A picture has been making the rounds on social media of a man fetching water in a meshed laundry hamper. The picture must have been taken early in the morning by the demeanour of the man and his long shadow. It shows water running into the hamper and spilling even faster while the man patiently waits for it to fill.
This is a simple illustration of what Illicit Financial Flows (IFFs) do to developing countries as they pursue economic growth. IFFs are illegal movements of money from one country to another in contravention of national and international laws.
Undeniably, Africa desires economic growth and it reaches out for foreign aid but the amount of money lost in the process through IFFs is enormous and increasing. It is estimated that developing countries lose six times more through IFFs than what they receive in Official Development Assistance (ODA). The ODA is government aid designed to promote the economic development and welfare of Third World countries.
A case in point is Nigeria during Sani Abacha’s rule when the country received more than $1 billion (Sh103.8 billion) in ODA. During his four-year term, Abacha stole $6 billion (Sh622.8 billion) from the state due to weak legal systems.
With millions of families living in poverty, ideally, the ODA should promote equality, make the recipient countries more independent and better the lives of people. But this is not always the case as the money lands in unintended hands, encouraging corruption.
The IFFs are complex, multi-dimensional and aided by incoherent as well as conflicting policies. Any anti-IFFs strategy will not yield much if it does not strive to strengthen cross-sectoral systems at national, regional and international levels.
There has been progress in the last decade in the tax justice sector, with various organisations conducting studies on public resource leakages and documenting recommendations on how best to combat IFFs. Tax Justice Network Africa (TJNA), a pan-African organisation that advocates progressive tax systems, knows this all too well and collaborated with other actors in the sector to pursue effective implementation of the recommendations.
TJNA has partnered with the media, civil society, academia and legislatures in the continent. Change may not be realised instantly, but even a modest improvement will be a cause for celebration as it will translate to a significant contribution to sustainable development.
Winning against public resource leakages calls for teamwork at all levels. Emerging economies that are more prone to IFFs should revise their game plan as they are vulnerable to both internal and external influences. Government institutions can support non-state actors by creating a hostile environment for IFFs to thrive. This heavily tasks government to make sound and coherent policies.
The anti-IFFs battle will not be won by one nation or one sector. Actors in this sector at global, regional and national levels must commit to curbing the outflows by sharing information and strategies.
If action is not taken, developing countries will continue living in an economic desert while sustainable growth remains a mirage; as we continue to document worse narratives of IFFs year in, year out.