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South Africa's Mbeki blasts multinationals for illegally moving billions out of Africa

By Xinhua | May 27th 2015 | 3 min read
By Xinhua | May 27th 2015

Africa is loosing over 50 billion U.S. dollars each year through illicit financial outflows, the bulk of which are made by multinational companies, former South African President Thabo Mbeki said on Thursday.

In his address to the 6th session of the Pan African Parliament (PAP) in Midrand, Johannesburg, Mbeki said multinational companies were illegally moving billion of dollars out of Africa, depriving the continent of the much needed cash.

"It is estimated that over the last 50 years, Africa lost in excess of 1 trillion dollars in illicit financial outflows," he said.

"The figure of 50 billion U.S. dollars is therefore an underestimate as it excludes such elements as trade in services and intangibles, proceeds of bribery and trafficking in drugs, people and firearms," said Mbeki.

Mbeki said it was wrong for such huge amounts to be illegally transferred out of the continent considering the immense developmental challenges that Africa is facing.

He called on PAP to implement the 2011 recommendations of the High Panel of the African Ministers of Finance, Planning and Economic Development on steps to be taken in stopping the illegal transfer of these funds by the multinational companies.

He said, "Indeed in its Declaration on Illicit Financial Flows, the AU Assembly has expressed the need to ensure that Illicit Financial Flows and their impact on domestic resources mobilization is given the necessary attention by the 3rd International Conference on Financing for Development, and in this regard, this stresses the need for robust international cooperation to address the problem."

Mbeki said the illicit flows contributed a large percentage of the problems which Africa is facing today.

"The United Nations has estimated that the number of Africans living on less than 1.25 dollars a day increased from 290 million in 1990 to 414 million in 2010. In addition, per capita GDP in Africa is one fifth, that is, 20 percent of the global average figure.

"The African Development Bank and others estimate that Africa needs an additional 30 to 50 billion U.S. dollars annually to address its infrastructure needs," Mbeki said.

The former president called on Africa to do all within its power to ensure that the estimated 50 billion U.S. dollars being shipped out per year remains in the continent to address the challenges of poverty and underdevelopment.

In its investigations, the High Panel found that 60 percent of the illicit flows are done by large commercial companies. It further found that criminal activities such as drug trafficking accounted for about 30 percent, with corruption contributing to the remaining 10 percent.

Mbeki said it was unfair for the international community to think that Africa can solve this problem on its own.

He said, "The outflows from Africa end up somewhere else in the world. The various tax havens and financial secrecy jurisdictions in Africa and elsewhere in the world are at the center of the problem of illicit financial outflows since they are among the major receiving countries for these outflows.

"This calls for concerted international action to address this challenge since it is clear that transparency in terms of financial transactions is indeed key to achieving success in the fight against the illicit outflows."

Mbeki also revealed that many African countries lack the capacity to stop the illicit financial outflows.

The High Panel found that the illicit financial outflows were taking place in the commercial sector through transfer pricing, tax evasion, aggressive tax avoidance, trade misinvoicing, tax incentives, double-taxation agreements and in many other ways.

Mbeki highlighted some of the steps which Africa should take as a matter of urgency to address the problem.

"African countries need to pay closer attention to illicit flows from the commercial sector. This means developing the required capacities, establishing or strengthening necessary institutions including transfer pricing units, and providing resources for the effective functioning of these institutions.

"It would also mean holding multinationals accountable for fraudulent practices by setting up requirements for their transfer of funds and business practices." said Mbeki.

He expressed confidence that Africa will indeed act fast to ensure the continent stops the desperately needed financial resources from leaving Africa.

"We are confident that the Pan African Parliament will indeed respond energetically to the call – Track it! Stop it! Get it!"

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