CAPITAL FLIGHT AND UNDERDEVELOPMENT
It is becoming increasingly evident that the lot of African countries will not change until the current wave of corrupt practices in government circles is checked and the resultant high rate of illicit flight of capital reversed. A study by a Washington-based organisation, Global Financial Integrity, reveals that a staggering sum of $854 billion has been illicitly transferred from the impoverished continent over the last 38 years.
Apart from successfully establishing the link between poverty and corruption in governance, the GFI report also shows that Africa's challenges of underdevelopment stem more from the mismanagement of its economic endowment than from shortage of resources. In GFI's reckoning, the $854 billion that has been evacuated from Africa illicitly is enough to relieve the continent of its debt burden and still 'leave $600 billion for poverty alleviation.' It is reckoned that, within the period of 1970 to 2008, illicit capital outflow, including proceeds from tax evasion, bribery, outright theft and other corrupt means, grew by 11.9 per cent.
It should not come as a surprise that Nigeria, with the rate of nearly $10 billion annual loss, leads the group of African countries with the highest amount of illicit capital outflow. 'The top five countries with the highest outflow measured are Nigeria ($89.5 billion); Egypt ($70.5 billion); Algeria ($25.7 billion); Morocco ($25 billion) and South Africa ($24.9 billion),' GFI states in the report presented at an Africa Union Conference of Economic and Finance Ministers in Malawi.
It is indeed an irony that a continent in such a dire need of capital to address its numerous aspects of developmental needs such as lack of good drinking water, deficit of infrastructure and collapsing social services is now suffering from illicit flight of capital to the tune of close to 1trillion US dollars. In a country like Nigeria, for instance, the effect of capital flight can be felt in the glaring failure of the government to fulfill its obligations to the citizenry.
Capital flight shrinks the economy and fosters unemployment and poverty. The assertion by GFI that grinding poverty continues to be the lot of Africans is therefore not surprising. 'So long as illicit capital continues to haemorrhage out of African countries over the long term at a rapid pace, efforts to reduce poverty and boost economic growth will be thwarted,' the report says.
Nigeria, just like other African countries, cannot develop when, instead of attracting capital, she is losing it.
Besides illicit capital flight, Africa's progress is also hobbled by other licit forms of capital flight, especially the lack of a strong manufacturing base that makes the continent import-dependent. The real sector has been virtually emasculated in Nigeria by the lack of steady electricity supply and a generally unfriendly business environment, with the resultant level of capacity utilisation dropping to as low as 37 per cent.
Adequate reforms must be instituted to revive the economy. African countries must halt the massive outflow of capital while at the same time creating a favourable environment at home to attract investments. African countries will fare much better if proceeds of corrupt enrichment could be ploughed back into their economies instead of shipping them out to foreign countries. The multiplier effects will be noticeable in the number of jobs created and in the reduction of poverty.
Better still, strengthening institutions and making them more effective in checking corruption will serve the continent better. For instance, the Economic and Financial Crimes Commission and the Independent Corrupt Practices and other Related Offences Commission must be empowered through adequate funding and other forms of support.
Where necessary, the anti-corruption agencies must be allowed to exploit the benefits of extant working agreements with foreign countries in a genuine bid to discourage the practice of siphoning public funds abroad. In cases where this has already been done, they should get such ill-gotten or illicit capital repatriated.
For this to be effectively carried out, the governments of African countries must be more transparent in the way they operate. They must be open to public scrutiny. In Nigeria, for instance, this can be achieved by the passage of the Freedom of Information Bill and prescription of conditions to enable the public to have access to the asset declaration forms of public office holders.