Africa loses approximately 54 trillion CFA francs (90 billion dollars) annually due to illegal financial flows (IFFs).
This situation severely hampers the continent’s economic development, making it difficult to achieve sustainable development goals.
The main causes of these financial losses include tax evasion, false invoicing in international trade, corruption, and money laundering linked to organized crime. These violations represent 3.7% of Africa’s GDP and limit investments in vital sectors such as health, education, and infrastructure.
The Mining and Oil Sectors Are Most Affected
The mining and oil industries are among the most impacted by illegal financial flows. Multinational companies exploit natural resources while using fraudulent methods to avoid paying taxes and duties. For example:
• They underreport export prices.
• They artificially inflate import costs.
Such practices result in governments losing significant revenue, making it difficult for African countries to invest in essential services and realize their economic growth potential.
Economic Impacts and Debt Burden
Illegal financial flows not only increase budget deficits but also:
• Weaken foreign exchange reserves.
• Make economies more vulnerable to external shocks.
• Limit their capacity to attract legitimate investments.
As a result, governments are forced to borrow more, and with rising public debt, economic growth slows down. Resource-rich countries like the Democratic Republic of Congo (DRC) and Nigeria are among the hardest hit by this issue.
Steps to Address the Issue
Key measures to combat illegal financial flows in Africa include:
- Increasing Transparency in Resource Industries: Companies’ tax filings and business activities should be more closely monitored.
- International Tax Cooperation: African countries should strengthen international tax agreements and enhance information sharing.
