The African continent was losing more than $80 billion (R1.16 trillion) a year through illicit outflows, former president Thabo Mbeki said on Monday.
The figure originally given was $50 billion, which was derived from statistics from the International Monetary Fund (IMF), but after looking more thoroughly into it, the number had increased to an estimate of between $80 billion and $90 billion, he told reporters in Johannesburg.
The former president chaired the African Union panel on illicit outflows from Africa.
The panel concluded its work last year and made recommendations on how to stop this from happening.
Mbeki said that, although the measures recommended were for Africa, there was interest in adopting them globally.
“We need to find a way of tracking these outflows so that we are able to measure whether the measures are working, leading to a reduction of the outflows.
“If we can’t measure, we can’t say if we making progress.”
Mbeki said the panel had met with US authorities, the IMF, the World Bank, the European Central Bank, the European Parliament and the Organisation for Economic Co-operation and Development to discuss the matter.
There were many ways used by the corporate world to effect these illicit outflows. Companies used things such as tax havens and transfer pricing.
Central banks needed to come on board to help monitor the outflow of funds from countries.
“Central banks have a role to play in terms of tracking money which goes through their systems,” he said.
“This money is not leaving the continent in plastic bags, it goes through financial systems.”
Mbeki said tax authorities on the African continent needed to be strengthened, as there were institutional weaknesses.
He claimed that two-thirds of illicit outflows were attributed to commercial companies and one-third to criminal activities such as trafficking, drugs, weapons and corruption.
Mbeki said the report by the panel on illicit outflows had raised the issue of tax havens.
“They became a destination of these illicit outflows. We have had exposure in the Panama Papers.”
The Panama Papers were a “concrete illustration” of how tax havens functioned.
“Maybe some of them, the money is legal and people may be putting money in tax havens for whatever reason. But what is also true is that people who expatriate capital from a country illicitly would use the same tax havens…
“We are happy the matter of Panama Papers was exposed,” Mbeki said.