REDUCING ILLICIT FINANCIAL FLOWS TO BOOST DOMESTIC RESOURCE MOBILISATION FOR FINANCING SUSTAINABLE DEVELOPMENT IN AFRICA

Abstract

Illicit financial flows (IFFs) inhibit African development by draining foreign exchange, reducing domestic resources, stifling trade and macroeconomic stability and worsening poverty and inequality. This study focuses on Africa as a recent assessment revealed that Africa lost between US$1.2 and US$1.3 trillion in illicit outflows over the 32 years, 1980-2012. Of great concern is that these figures are almost four times Africa‘s current external debt and nearly equivalent to its current Gross Domestic Product (GDP). Zimbabwe is not an exception, with IFFs rampant in industries such as mining, especially among artisanal miners who operate clandestinely, avoiding selling their products to the state and evading tax. The rationale for a greater focus on domestic resource mobilisation in Zimbabwe springs from the quest for ever-elusive fiscal consolidation and debt sustainability. However, domestic resource mobilisation cannot succeed without tackling IFFs and other resource leakages through tax evasion and aggressive tax avoidance. According to the Zimbabwe Coalition on Debt and Development (ZIMCODD), the country loses an average of US$276 million annually through IFFs. Motivated by this problem, the study interrogated the challenges and opportunities for curbing these illicit flows to boost domestic resource mobilisation for financing sustainable development in Africa. The study used a desk review and secondary data to explore IFFs and domestic resource mobilisation, with a special focus on the dollarisation period in Zimbabwe. An inadequate regulatory framework, the lack of information and communication technologies facilities, transportation and other relevant infrastructure, , to mention a few, were some of the factors found to be inhibiting the prevention of IFFs. The study concludes that curbing illicit financial flows can help African countries mobilise capital to finance the achievement of the Sustainable Development Goals (SDGs) and other national priorities.