Former South African president Thabo Mbeki and head of the High-Level Panel on Illicit Financial Flows from Africa (African Union) to examine these issues said, "It's clear that part of this illicit flow comes from activities that are carried out by multi-national corporations," he said, explaining that the transfer of such large quantities of revenue must involve international corporations."
The $50 billion that 'leaks out' of Africa is twice the amount the continent receives in foreign aid.
Amongst the means used to do this kind of smuggling are ax evasion, over-invoicing and under-pricing.
A recent report by the U.S.-based research organization Global Financial Integrity (GFI) found the most common way illicit money is moved across borders is through international trade and money laundering, which accounts for about 60 percent of this illicit activity.
According to GFI's study, corruption by government officials only amounts to about three percent of illegal transfers.
The report on Illicit Financial Flows from Africa: Scale and Developmental Challenges says that since the early 1960s when multinationals entered Africa, “foreign direct investment by the multinationals could have been as high as US$ 1.5 trillion a year, although most is directed towards the developed world.”
It notes that the trend has been increasing over time and especially in the last decade, with an annual average illicit financial flow of US$ 50 billion between 2000 and 2008 against a yearly average of only US$ 9 billion for the period 1970-1999.
It records great variations between regions, countries and even between sectors of activities.
“Two-third of the outflows was attributed to only two regions, namely West Africa and North Africa, with 38% and 28%, respectively.
“Each of the other three regions (Southern, Eastern and Central Africa) registered about 10% of total Africa’s illicit financial flows” perhaps because of lack of data and due to the poor quality of available data, the report warns.
The consequences of these illegal transfers on Africa are dire, according to the report findings.
“Ultimately, Illicit financial flows worsens the socio-economic fabric of poor communities and leads to shorter life expectancy due to limited spending in providing social services such as health care, the loss of US$ 10 for every US$ 1 received in aid is both economically and financially detrimental to the continent”, it says.