To effectively combat Illicit Financial Flows (IFFs) on the continent, the African Union Commission through the Department of Economic Affairs, has launched a Multi-Donor Action to add to the existing mechanisms established to stem illicit outflows.
This new mechanism was launched during the African Union’s Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration which ended Friday, December 4, 2020.
This has become necessary as the AU Commission and its key development partners including the European Union (EU), the German Federal Ministry of Economic Development and Cooperation (BMZ) and GIZ have resolved that IFFs have been at the centre of discussions in Africa due to their negative impact on development financing, sustainable development and growth.
“The emergence of the COVID-19 pandemic has exacerbated the fiscal deficit situation in some African countries, equally bringing to the fore, the urgency to address the vice of the illicit outflows.”
“This is in acknowledgement that the contraction in budgetary resources is likely to impede and delay the implementation of Africa’s Agenda 2063 and the United Nation’s Sustainable Development Goals (SDGs)”, a recent report released by the AU indicates.
As a result, the group insists that and strengthening domestic resources mobilization by intensifying the fight against IFFs, and supporting current continental ongoing initiatives has now become crucial.
The Multi-Donor-Action employs a two-fold implementation methodology and aims to strengthen the capacities of the AU Commission to play a pivotal role in coordinating anti-IFFs policies on the continent.
A recent assessment conducted by the United Nations Conference of Trade and Development (2020) estimated losses at about US US$89 billion annually. These outflows are of tremendous concern, given the various socioeconomic challenges still faced by the continent
Illicit Financial flows are often associated with the extractive sector as extractive industries are particularly vulnerable to IFFs due to the complex and elaborate global value chains associated with the sector.
More so, the lack of financial transparency in the extractive sector all too often allows for sector-wide corruption and prevents governments from collecting the needed revenue.