- Capital flight from Africa is not a new phenomenon. It is estimated that the continent has lost over one trillion of dollars through capital flight since the 1970s. This vastly exceeds the amount borrowed or received by the continent in the form of official development aid over the same period.
- If this capital had been retained and invested, African countries would have progressed more quickly towards their target of reducing poverty by up to 2.5 per cen faster. All of them would be better positioned to reach the Sustainable Development Goals (SDGs).
- A key mechanism of capital flight is the misinvoicing of international trade – especially in primary commodities, an industry dominated by multinational corporations (MNCs). This is facilitated by the poor enforcement of regulations, opacity in trade statistics, and the ability of MNCs to take advantage of their complex structures to shift profit through trade misreporting and tax arbitrage.
- Combatting capital flight requires concerted and coordinated efforts by African governments and their foreign counterparts to increase transparency in international trade and finance, enhance accountability in international borrowing and lending, and clamp down on tax evasion and trade-based money laundering. The global dialogue on development financing must move from increasing aid to Africa, to preventing the illicit export of African capital. A more productive model of global partnership with Africa is one that helps the continent raise more domestic resources and keep its capital onshore.
Curtailing Capital Flight from Africa
by: Leonce Ndikumana
April 30, 2017 |
Published Study
Estimates find that Africa has lost more than $1 trillion since the 1970s through capital flight. Léonce Ndikumana argues that it is time to move the global dialogue on development financing from increasing aid to Africa to preventing illicit export of African capital. The paper states that the key mechanism of capital flight is the misinvoicing of international trade, especially in primary commodities. Ndikumana proposes that combatting this problem requires increased transparency in international trade and finance, enhanced accountability in international borrowing and lending and clamping down on tax evasion and trade-based money laundering. A productive global partnership with Africa is one that helps the continent raise more domestic resources and keep its capital onshore.
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