2 - Illicit Financial Flows in Southern Africa: Exploring Implications for Socio-economic Development
Corresponding Author(s) : Vusi Gumede
Africa Development,
Vol. 44 No. 2 (2019): Africa Development: Special Issue on Money, Security and Democratic Governance in Africa (II)
Abstract
This article views Illicit Financial Flows (IFFs) as any illegal and corrupt practice to acquire money without the due process that is in line with international financial and trade regulatory frameworks. Based on this working definition, the article explores IFFs in the mining sectors in four countries (the Republics of Botswana, Namibia, South Africa and Zimbabwe) with a specific focus on the socio-economic implications for communities in the mining or former mining areas. Measurement issues are also attempted. Indeed, IFFs have severe implications for the communities (as for countries). Although the results are mixed, regarding the quantification of IFFs in the mining sector, it is clear that IFFs have major negative effects on welfare and political stability. Estimates show high levels of IFFs through trade mis-invoicing for the mining sector in all the four countries.
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- Bhebhe, N., 2015, Zimbabwe loses millions in illicit financial flows, The Africa Report, available an www.theafricareport.com/Southern-Africazimbabwe-loses-millions-in-illicit-financialflows.html. Accessed on 17 January 2017.
- Bokosi, F., and Chikumbi, T., 2015, Tackling Illicit Financial Flows from and within Africa, African Civil Society Circle Position Paper (https://www.francophonie.org/IMG/pdf/afrodad.pdf ), African Civil Society Platform. Accessed on 7 June 2017.
- Boyce J.K. and Ndikumana, L., 2001, ‘Is Africa a net creditor? New estimates of capital flight from severely indebted sub-Saharan African countries, 1970–96’, Journal of Development Studies 38 (2): 27–56.
- Cuddington, J.T., 1986, Capital Flight: Estimates, Issues, and Explanations, Princeton, NJ: International Finance Section, Department of Economics, Princeton University.
- Dikuelo, P., 2016, Botswana Illicit Financial Flows top P200bn-Report, Mmegi online, available at www.mmegi.bw/index.php?aid=59322&dir=2016/april/15. Accessed on 16 January 2017.
- Fadiran, D.O. and Sarr, M., forthcoming, ‘Institutions, natural resources, and capital flight: the Nigerian case’.
- Fedderke, J.W. and Liu, W., 2002, ‘Modelling the determinants of capital flows and capital flight: with an application to South African data from 1960 to 1995’, Economic Modelling 19 (3): 419–44.
- Gaulier, G., Mirza, D., Turban, S. and Zignago, S., 2008, ‘International transportation costs around the world: a New CIF/FoB rates Dataset’, CEPII, March, 304–24.
- Gaulier, G. and Zignago, S., 2010, BACI: international trade database at the product-level (the 1994–2007 version).
- Gumede, V., 2017, Leadership for Africa’s Development: Revisiting Indigenous African Leadership and Setting the Agenda for Political Leadership, Journal of Black Studies, Vol. 48, No. 1, 2017, pp. 74-90.
- Gumede, V., 2018, ‘Poverty and Inequality in Africa: An Agenda for Post-2015 Development’, in S. Oloruntoba and V. Gumede, eds, State and Development in Post-Independent Africa, Austin, TX: Pan-African University Press.
- Guaranty, M., 1986, ‘LDC capital flight’, World Financial Markets 2: 13–16.
- Hummels, D. and Lugovskyy, V., 2006, ‘Are matched partner trade statistics a usable measure of transportation costs?’, Review of International Economics 14 (1): 69–86.
- Kar, D. and Cartwright-Smith, D., 2010, ‘Illicit financial flows from Africa: hidden resource for development’, Global Financial Integrity, March.
- Le, Q.V. and Zak, P.J., 2006, ‘Political risk and capital flight’, Journal of International Money and Finance, 25 (2).
- Maddala, G.S. and Wu, S., 1999, ‘A comparative study of unit root tests with panel data and a new simple test’, Oxford Bulletin of Economics and statistics 61 (S1): 631–52.
- Menzie, W.D., Soto-Viruet,Y., Bermúdez-Lugo, O., Mobbs, P.M., Perez, A.A., Taib, M. and Wacaster, S., 2013, ‘Review of selected global mineral industries in 2011 and an outlook to 2017’, Reston, VA: U.S. Geological Survey.
- Mevel, S., Vakataki‘Ofa, S. and Karingi, S., 2015, ‘Illicit Financial Flows, Trade Mispricing, and their Impact on African Economies’, in A. Elhiraika, A. Mukungu and W. Nyoike, eds, Regional Integration and Policy Challenges in Africa, Basingtoke (UK): Palgrave Macmillan.
- Ncube, C., and Okeke-Uzodike, U., 2015, ‘Understanding Illicit Financial Flows in post-2000 Zimbabwe’, Journal of African Affairs, Vol.2, Numbers 1 &2, pp 93-112.
- Ndikumana, L. and Boyce, J.K., 2008, ‘New estimates of capital flight from sub- Saharan African countries: linkages with external borrowing and policy options’, PERI Working Papers 144.
- Ndikumana, L. and Boyce, J.K., 2011, ‘Capital flight from sub-Saharan Africa: linkages with external borrowing and policy options’, International Review of Applied Economics 25 (2): 149–70.
- Pastor, M., 1990, ‘Capital flight from Latin America’, World Development 18 (1): 1–18. The World Bank, 2016a, World Bank Development Indicators.
- The World Bank, 2016b,The World Bank Global Economic Monitor (GEM) Commodities.
- UN COMTRADE, 2015, UN COMTRADE database. UN COMTRADE Online.
- United Nations Economic Commission for Africa (UNECA), 2015a, Illicit Financial Flow: Report of the High Level Panel on Illicit Financial Flows from Africa.
- United Nations Economic Commission for Africa (UNECA), 2015b, Illicit Financial Flows – Why Africa Needs to ‘Track It, Stop It and Get It’.
- Yearbook, U.M., 2002–2014, Platinum-Group Metals, U.S. Geological Survey.
References
Bhebhe, N., 2015, Zimbabwe loses millions in illicit financial flows, The Africa Report, available an www.theafricareport.com/Southern-Africazimbabwe-loses-millions-in-illicit-financialflows.html. Accessed on 17 January 2017.
Bokosi, F., and Chikumbi, T., 2015, Tackling Illicit Financial Flows from and within Africa, African Civil Society Circle Position Paper (https://www.francophonie.org/IMG/pdf/afrodad.pdf ), African Civil Society Platform. Accessed on 7 June 2017.
Boyce J.K. and Ndikumana, L., 2001, ‘Is Africa a net creditor? New estimates of capital flight from severely indebted sub-Saharan African countries, 1970–96’, Journal of Development Studies 38 (2): 27–56.
Cuddington, J.T., 1986, Capital Flight: Estimates, Issues, and Explanations, Princeton, NJ: International Finance Section, Department of Economics, Princeton University.
Dikuelo, P., 2016, Botswana Illicit Financial Flows top P200bn-Report, Mmegi online, available at www.mmegi.bw/index.php?aid=59322&dir=2016/april/15. Accessed on 16 January 2017.
Fadiran, D.O. and Sarr, M., forthcoming, ‘Institutions, natural resources, and capital flight: the Nigerian case’.
Fedderke, J.W. and Liu, W., 2002, ‘Modelling the determinants of capital flows and capital flight: with an application to South African data from 1960 to 1995’, Economic Modelling 19 (3): 419–44.
Gaulier, G., Mirza, D., Turban, S. and Zignago, S., 2008, ‘International transportation costs around the world: a New CIF/FoB rates Dataset’, CEPII, March, 304–24.
Gaulier, G. and Zignago, S., 2010, BACI: international trade database at the product-level (the 1994–2007 version).
Gumede, V., 2017, Leadership for Africa’s Development: Revisiting Indigenous African Leadership and Setting the Agenda for Political Leadership, Journal of Black Studies, Vol. 48, No. 1, 2017, pp. 74-90.
Gumede, V., 2018, ‘Poverty and Inequality in Africa: An Agenda for Post-2015 Development’, in S. Oloruntoba and V. Gumede, eds, State and Development in Post-Independent Africa, Austin, TX: Pan-African University Press.
Guaranty, M., 1986, ‘LDC capital flight’, World Financial Markets 2: 13–16.
Hummels, D. and Lugovskyy, V., 2006, ‘Are matched partner trade statistics a usable measure of transportation costs?’, Review of International Economics 14 (1): 69–86.
Kar, D. and Cartwright-Smith, D., 2010, ‘Illicit financial flows from Africa: hidden resource for development’, Global Financial Integrity, March.
Le, Q.V. and Zak, P.J., 2006, ‘Political risk and capital flight’, Journal of International Money and Finance, 25 (2).
Maddala, G.S. and Wu, S., 1999, ‘A comparative study of unit root tests with panel data and a new simple test’, Oxford Bulletin of Economics and statistics 61 (S1): 631–52.
Menzie, W.D., Soto-Viruet,Y., Bermúdez-Lugo, O., Mobbs, P.M., Perez, A.A., Taib, M. and Wacaster, S., 2013, ‘Review of selected global mineral industries in 2011 and an outlook to 2017’, Reston, VA: U.S. Geological Survey.
Mevel, S., Vakataki‘Ofa, S. and Karingi, S., 2015, ‘Illicit Financial Flows, Trade Mispricing, and their Impact on African Economies’, in A. Elhiraika, A. Mukungu and W. Nyoike, eds, Regional Integration and Policy Challenges in Africa, Basingtoke (UK): Palgrave Macmillan.
Ncube, C., and Okeke-Uzodike, U., 2015, ‘Understanding Illicit Financial Flows in post-2000 Zimbabwe’, Journal of African Affairs, Vol.2, Numbers 1 &2, pp 93-112.
Ndikumana, L. and Boyce, J.K., 2008, ‘New estimates of capital flight from sub- Saharan African countries: linkages with external borrowing and policy options’, PERI Working Papers 144.
Ndikumana, L. and Boyce, J.K., 2011, ‘Capital flight from sub-Saharan Africa: linkages with external borrowing and policy options’, International Review of Applied Economics 25 (2): 149–70.
Pastor, M., 1990, ‘Capital flight from Latin America’, World Development 18 (1): 1–18. The World Bank, 2016a, World Bank Development Indicators.
The World Bank, 2016b,The World Bank Global Economic Monitor (GEM) Commodities.
UN COMTRADE, 2015, UN COMTRADE database. UN COMTRADE Online.
United Nations Economic Commission for Africa (UNECA), 2015a, Illicit Financial Flow: Report of the High Level Panel on Illicit Financial Flows from Africa.
United Nations Economic Commission for Africa (UNECA), 2015b, Illicit Financial Flows – Why Africa Needs to ‘Track It, Stop It and Get It’.
Yearbook, U.M., 2002–2014, Platinum-Group Metals, U.S. Geological Survey.