corruption scandals. Meanwhile, a handful of political leaders who have spoken out and exposed corruption are lionised on social media.

In Tanzania, Mr Magafuli is taking a swipe at the low-hanging fruit of illicit financial outflows – mining royalties and taxes. In the process he is reaping political capital.

"Magufuli's mining initiatives are about domestic politics," says Dan Paget, a scholar at Oxford University's department of politics and international relations. "He's trying to put clear water between himself and his predecessors."

Given the shift in political landscapes, resource companies are going to have adapt to a new way of doing business. There is a deep and abiding suspicion that companies have used the lack of expertise in some countries to secure unfairly beneficial tax and royalty deals.

"Yes, mining companies use this to their advantage," says Ignatius Kamwanje, a geoscience consultant based in Malawi. "There is a technical information gap because of dealing with people who are not experts. Some of them use shortcuts so long as the government accepts them."

Even if resource companies do no wrong, the sector as a whole is under scrutiny. What counts is public perception.

Africa offers some of the last untapped reserves of oil, gas and minerals and its growing population will increasingly demand a say in how this wealth is administered.