UNCTAD talks to tackle illegal trade flows

Security officers patrol city streets yesterday. [PHOTO: JONAH ONYANGO/ STANDARD]

NAIROBI: African nations will be seeking ways of limiting illicit financial flows.

This comes as the United Nations Conference on Trade and Development (Unctad) enters its second day in Nairobi today.

The event, themed ‘From Decision to Action: Moving Towards an Inclusive and Equitable Global Economic Environment for Trade and Development,’ has attracted 194 countries who hope to agree on a win-win formula for trade.

Yesterday, the event opened with focus on sustainable investments. Various leaders are also gathering to share on how public-private partnerships can bridge the over Sh250 trillion investment gap.

But with many African countries depending on the commodities market, a discussion dubbed ‘Breaking the Chains of Commodity Dependence’ was accorded more significance.

Participants had two days, from last Friday, to discuss how countries could adapt to the twin shocks of lower commodities prices and shrinking demand from emerging economies.

According to the latest study by Unctad, it is estimated that some commodity-dependent developing countries are losing as much as 67 per cent of their billion dollar export earnings due to trade inaccurate invoicing.

The study, which is the first to analyse this issue for specific countries and the respective commodities, found that trade mis-invoicing is among the largest drivers of illicit financial flows from developing countries.

Released during the Unctad Global Commodities Forum,the study analyses commodities such as cocoa, copper, gold and oil from countries like Chile, Côte d’Ivoire, Nigeria, South Africa and Zambia.

Wrong invoicing, according to Unctad findings, costs such countries valuable foreign exchange earnings, taxes and income that might otherwise have been spent on development.

“This research provides new detail on the magnitude of this issue, made even worse by the fact that some developing countries depend on just a handful of commodities for their health and education budgets,” Unctad Secretary General Mukhisa Kituyi said.

GOLD EXPORTS

For instance, in a 15-year period to 2014, under-invoicing of gold exports from South Africa amounted to $78.2 billion (Sh7.94 trillion), or 67 per cent of total gold exports.

Between 1996 and 2014, under-invoicing of oil exports from Nigeria to the US was worth $69.8 billion (Sh6.98 trillion), or 24.9 per cent of all oil exports to the US. During the same period, South Africa lost $3 billion (Sh304.7 billion) due to under-invoicing of its iron ore exports China.

The same research also discovered that between 1995 and 2014, Zambia recorded $28.9 billion (Sh2.89 trillion) in copper exports to Switzerland yet this did not reflect in Switzerland’s books.

According to Mr Kituyi, available data shows commodity exports account for up to 90 per cent of a developing country’s total export earnings.

The 14th edition, being the second Unctad forum for Kenya to host in 40 years, got underway yesterday in Nairobi and will run until Friday.