The
Universal
Declaration of Human Rights turned 70
on December 10. Governments and civil society organizations around
the world commemorated the day with a range of activities.
Over
the years, the Declaration has been a global beacon for Africans
fighting against colonialism and for inclusive economic equality and
sustainable development. Its provisions stand as aspirational goals
for nations, and standards that nations are duty-bound to uphold and
promote.
But
what if despite your country’s commitment to uphold these and
other fundamental freedoms, every year it was robbed of the financial
resources necessary to promote and protect rights?
This
is the case for most nations in Africa, where illicit financial flows
(IFFs) rob countries of $60-100 billion dollars each year —
losses in many countries that exceed foreign direct investments and
development assistance. Funds that could be used to secure basic
economic and social rights — for example the rights to social
security, decent work, and human dignity — are instead held in
secret tax havens for the benefit of corporate elites.
In
2015, the African Union’s Economic Commission on Africa
released Illicit
Financial Flows: Report of the High-Level Panel on Illicit Financial
Flows from Africa.
The report — generally known as the Mbeki
Report
after the panel’s chair, former South African President Thabo
Mbeki — defines IFFs as “money illegally earned,
transferred, or used,” a definition that includes money
laundering, tax abuse, and market and regulatory abuse, along with
practices that “go against established rules and norms,
including legal obligations to pay tax.”
Some
30 percent of IFFs are attributed to criminal activities, and 5
percent to corruption. The panel determined that 65 percent is
attributed to commercial or business activity. The most prevalent
method of commercial theft is the practice of trade misinvoicing,
where companies report export values to the developing country that
are far below their actual worth, which results in a reduction in
corporate income taxes, customs duties, and value added taxes (VAT).
Nigeria,
Africa’s most populous nation and its largest economy, lost
$2.2 billion this way in 2014, which according to Global Financial
Integrity (GFI), a Washington, D.C.-based think tank, was equal to 4
percent of total government revenue.
Those
resources could have been used for investment in education, in
health, or to address the persistent problem of government wage
theft. Nearly 30 out of Nigeria’s 36 states are unable to pay
their workers on time. According to Working
for Peace in North-East Nigeria,
a September 2018 report by the Solidarity Center, a U.S.-based
international labor organization, medical professionals caring for
internally displaced victims of Boko Haram are paid their government
wages irregularly, despite the fact that they — along with
teachers and civil servants — are targeted and killed by the
extremist group.
Ghana
loses nearly $1.4 billion a year to IFFs. As monies owed to Ghana
left the country, it borrowed $930 million from the International
Monetary Fund (IMF).
South
Africa, one of the most economically unequal countries in the world,
reports an average of $7.4 billion per year lost to IFFs from
2010-2014. In a country with 36.3 percent unemployment, where nearly
a quarter of people go hungry every day, IFFs can have deadly
consequences.
With
this type of normalized theft, how can citizens in developing
countries secure the global promise of fundamental freedoms?
Combatting
IFFs is an African priority, but countries around the world have a
role to play.
When
the next U.S. Congress convenes, addressing IFFs is an important
opportunity. The Mbeki Report notes that the U.S. is a top
destination for IFFs, mainly those derived from trade mis-pricing
related to oil from Nigeria and Algeria, precious metals from
countries in the Southern Africa Customs Union, and cocoa from Cote
d’Ivoire,
Despite
the acrimony, division, and hyper-partisanship that characterizes
politics in Washington today, there are issues where success and
progress can be achieved. Combatting IFFs is one such issue.
Majorities in both parties claim to support efficiency and
efficacious international development spending programs — and
what’s more powerful than plugging the resource gap created by
IFFs?
The
new Congress has an opportunity to consider and advance policies that
make corporate ownership and control more transparent, support
anti-corruption measures, strengthen African customs and border
capacity, and require banks to do their part to eliminate IFFs and
support the recovery of stolen assets, so that countries can invest
in inclusive economic development that will help guarantee
fundamental freedoms for all.
GFI’s
President Raymond Baker called IFFs “the ugliest chapter in
international affairs since slavery.” The incoming Congress has
an opportunity to contribute to ending this chapter and achieving
fundamental rights for many in Africa.
This commentary was originally published by Foreign Policy in Focus
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