Last meeting, we were pleased to be joined by our Guest Speaker, Sunit Bagree, promoting his report “The Money Drain” which discusses human rights and financial outflows from Southern Africa. Sunit delivered an inspiring and passionate talk summerized below:

The issue.
Southern Africa is losing US$30 Billion annually in trade-related illicit outflows ($8.8bn) & external government debt payments ($21.1bn).
Southern Africa faces major social and economic challenges, while the governments fail to protect their citizens, and money coming into Africa is outweighed by money coming out. In his article, Sunit addresses the effects of finance flowing out of the region illicitly, foreign public debt payments, and the potential for financial accountability through international bodies.

Why is this important?
It is estimated that Africa requires additional annual financing of between $500 billion and $1.2 trillion in order to achieve the Sustainalbe Development Goals, thus similar sums for achieving human rights on the continent. It is for this reason that many activists are greatly interested in the financial outflows from Africa.

A proportion of each of these different outflows represents money draining out of Southern Africa that could instead be spent by the region’s government to further the realisation of economic and social rights. This money drain means fewer jobs, medicines, teachers, houses and more. Here are some facts from Sunit’s article:

• Up to 80% of Southern Africa’s urban population live in slums
• 32% Grade 6 students are illiterate
• 52% homes without electricity
• 80%+ elderly without pensions
• 40%+ no sanitation facilities
• 617k new HIV infections each year
• 31% Youth unemployment

(The Money Drain, 2019)

The Money Drain touches on economic and social rights being an integral part of human rights, and the responsibility of states to ensure that these rights are respected, protected and fulfilled.

Examples of economic rights including the rights to work, fair wages, and safe conditions. Examples of social rights including rights to education, food and health.  Southern African countries are a long way from realising the economic and social rights of all of their citizens, with 4 of the 10 worst performing countries being in southern Africa.

This Money Drain is taking away from what should be the basic right to food, health, housing, electricity, education, employment and social security for all.

What are Trade-Related Illicit Outflows?

Illicit financial flows = illegal movements of money from one country to another.

It is estimated that Africa loses over US$50 billion every year from illicit financial outflows.(1)

How does it occur?

Trade illicit flows are generated through trade mis-invoicing ie: the deliberate falsification of the value, volume and/or type of commodity in an international commercial transaction.

For example:

In Mozambique, producers of shrimp frequently declare that their product is of lower quality than it really is, thus declared values are reduced, lowering the tax payable.(2) The proceeds of trade mis-invoicing are often transferred to offshore financial centres via secrecy jurisdictions. (3)

It is estimated that 30% of Africa’s wealth is held offshore. (4)

What are External Government Debt Payments?
Government debt is public debt, and those of South African governments are owed to international financial institutions, other governments and the private sector. However sadly when it comes to loans to Southern African governments, the results are rarely positive, fair or sustainable for 3 reasons. Debt justice involves identifying and cancelling illegal, odious and illegitimate debts. It also means respecting climate debts.

What are climate debts?
The global north is largely responsible for Climate Change, yet it is countries in the global south that suffer the consequences. Climate change has caused a vast increase is droughts, flooding and extreme weather events which is having disastrous impacts on livelihoods, food security and safety in the global south. For example, cyclones in Mozambique last year are estimated to have cost US$2 billion (5) further increasing the countries debt crisis.

Sunit then went on to list his recommendations for countries of the Global North and Southern Africa in order to improve accountability. These included suggestions on economic and social rights, trade mis-invoicing and unjust debt. Head over to the article here to read all 12 recommendations on how we can hold accountability.

Thank you for reading ?

References

(1) High Level Panel on Illicit Financial Flows from Africa (2015) Illicit financial flows, p. 2.

(2) High Level Panel on Illicit Financial Flows from Africa (2015) op. cit.

(3) Transparency International (2018) Anti-corruption glossary: Secrecy jurisdiction

(4) G Zucman (2015) The hidden wealth of nations, University of Chicago Press, p. 53.

(5) World Bank (2019) Statement on high-level meeting on humanitarian and recovery efforts following Cyclone Idai

(Emily Jayne Bruce)