African nations set on waging a war against illegal capital flight have long bemoaned the geographical disparity shown by the West in the recovery of these funds.
As the recovery of funds continues elsewhere in the world, including Europe and Asia, the leaders of the African countries spearheading the battle against corruption may be forgiven for wishing for more influence on the geopolitical chessboard.
This is not how it should be. Taking action against a crime that deepens a country’s income inequality, perpetuates high unemployment rates and weakens its social fabric should be a priority for Western governments, regardless of political gain.
In Africa illegal capital flight through the misappropriation of funds is an increasing problem.
From 1970 to 2010, illegal capital flight from Africa increased from about $2.6 billion to more than $1.7 trillion, an increase of over 650 times over the four decades, through embezzlement of natural resource exports, tax evasion, corruption, transfer pricing, and outright smuggling of capital. Staggeringly, this exceeds the region’s total external debt outstanding of around $293.8 billion at end of December 20101.
So who has all the money? All too often it’s the political and private elites that perpetrate the illegal transactions. For example, estimates of the combined amount of wealth siphoned out of the economy by the former officials of some African countries have reached billions.
This however pales into insignificance compared to the $7.3 trillion that the Tax Justice Network conservatively estimates is stashed in secret offshore accounts held by residents of developing world countries. These private and political elites seem unaffected that their nations continue to borrow themselves into bankruptcy as they enjoy an opulent lifestyle of private jets, superyachts and pink champagne.
Sadly, the existing international financial architecture and global trading systems favour the dominant stakeholders whose interests are to preserve the status quo. Furthermore the offshore world of tax havens — home to a substantial portion of the illicit capital — does not make life easy for prosecutors pursuing complex financial crimes to follow the money.
Many offshore jurisdictions refuse to recognise international subpoenas and account information is hidden under layers of corporate shells.
Therefore the likelihood of misappropriated funds being recovered remains low; over the past 15 years only $5 billion has been retrieved.
Complicity between powerful bankers and countries, the fact foreign investment interests often override the need to support a campaign for justice and funds recovery in the developing world, collusion among politicians and private sector operators, and absence of sanctions or punitive measures for perpetrators who violate international conventions are all contributing factors.
Yet it does not justify inaction.
A number of African countries have begun to tackle the problem of misappropriation of funds head-on. One such country has been Djibouti, a smallest, yet strategically important country in the Horn of Africa.
The nation’s democratically elected President, Ismaïl Omar Guelleh, has long been committed to improving governance and transparency with regards to the management of public funds — the heart of any effective fight against corruption.
The country has made notable progress over the past decade. A raft of legislative reforms targeting anticorruption and improving transparency has been passed. Institutional and administrative practices have evolved.
A number of new institutions charged with regulation, including an ombudsman to strengthen the tools used to monitor government action and a court of accounts to ensure judicial review of public accounts have been established.
Djibouti has made significant strides; today the country offers a strong regulatory framework and a safe and stable political environment for investors.
The Office of the State Inspector General (IGE) has driven forward efforts to promote good governance and transparency in Djibouti as well as pass on their knowledge to other African institutions.
The IGE helped establish the Federation of State Inspectorate Generals of Africa (FIGE), which has grown to include 22 institutions across Africa dedicated to the fight against corruption.
The fight against corruption also requires sending a clear message to all private operators who may be tempted to bribe public officials to negotiate on behalf of the government that any contract obtained by corrupt means may be terminated.
Political will to repatriate misappropriated funds is strong in Djibouti. Indeed, the willingness and ability to introduce legislative reforms and prosecute corrupt officials despite the power and influence they might wield demonstrates the progress the made by the African gateway.
Yet neither an individual country nor a group of developing nations can win the campaign against corruption. The problem is global and must be addressed as such.
Djibouti and the other African nations’ success in fighting illegal capital flight requires strong cooperation from their partners in the developed world where most of the wealth is domiciled, including in tax havens.
Only when developing countries are offered the same levels of access and support enjoyed by developed countries and the multimillion dollar fraud seen for what it is, direct theft from an emerging nation, will the battle be won.
The writer is State Inspector-General for Djibouti.