Unlawful monetary transfers hindering Africa's economic expansion

In a concerning revelation, Christoph Trautvetter, coordinator of the German organization Network for Tax Justice, has highlighted that Africa loses billions of dollars each year due to profits being shifted to tax havens and corrupt elites stashing money in anonymous offshore accounts.

The issue of illicit financial flows has been acknowledged by the Tax Justice Network's Idriss Linge, who has pointed out that these flows have significantly impacted Africa. According to Linge, African countries are forced to accept higher interest rates on the capital market than rich economies, depriving them of revenue and burdening them with high debt repayments.

Some African nations have enormous levels of government debt, and due to tax evasion and high debt repayments, many find their budgetary and fiscal policies severely restricted. The money lost to these illegal financial flows could provide essential services such as clean water, sanitation, education, and healthcare.

Linge suggests that stemming these illegal financial flows would be a first step toward greater sovereignty for African governments. He also believes that the African Union's (AU) estimate of Africa's financial loss from illegal activities at around $88 billion is likely an underestimation.

Resource-rich countries like Nigeria, Angola, and the Democratic Republic of Congo are most exposed to these financial losses. In Nigeria alone, billions have been lost through profit shifting in the oil sector.

The AU has created several instruments to combat illegal transactions, including a pan-African cooperation platform, working groups to recover stolen assets abroad, and controls over economic sectors like mining. However, at the national level, many African countries have established financial investigation units or specialized tax authorities, but the AU's findings show these institutions have not been as efficient as hoped.

Trautvetter believes that too little is being done to curb these losses, but there has been progress. In 2017, more than 100 countries agreed to automatically exchange information about bank account owners. Banks in many tax havens now report this information to the tax authorities in their home countries.

However, many African countries are still implementing this agreement, so data for evaluation is currently missing. Trautvetter predicts significant improvements in the coming years due to the implementation of the agreement. In 2015, the estimated annual loss was $50 billion.

The AU report notes that global geopolitical changes over the past ten years have made Africa more vulnerable. Factors including the rivalry between the United States and China, the COVID-19 pandemic, the war between Russia and Ukraine, and the geopolitical consequences of climate change have all played a role.

China, the United Arab Emirates (UAE) and some European countries like France and the United Kingdom have been linked to illicit financial flows in Africa in recent years. A United Nations' global framework agreement aims to address issues ranging from global tax justice and the taxation of large digital corporations to the detection of illegitimate financial flows, starting from August 2025.

Trautvetter also mentioned that this system promotes corruption and crime, weakens states, and ultimately benefits the rich and powerful in both Africa and the global North. He emphasized that more needs to be done to combat these losses and ensure a fairer distribution of wealth.