Former president Thabo Mbeki said there was a need to strengthen the “legal and regulatory framework” to be able to deal with the problem of illicit financial outflows from Africa.

Mbeki said countries such as Nigeria and South Africa should have the necessary legislation to be able to deal with the problem properly.

“It is necessary for the countries to have the legislative framework which enables them to act to identify resources without impacting negatively on what will be normal and desirable econo-mic integration on the continent,” Mbeki said yesterday at the Pan African Parliament (PAP) ordinary session in Midrand, north of Johannesburg.

South Africa already has legislation which enables it to identify what might be an illicit inflow.

“They should be able to pick up if there is any such money coming from Nigeria,” Mbeki said.

“I don’t know if Nigeria has similar legislation so that the countries can cooperate in dealing with this.”

PAP formally adopted Mbeki’s report on financial illicit outflows.

Mbeki, who chairs the United Nations high-level panel on illicit financial flows from Africa, said the report raised the matter of corruption by Africans.

“It will not say necessarily politicians, doctors, lawyers, or senior government are involved. It is very detailed. It is not propaganda.”

Economic Freedom Fighters MP Floyd Shivambu said the ultimate solution was Africa’s strategic ownership and control of its natural resources.

Mbeki called on African countries to pay closer attention to illicit flows from the commercial sector.

“It would also mean holding multinationals accountable for fraudulent practices by setting up requirements for their transfer of funds.”

However, Mbeki said most African countries did not have enough highly trained lawyers, accountants and tax experts to prevent or punish perpetrators.

Developed countries were keen to deal with illicit outflows. “The reason for it is because they see they themselves are losing billions of dollars through this,” Mbeki said.

Year-end profits of major corporations based in their countries “don’t come to London. They go to a tax haven somewhere”, he said.

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Address of the TMF Patron, Thabo Mbeki, at the Pan African Parliament: Midrand, 21 May 2015

In 2011, the African Ministers of Finance, Planning and Economic Development, jointly convened by the African Union and the UN Economic Commission for Africa, identified these illicit capital outflows as constituting a major obstacle to our development efforts.

Accordingly they decided to form a High Level Panel to investigate and make recommendations about what Africa should do to stop these illicit financial outflows.

The Panel, which I had the privilege to Chair, started its work in 2012 and submitted its Report to the 24^th Ordinary Session of the Assembly of African Union Heads of State and Government this January. The Assembly adopted the Report and its Recommendations.

By way of background, it is estimated that over the last 50 years, Africa lost in excess of $1 trillion in illicit financial outflows.

Our Panel further estimated that our Continent loses annually over $50 billion through these illicit financial outflows.

This estimate is based on data obtained from the International Monetary Fund Direction of Trade Statistics which, as Raymond Baker, Director of Global Financial Integrity explains, report annual exports and imports for all pairs of reporting countries.

The figure of $50 billion is therefore an underestimate as it excludes such elements as trade in services and intangibles, proceeds of bribery and trafficking in drugs, people and firearms.

As we have said, the African Ministers decided to investigate the matter of illicit financial outflows because of the immense developmental challenges which face the Continent.

For us to meet these challenges requires huge volumes of capital. Accordingly it does not make any sense that we should be exporting capital which should be retained within our Continent.

You will recall that later this year, the Millennium Development Goals, the MDGs adopted in the year 2000, will be replaced by the new Sustainable Development Goals. In this regard you know that many of our African countries did not achieve all these MDGs because of insufficient capital to finance the required actions.

You will also recall that to address this challenge of generating the resources to enable all countries to realise the MDGs, in 2002 the UN convened the International Conference on Financing for Development.

As you know, the next International Conference on Financing for Development will be held in Addis Ababa in July this year. It is clear that this time round the Conference will pay particular attention to the matter of domestic resource mobilisation to finance the new Development Goals.

Indeed in its Declaration on Illicit Financial Flows, the AU Assembly has expressed “the need to ensure that Illicit Financial Flows and their impact on domestic resources mobilisation is given the necessary attention by the 3rd International Conference on Financing for Development, and in this regard, stress(es) the need for robust international cooperation to address the problem.”

It is therefore obvious that particular attention will be paid to the issue of stemming the illicit financial outflows throughout the developing world. This will put pressure on all of us to act on this matter.

In this context we should take particular note of the observation made by the AU Assembly in its Declaration of Illicit Financial Flows concerning “the growing need for domestic resource mobilisation for the attainment of our continental development visions and goals particularly Agenda 2063 and the Common African Position on the post 2015 Development agenda, which both call for inclusive growth, sustainable development and social and economic structural transformation of Africa through optimal utilization of our natural resource endowments…”

In the context of everything I have said, it is necessary to keep in mind various specifics of our situation as Africans. The United Nations has estimated that the number of Africans living on less than $1.25 a day increased from 290 million in 1990 to 414 million in 2010. In addition, per capita GDP in Africa is one fifth, that is, 20 per cent of the global average figure.

In 2012 the gross capital formation rates in Nigeria and South Africa were 13 and 19 per cent respectively. The related figures for China and India respectively were 49 and 35 per cent.

And yet the African Development Bank and others estimate that Africa needs an additional $30 to $50 billion annually to address its infrastructure needs.

These statistics make the unequivocal statement that Africa needs large volumes of capital effectively to address the challenge of the eradication of poverty and underdevelopment.

It is precisely in this context that the imperative stands out that everything should be done to stop the illicit financial outflows which contribute so much to depleting the capital our Continent so urgently needs.

Accordingly, to indicate what needs to be done, our Panel on Illicit Financial Flows adopted the self-explanatory action slogan: Track it! Stop it! Get it!

Of central importance in this regard is the Finding our Panel made that the bulk of illicit financial flows from our Continent – 60 per cent and more – derives from the activities of the large commercial companies.

The second and third sources of these illicit outflows respectively are through criminal activities such as drug trafficking accounting for about 30 per cent, and lastly, corruption.

With regard to the latter we must explain that here corruption features in two contexts. One of these which we have just mentioned is the expatriation of corruptly acquired resources.

The second is corruption understood as the abuse of entrusted power to facilitate the illicit export of capital by others and therefore its prevalence throughout the various activities which represent the illicit outflows.

The second important Finding I must mention is that the outflows from Africa end up somewhere else in the world. Accordingly to stem these outflows requires cooperation and joint action among the originating and receiving countries.

» Read the full address here.