African Development Bank tempers cautious optimism with warning against bad practice.
The annual meeting of the African Development Bank (AfDB) group held in late May in Marrakesh, Morocco had two main concerns – how to move on with developing the continent’s infrastructure and how to plug the massive financial hole caused by illicit outflows.
On many levels, the Finance Ministers and Central Bank Governors who represent the 77 member countries felt there was cause for celebration. African economies are recording impressive growth rates and bucking the global recessive trend. Africa’s economy is projected to grow by 4.8% in 2013 and 5.3% in 2014, the AfDB said.
Africa Infrastructure Fund
One of the ideas for tackling the inadequate infrastructure, seen as a serious constraint to Africa’s development, is an innovative funding proposal – the creation of the Africa 50 Fund. The aim is to mobilise commercial funds which means making the infrastructure projects bankable and managing the commercial, political and regulatory risks. It hopes to draw in sovereign wealth funds, pension funds and the African diaspora. The AfDB said the fund could be as big as $50 billion.
“The governors have been keen and are considering how to accelerate the process, but there is no calendar for the project,” said chief economist and vice-president of the bank Mthuli Ncube.
The Bank estimates the continent needs $100 billion a year spent on infrastructure this decade.
Net Resource Transfers
The other imperative is to plug the massive illicit outflows from Africa in the form of trade mispricing, contract fraud and systematic tax evasion. A joint report by the Bank’s research department and Global Financial Integrity, based in Washington DC, calculated that illicit transfers from Africa to the rest of the world between 1980 and 2009 totalled $1.22-$1.35 trillion. For years, campaigners against tax evasion and transfer pricing were seen as outliers and distractions to the greater cause of free markets. As states treasuries in industrial and developing economies alike chase the tax avoiders and contract pricing fraudsters, these issues are now mainstream concerns. For Africa, they are a vital piece of the economic jigsaw, Africa Confidential points out.
“For every country losing money illicitly, there is another country absorbing it. These outflows are facilitated by financial opacity in advanced Western economies and offshore tax havens. Implementing transparency measures to curtail tax haven secrecy and anonymous shell companies is crucial to curtailing illicit flows,” said GFI’s Baker.
The AfDB and GFI offered a number of policy recommendations for boosting net resource transfers from Africa and curtailing illicit financial flows, including:
- Requiring banks and tax havens to regularly report to the Bank for International Settlements (BIS) detailed deposit data by sector, maturity, and country of residence of deposit holders. The BIS must be permitted to widely disseminate this cross-border banking data
- Addressing problems posed by anonymous shell companies, foundations, and trusts by requiring confirmation of beneficial ownership in all banking and securities accounts
- Ensuring that the anti-money laundering regulations already on the books are strongly enforced
- Requiring the country-by-country reporting of sales, profits, employee levels, and taxes paid by all multinational corporations
- Addressing capacity issues and corruption within African tax authorities
Which countries lost the most net resources?
Filed under: Uncategorized |