Africa loses nearly $90bn a year to illicit financial flows: UN

Africa loses an estimated $90 billion every year to illicit financial flows, draining resources that could otherwise fund infrastructure, industrialisation and economic development, the United Nations Economic Commission for Africa (ECA) warned on Thursday.

The UN agency said the losses, coupled with one of the world’s lowest tax-to-GDP ratios of around 16%, underscore the urgency for African countries to mobilise more domestic resources rather than relying heavily on external financing.

Speaking at the 5th Session of the African Union Specialized Technical Committee on Trade, Tourism, Industry and Minerals, held alongside a meeting of African finance ministers, central bank governors and development partners, ECA Executive Secretary Claver Gatete said stronger domestic financing is essential if the continent is to achieve long-term economic transformation.

“Considering our current situation, it is clear that Africa cannot rely indefinitely on external financing to transform its economies. We must increasingly finance Africa’s development with African resources,” the commission said.

Gatete said the ECA has been supporting member states to strengthen tax administration, digitise revenue collection, curb illicit financial flows, expand domestic capital markets and build stronger fiscal institutions capable of financing industrial development.

“We have been supporting Member States to strengthen tax administration, digitize revenue systems, tackle illicit financial flows, expand domestic capital markets, leverage innovative financing and build stronger fiscal institutions capable of financing industrial development,” he said.

Finance alone not enough

Gatete argued that raising more revenue alone would not deliver the structural transformation Africa seeks without sustained investment in productive sectors.

“No country has achieved lasting prosperity without industrialisation, and no country has industrialised without sustained investment in productive sectors,” he said, describing finance and industrial policy as inseparable.

He urged African governments to channel capital into infrastructure, manufacturing, innovation and competitive enterprises while accelerating implementation of the African Continental Free Trade Area (AfCFTA) to deepen regional value chains and increase value addition.

“Fragmented policies cannot produce integrated economies. We need coherent action across macroeconomic policy, trade, infrastructure, energy, finance and industrial development.”

The ECA also called for stronger domestic capital markets, wider use of blended finance and guarantees to attract private investment, and greater regional cooperation on energy to support industrial growth.

Gatete highlighted initiatives including the Pan-African Payment and Settlement System (PAPSS), the proposed African Financing Stability Mechanism, the Alliance of African Multilateral Financial Institutions, and the planned African Credit Rating Agency as important steps toward strengthening Africa’s financial architecture and reducing dependence on external institutions.

He said these initiatives, alongside reforms championed by the African Development Bank’s New Africa Financial Architecture for Development, could help keep more African savings and investment within the continent while mobilising long-term financing for infrastructure, industry and innovation.