NAIROBI, Aug. 15 (Xinhua) — Over 50 billion U.S. dollars is illicitly transferred from Africa annually with multinational corporations being the main culprits, former South African president Thabo Mbeki said in Nairobi on Wednesday.
Mbeki, who is the chairman of a high level panel that seeks to track and stop Africa’s illicit financial capital flight, said the amount is against 25 billion dollars that the continent receives in overseas assistance from various donors.
“Organizations that can deal in such volumes of funds are not those that handle 15 or 20 dollars but those with the ability to engage in the colossal amounts,” Mbeki told journalists in Nairobi.
The panel was inaugurated on Feb. 18 to lead a global initiative to track and stop the illicit financial flows from Africa, with the Nairobi meeting being the third since inception.
Sub-Saharan Africa has experienced an exodus of more than 700 billion dollars in capital flight since 1970, a sum that far surpasses the region’s external debt outstanding of roughly 175 billion dollars.
It is believed that some of the money wound up in private accounts at the same banks that were making loans to African governments.
Common mechanisms of capital flight include inflated procurement contracts for goods and services, kickbacks to government officials, and diversion of public funds into the bank accounts of politically influential individuals.
He said part of the illicit flows of the money comes from activities emanating from multinationals, which he said are the only organizations capable of dealing in such huge amounts of money.
“No particular sector can be pin-pointed out at this particular moment because we are only six months old but all we can disclose at the moment is that some of the companies are associated with extractive industries,” Mbeki said.
The former president said the panel has received cooperation from African governments which he said came up with the then idea of setting up the body following a meeting of finance ministers and the UN Economic Community for Africa (UNECA).
He said that the initiative came from African governments signals that Africa is concerned about capital flight from the continent and are willing to do something about it.
“It is still too early to say how it can be stopped because it requires a lot more detailed investigations though what is clear is that we cannot rely only on the confessions of the multinationals in a bid to end the practices,” Mbeki said.
Some of Africa’s flight capital comes from other sources such as earnings from oil and mineral exports, but foreign loans make an exceptionally easy mark in that there is no need to bother with the messy business of extracting natural resources to convert them into cash.
Efforts by some African governments to recover wealth stolen by past officials have won international backing from the Stolen Asset Recovery Initiative launched by the World Bank and the United Nations on Drugs and Crime.
New research by the Africa Growth Initiative at the Brookings Institution in Washington suggests that mismanaged funds from foreign loans amount to more money than previously believed.
Osita Ogbu, a Brookings visiting fellow and professor of economics at the University of Nigeria, says billions of dollars in debt that Africa has accumulated in its post-colonial era are partially a result of irresponsible foreign lenders.