Corruption and illicit financial flows cost Africa $580b every year – Adesina

Corruption and illicit financial flows are costing Africa several billion dollars, as every single day the continent loses a total of $1.6 billion, culminating into losses amounting to $580 billion every year, according to estimates given by Dr Akinwumi Adesina, the President of the African Development Bank (AfDB).

According to estimates by the AfDB Africa loses about $1.6 billion daily to what it termed “financial leakages.”

Dr Adesina told Bloomberg in an interview that the annual losses are undermining growth and worsening Africa’s nearly $2 trillion debt burden. He said the continent loses about $1.6 billion daily in “financial leakages,” including $90 billion in illicit financial flows, $275 billion through profit-shifting by multinationals, and $148 billion from corruption.

Dr Adesina, indicated that while African countries also need access to more concessional financing and debt-restructuring where necessary, curbing outflows is crucial.

He pointed out that the losses are through illegal channels such as tax evasion, trade misinvoicing, corruption, smuggling, and money laundering, and noted that these outflows drain resources that could otherwise fund infrastructure, education, health, and job creation.

“It doesn’t matter how much water you pour into a bucket if the bucket is leaking. If you’re able to reduce the leakages to illicit capital, also corruption and all of these things, Africa will be able to keep a lot of these resources and meet the amount of infrastructure it needs,” he said.

The total figure included the loss of $90 billion a year to illicit financial flows, with $275 billion “siphoned away” by multinational corporations shifting profits, and $148 billion lost to corruption.

Africa has infrastructure investment needs of between $130-$170 billion per year, but only about $80 billion of that financing is met. However, if the continent is able to raise the full amount, there will be investments in infrastructure development that would bridge the gaps to bolster economic growth, create jobs and stir regional integration.

Investments in roads, rail, air transport, dams, ports and associated development are key factors for spurring economic growth due to interconnectivity and trade.

Available data from DevelopmentAid shows that in 2021, an estimated 490 million people in Africa lived in extreme poverty, which was 36% of the continent’s population. This figure represents an increase from 478 million in 2019, largely attributed largely to the impact of the COVID-19 pandemic, which reversed previous poverty reduction efforts.

Ironically, Africa is the poorest continent on Earth, according to the World Bank. The continent is also plagued with economic insecurity, political instability and corruption, civil wars, and terrorist insurrections leaving millions of Africans living in abject poverty.

Out of the 26 countries ranked by the World Bank as low income economies, 22 are in Africa. These rankings refer to the very poorest countries in the world. Africa also includes 23 of the world’s 54 lower middle income countries, according to the World Bank.

By Emmanuel K Dogbevi

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