Trade Misinvoicing
and Illicit Financial Flows
in Sub-Saharan
Africa
Last year, Global
Financial Integrity (GFI) and the African Development Bank
published a report indicating that from 1980–2009 unrecorded illicit financial outflows from Africa represent US $1.22-1.35
trillion(1). The World Bank estimates the total GDP of Sub-Saharan
Africa at US
$2,249.95 billion in 2013. In a new report published on May 12, 2014 GFI(2)
put light on illicit financial outflows created by trade misinvoicing in
Sub-Saharan Africa. The report shows that between 2002 and 2011, illicit
financial flows has moved US $60.8 billion out of Ghana, Kenya, Mozambique,
Tanzania, and Uganda. Global Financial Integrity defines under-invoicing of
exports as the primary method for shifting money illicitly out of the country
and under-invoicing of imports illegally smuggled capital into the country. Trade
misinvoicing lowers government revenues and consequently handicaps economic
growth.
It represents important
tax losses. During the period of 2002 and 2011, the yearly tax losses of Ghana could
be estimated at $368 million (11% of total government revenue); Kenya $435
million; Mozambique $187 million; Tanzania $248 million; and Uganda $243
million. The report indicated that the total cumulative trade misinvoicing
(export under-invoicing, import under-invoicing, export over-invoicing, and
import over-invoicing) could be estimated at $14.39 billion in Ghana
(7th−largest economy in Africa-GDP growth 7.9% in 2012); $13.58 billion in
Kenya (world leader in mobile money system-GDP growth 4.6% in 2012); $5.27
billion in Mozambique (4th largest gas
reserves in the world-GDP growth 7.4% in 2012); $18.73 billion in Tanzania (Soon to be
world leading LNG exporter - GDP growth 6.9% in 2012); and $8.84 billion in
Uganda (2.5 billion barrels of oil-GDP growth 3.4% in 2012). All 5 of these African
States are natural resource rich countries. Ghana is the world’s 2nd largest
producer of cacao, after Ivory Coast. Cacao export generates about US $1.6
billion in foreign exchange for Ghana. This country has the 5th
largest oil reserve in Africa, with an oil reserve that could
reach 5 billion barrels in 2015. Ghana, Mozambique, and
Tanzania are compliant countries with the Extractives
Industry Transparency Initiative (EITI), but Kenya and Uganda are not members
of this organization. Transparency International corruption perceptions index
ranked Ghana number 63/177; Tanzania 111/177; Mozambique 119/177; Kenya 136/177;
and Uganda 140/177. Trade misinvoicing is more prevalent in resources-rich
countries.
With these two reports, we can conclude that the African continent
should not experience a high level of debt and poverty. As stated by Global Financial
Integrity, Africa is a net creditor to the world.
1-http://www.afdb.org)
2-Global Financial Integrity: Hiding in Plain Sight
Trade Misinvoicing and the Impact of Revenue Loss
in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011,
by Raymond
Baker, Christine Clough, Dev Kar, Brian LeBlanc,
Joshua Simmons – Funded by Ministry of Foreign Affairs of Denmark - May 2014
