How Foreign Companies and Financial Centres Are Aiding Fleecing of Billions From Africa

A recent report by Transparency International reviews foreign actors are playing a significant role in fuelling and perpetuating corruption in Africa, chipping away at the region’s sustainable development.

Africa is the world’s second fastest-growing region, and yet 100 million more Africans live in extreme poverty today compared to the 1990s. Despite being home to six of the top ten fastest growing economies, Sub-Saharan Africa, in particular, is home to the largest share of people living in extreme poverty.

According to some estimates, African countries are losing at least US$50 billion annually to illicit financial flows.

Corruption continues to harm the efforts to bring people out of poverty. In recent years, many national governments, as well as the African Union, have declared the fight against corruption as their priority.

In some parts of the continent such as Rwanda it has been genuine talk. Political commitments have been followed by solid gains on the ground. In other parts, rhetoric has been just that, and the corruption has continued to go unabated.

Unsurprisingly, surveys reveal that the poorest people are twice as likely to pay a bribe – and more likely to be victims of corrupt behaviour by bureaucrats – than the richest.

One factor the report tries to bring about is that national governments aren’t the only ones failing African citizens in the fight against corruption. Foreign actors have been complicit in the continuous fleecing of resources from the government. 

Unlike impoverished citizens who have to pay bribes to access basic public services, companies are after mining rights, contracts for major construction projects and other deals. Their targets are often the politicians and the policymakers in the resource-rich countries.

Most of the bribes are often exchanging hands overseas and leaving governments with little room to enforce the law.

Transparency International’s recent report, Exporting Corruption, found that only 11 major exporting countries – accounting for about a third of world exports – have active or moderate law enforcement against companies bribing abroad, including in Africa. The rest fail to investigate and adequately sanction companies that pay bribes overseas.

In several countries, legal action has been initiated against multinational companies with operations on the continent. 

Earlier this year, the US government raised charges of fraud against three former government officials from Mozambique and five business executives over an alleged US$2 billion fraud and money laundering scheme. As part of this, more than US$200 million in alleged bribes and kickbacks was paid to Mozambican government officials and investment bankers.

In 2014, Spain launched an investigation into DEFEX, a state-owned company that promotes and exports goods and services, including weapons. DEFEX was accused of bribery and money laundering in connection to several countries, including Angola and Cameroon. Twenty-seven people are currently on trial in the Angola case alone.

What of China which has growing influence on the continent?

China, too, has anti-foreign bribery laws; yet there are no reports about the Chinese government investigating these or other companies accused of foreign bribery during that period.

How then does this move across borders undetected?

In 2018, the West Africa Leaks investigations showed how easy it is for corrupt public officials, money launderers and other criminals in West Africa to hide behind anonymous companies and access the global financial system. Powerful and well-connected individuals reportedly used secrecy jurisdictions to hide their conflicts of interest and breach public trust.

Anonymous companies allow the identity of their real owners to remain secret and enable those who wish to hide illicit wealth or launder money, to do so with ease.

One measure that Transparency International has been advocating for to tackle the flow of illicit money across borders and continents is the principle of beneficial ownership transparency. 

Whilst corruption seems to be an African problem, it is one that has global repercussions that need global attention. A lot of the money that African officials are taking away from the continent has been staked in European banks. Swiss bankers advise on the complex structures that are used to facilitate the illicit flows.

As Africa looks into the future and strengthening its structures, there is need for a united front to tackle the challenge.

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