Africa a net creditor to the rest of the world, says new report

May 29 - A new joint report released today by the African Development Bank (AfDB) and Global Financial Integrity (GFI), revealed that the African continent has been a long-term net creditor to the rest of the world.


The results were revealed at the 48th AfDB Annual Meetings in Marrakech, Morocco and found that Africa suffered between US $597 billion and US $1.4 trillion in net outflows between 1980 and 2009 after adjusting net recorded transfers for illicit financial outflows.

“The traditional thinking has always been that the West is pouring money into Africa through foreign aid and other private sector flows, without receiving much in return,” said Raymond Baker, President of GFI, a Washington-based research and advocacy organization. “Our report turns that logic upside down – Africa has been a net creditor to the rest of the world for decades.”

Titled Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009, the study found that cumulative illicit financial outflows from the African continent over the 30-year time span ranged from between US $1.2 trillion to US $1.3 trillion in real terms. The report did not consider the drivers behind the illicit financial outflows, noting that country-specific case-studies would have to be performed to determine the underlying causes, which likely vary between African nations. Also, much of the proceeds of drug trafficking, human smuggling, and other criminal activities—which are often settled in cash—were not included in this work.

However, the AfDB and GFI noted that such significant transfers of capital out of the continent were likely to have a negative effect on economic development.

“The resource drain from Africa over the last 30 years—almost equivalent to Africa’s current GDP—is holding back Africa’s lift-off,” said Prof. Mthuli Ncube, Chief Economist and Vice-President of the AfDB.

The AfDB and GFI offered a number of policy recommendations for boosting net resource transfers from Africa and curtailing illicit financial flows, like requiring banks and tax havens to regularly report detailed deposit data to the Bank for International Settlements; addressing the 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 were strongly enforced; requiring the country-by-country reporting of sales, profits, employee levels, and taxes paid by all multinational corporations; and reforming customs departments to better detect and deter trade misinvoicing.

“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,” added Baker.