Illicit Financial Flows: Africa is the world’s main creditor

5 November 2020 by Milan Rivié

In its latest report on Illicit Financial Flows (IFF) in Africa, UNCTAD (United Nations Conference on Trade and Development) discloses that 88.6 billion US$ from the continent go up in smoke every year. Not only must we ask questions about the size of these amounts, we must also wonder how this is at all possible.

 1. Colossal losses

According to the report, “Illicit Financial Flows (IFFs) are movements of money and assets across borders which are illegal in source, transfer or use” . There are four main categories: firstly, “Tax and commercial IFFs”, which mostly consists of fraudulent issuing of invoices for products to be imported or exported, amounting to approximately 40 billion US$ per year; second, “illegal markets”, which are principally human trafficking and toxic waste; third, “Theft-type activities and financing of crime and terrorism”; and finally, IFFs linked to “corruption”.

With IFFs rising to 836 billion dollars from 2010 to 2015, and an external debt of 770 billion dollars in 2018, the continent [is] being labelled a net creditor to the world

For Africa, these are colossal losses, 89 billion US$ per year according to the lowest estimates. This amounts to 3.7% of the continent’s GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
, and 25% of Egypt’s GDP, which is one of the three largest African economies alongside South African and Nigeria. It is also, almost equivalent to the total Official Development Aid, 48 billion US$, and Foreign Direct Investment, 54 billion US$, received by African countries per year.

Contrary to the dominant discourse, it is actually the case that the 54 African states finance developed countries and not the other way round. Similarly to the CADTM, the UNCTAD UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

report also supports this claim. With IFFs rising to 836 billion dollars from 2010 to 2015, and an external debt of 770 billion dollars in 2018, “the continent [is] being labelled a ‘net creditor to the world’”.

Figure 1: Comparing external debt stock Debt stock The total amount of debt (public and total - left axis), external debt servicing (public and total), and IFFs (right axis) - in billions of US$

Although only 13 African countries are on the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
’s list of countries overburdened with debt, and only about ten have suspended their payments [2], the comparison is striking. Between 2011 and 2018, see Figure 1, IFFs have always been largely superior to the servicing of public and total external debt. In sum, if these countries could get a hold of these IFFs, they could entirely free themselves of external debts. Moreover, without IFFs, African peoples wouldn’t be subjected to different mechanisms of domination and hierarchy which are integral to the Debt System. So, who is responsible here?

 2. Shared Responsibilities?

Whenever you speak of Africa and the reasons why countries are facing underdevelopment, internal corruption is immediately singled out as the main factor. It is inevitable: it costs 148 billion US$ per year according to the African Development Bank. However, we must distinguish between “minor” and “major” corruption.

As far as fighting corruption goes, fighting “minor corruption” is indispensable, yet it must first and foremost be seen as the product of a crumbling State apparatus caused by decades of external neocolonial meddling, in which local capitalist and ruling classes have indulged

In an environment where the capitalist ruling classes are perceived as corrupt, minor corruption is all the more present. Since official obligations are transgressed by senior representatives in upper spheres of the State and organizations (both public and private), it is suggested that it becomes normal, rational, and even necessary that such transgressions occur at lower echelons of the administration, especially amongst low-level state officials who are underpaid or not paid for months on end. “Minor” corruption is thus seen as an outgrowth of “major” corruption. The middle classes thus start to exchange administrative authorizations, procedural shortcuts, tax rebates, land and building permits, amongst other monetized “favours”. In this way, “minor corrupters” purchase what they need, although they should have had access to these services perfectly normally had state officials and public services been properly funded by the State. State employees benefitting from this “minor corruption” thus access additional subsistence income which they often need since their official salary is either very small or sometimes goes unpaid. All of this occurs in a dysfunctional structure which is rotten at the top and known to all. As an unfortunate consequence, these criminal but understandable acts doubly impact the poorest in society. In relation to their income, they are the ones who have to pay the highest share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. in order to access public and private services, knowing full well that the State, and these services in particular which are meant to be accessible to all, will continue to be run to the ground. As far as fighting corruption goes, fighting “minor corruption” is indispensable, yet it must first and foremost be seen as the product of a crumbling State apparatus caused by decades of external neocolonial meddling, in which local capitalist and ruling classes have indulged.

Thus, “20 to 30 per cent of private wealth in many African countries is held in tax havens” and there were “almost 5,000 individuals from 41 African countries with assets of about $6.5 billion” in offshore bank accounts in 2015. In both cases, this type of major corruption is enabled by the (lack of) action of major powers. The OECD OECD
Organisation for Economic Co-operation and Development
OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.
(Organization for Economic Co-operation and Development), which has its headquarters in Paris, is meant to fight offshore tax havens, yet none of its 38 members is African. [3] Regarding offshore bank accounts, the Tax Justice Network has shown that 10 of the most financially secretive countries fighting to defend bank secrecy practices are all major powers. Amongst them we can find the Cayman Islands, the USA, Switzerland, Hong-Kong and even Luxembourg, Japan and the Netherlands. [4] Numerous scandals these past few years – including Offshore Leaks, Luxembourg Leaks, Swiss Leaks, Mauritius Leaks [5], and Luanda Leaks (implicating Isabel dos Santos, the daughter of ex-President of Angola from 1979 to 2017) [6] – have provided evidence that IFFs and “major corruption” are organized “at the top” and have their headquarters in cities in the richest countries, such as New York, London, Paris, Berlin, and Tokyo.

Numerous scandals these past few years – including Offshore Leaks, Luxembourg Leaks, Swiss Leaks, Mauritius Leaks, and Luanda Leaks – have provided evidence that IFFs and major corruption are organized at the top

International Financial Institutions (IFIs) and imperial powers also self-interestedly encourage major corruption. Despite the Blumental Report’s revelations regarding the real destination of most of the funds lent to Mobutu in then Zaire (today’s Democratic Republic of Congo), the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and the IMF pursued their financial support in the interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. of geopolitical aims. The recent World Bank #Papergate affair in February 2020 [7] only goes to further confirm these quasi-generalized practices. [8] In terms of bilateral meddling, we can cite just one example involving France, where Loïk Le Floch-Prigent, Elf’s former Director General (a parastatal company that was taken over by Total), recently claimed : “petrol money enabled the personal financing of African presidents, namely in Gabon and Congo-Brazzaville, and the perpetuation of this system until today, although in different forms.” [9] In order to thank them for their unwavering support, several French political parties, including the Socialist Party and right-wing parties, have taken advantage of shadowy payments to fund their presidential campaigns. [10] This type of prejudicial operation against the interest of the people isn’t limited to ‘Françafrique’, not even to Africa itself.

Large corporations and multinationals are also key players in IFFs and they keep the African continent in the position of supplying raw materials in order to extract maximum profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . As stated in the report, “It has been estimated that as much as 50 per cent of illicit outflows from Africa are generated via trade mispricing and more than half of trade-related IFFs stem from the extractive sector”. Thus, 40 billion dollars in IFFs come from the activities of destructive extractive industries (gold accounts for 77%, diamond 12%, and platinum 6%). The report goes on to say, “In the case of mining, MNEs [Multi-National Enterprises] increasingly centralize their trading Market activities
Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit.
operations, which raises the risk of trade mispricing. Singapore and Switzerland are among the most attractive places for centralizing trade operations due to tax incentives for multinational trading companies”. Who are the main beneficiaries? All the main extractive industry multinationals on the African continent are in the hands of major investors in the Global North, including Canada, France, the USA, Switzerland, etc. (Anglo American, De Beers, Glencore, BHP, Rio Tinto, Umicore (formerly Union minière du Haut Katanga), Vieille-Montagne, etc.).

Who are the main beneficiaries? All the main extractive industry multinationals on the African continent are in the hands of major investors in the Global North, including Canada, France, the USA, Switzerland, etc. (Anglo American, De Beers, Glencore, BHP, Rio Tinto, Umicore, Vieille-Montagne, etc.)

Further the report specifies that, “The main mechanisms for tax avoidance and evasion include trade mispricing, abusive transfer pricing, profit shifting and tax arbitraging.” In order to paint a full picture we must also take into account the actions of the “Big Four” (KPMG, Ernst & Young, Deloitte, and PwC). These audit firms – notorious for the numerous lay-offs, so called “social programmes” in neoliberal jargon – have specialized in providing advice to companies seeking to "avoid” taxation. In this porous architecture, it is easier to understand that “It is estimated that between 30 and 50 per cent of global FDI is channeled through networks of offshore shell companies”, with direct consequences in terms of accrued volatility of invested stock capital, a growing share of benefits declared in tax havens, and a chronic instability holding back the countries’ development.

 3. A Question of Social Justice

In light of this UNCTAD report, the United Nations (UN) should reconsider its systematic promotion of private finances for the realization of its Sustainable Development Goals (SDGs) [11] and rather, challenge FFIs’ “tax and commercial practices”. This should enable African countries to recover half of the money needed for the realization of SDGs, which are to be achieved by 2030. This breath of fresh air would be significant for African countries’ public finances. Even more so in a time of debt crisis coupled with increasing pressures on public finances as a result of the Covid-19 pandemic’s healthcare and economic consequences.

Other measures need to be taken as well, including a better tax collection system. If “tax revenue” are progressing and they “represent 16% of Africa’s GDP [today]”, they are nonetheless well below their potential and suffer in comparison to tax-levels in other countries of the Global North and Global South. Nonetheless it must be highlighted that, “Although the recent trend is upward, this increase largely reverses a decline that took place in the 1980s and 1990s, as structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

reforms significantly reduced tax revenue from international trade.” In other words, by insisting on the liberalization of the economy, the imposition of VAT, the removal of import/export restrictions, the control of exchange rates and the movement of capital, the World Bank and IMF have participated in maintaining a majority of the countries’ populations in poverty. Capitalist and ruling classes on the continent and abroad have greatly profited from this situation.

Structural adjustment reforms significantly reduced tax revenue from international trade

In order to fight IFFs, UNCTAD offers a series of conclusions and qualified recommendations at the end of its report.

Certainly we share the claim that “IFFs are a shared responsibility between developed and developing countries,” but we regret that there is no nuance in terms of degrees of responsibility. If people in the Global North are victims of austerity as a result of IFFs in the same sense as people in the Global South, we cannot make an equivalent comparison at the level of States. The interests of capital are very largely situated in Global North countries. They are the ones who directly influence international architecture and international, multilateral, and national regulatory frameworks to be adopted. Stock markets, banks, and dominant multinationals are located in countries who themselves dominate major decision making bodies (G7, G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). , OECD, World Bank, IMF, IIF, Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

World Trade Organisation
The WTO, founded on 1st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

, etc.) and in China, which is starting to take a share in the imperialist neocolonial cake. Without denying that the interests of Aliko Dangote, the richest African entrepreneur, are the same as his colleagues’ on other continents, there is a vast imbalance of power between the two. With 8.3 billion US$ in his accounts, he ranks 162nd on a list of largest fortunes of which, among the first 20, we find 14 US citizens, 2 Chinese, 2 French, 1 Spanish and 1 Mexican. [12] At the national level, Nigeria is the leading African nation in terms of GDP and ranks “only” 29th globally. Moreover, Nigeria ranks 133rd when GDP per capita is taken into consideration. [13] If we turn to the institutional, political, economic or even military strength of African countries in relation to major powers, we can see that they are not in a position to oppose the latter’s diktats (except for South Africa which has a certain autonomy and plays the role of hand-maiden to imperialism in southern Africa). In this context, UNCTAD might do all it can to “Strengthen African engagement in international taxation reform”, or to “Intensify the fight against corruption and money-laundering”, we very much doubt that Africa would really benefit from this multilateral collaboration, especially as it would be in partnership with “the IMF, the World Bank and the OECD.” That UNCTAD positively welcomes the establishment of the African Continental Free Trade Area can only strengthen our doubts. Indeed, Free Trade Agreements lead to a weakening of States in the face of multinational corporate interests and precipitate a downgrading of national regulations. We can certainly hope for a strong union between African leaders to build a space of economic solidarity between African peoples, but as we have previously indicated, these leaders do not seem equipped with the necessary power nor will.

Only groundwork and international campaigns led by locals with the support of international solidarity have obtained significant advances in fights for transparency, taxation, etc. by exerting constant pressure on leaders

Finally, in order to fight against IFFs, only one recommendation seems redeemable and effective. It aims to “protect and support civil society organizations, whistle-blowers and investigative journalists”. Organizations such as Open Ownership, Financial Transparency Coalition, Tax Justice Network and even Action Aid, have all shown that only groundwork and international campaigns led by locals with the support of international solidarity have obtained significant advances in fights for transparency, taxation, etc. by exerting constant pressure on leaders. African peoples continue to act collectively for their rights and liberties, as we cannot expect the “natural progress” of institutions and ruling classes. From Balai Citoyen in Burkina Faso (the overthrow of Blaise Compaoré) to La Lucha in DRC (the defence of human rights and politicization of the people), not forgetting Front Anti-FCA (by playing on the name of Franc CFA) and so many other struggles, these campaigns, through popular mobilization, have successfully obtained advances, albeit fragile, in the hope of building an authentic Pan-African struggle.

In order to move towards solutions that attack problems at their roots, many measures need to be taken in Global North countries where most of the primary corruptors and facilitators of illegal financial flows are based.

Thus, governments of the Global North must, without pursuing any further forms of meddling abroad, commit to:

All the necessary measures mentioned above are taken from: ReCommons Europe -
Impact of European policies on the Global South and possible alternatives

The author would like to thank Jean Nanga, Claude Quémar, Eric Toussaint for their proof-reading and suggestions.

Translated from French by Dimitri Cautain, Revised by Christine Pagnoulle


[1Sources : For debt stock and servicing, World Bank. For IFFs, present report.

[2Read Éric Toussaint and Milan Rivié, « Les pays en développement pris dans l’étau de la dette » [Developing Countries Caught in a Debt Trap], 6th October 2020. Available in French online:

[3Member states are: Australia, Austria, Belgium, Canada, the Czech Republic, Chile, Colombia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Iceland, Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, Mexico, Norway, New Zealand, the Netherlands, Poland, Portugal, Slovakia, , Slovenia, South Korea, Spain, Switzerland, Sweden, Turkey, the United Kingdom, the United States of America.

[4See the Tax Justice Network’s website:

[5Fergus Shiel and Will Fitzgibbon, “About the Mauritius Leaks Investigation”, ICIJ, 23rd July 2019.

[6See the ICIJ’s research: and Marlène Panar, “Luanda Leaks, ou l’effondrement de l’empire dos Santos” [Luanda Leaks and the unravelling of the dos Santos Empire], 21st January 2020, Le Point Afrique. (in French)

[7Renaud Vivien, "#Papergate : vers un nouveau scandale de corruption classé sans suite ?” [#Papergate: A new corruption scandal closed without further action], Le Soir, 27th January 2020. (in French)

[8Éric Toussaint, “World Bank and IMF support to dictatorships”, 9th April 2020.

[9In Fabrice Afri, « Corruption: le testament judiciaire d’un ancien patron d’Elf » [Corruption: A former Elf boss’ testimony in court], 30th September 2020, Mediapart. (in French)

[10See Antoin Dulin and Jean Merckaert, « Biens mal acquis, A qui profite le crime ? », CCFD, june 2009. Available in French online: and « Chirac, Villepin et Le Pen accusés de financement occultes », Le Monde, 12th September 2011. Available in French online:

[13Data from the World Bank.

Milan Rivié

CADTM Belgium
milan.rivie @
Twitter: @RivieMilan

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