Illicit financial flows enhance inequality

NAIROBI, KENYA - Inequalities in Africa could be greatly reduced if illicit financial outflows, which are costing the continent an estimated $60 billion annually, are stemmed.

Carlos Lopez, Executive Secretary for Economic Commission for Africa says inequality remains a critical issue that should be addressed with urgency if costly consequences are to be avoided.

In a keynote address to a symposium jointly hosted by Oxfam and Oxford University to examine, among other issues, the causes and consequences of uneven economic growth and rising inequality between and within nations, Lopes said inequality should never be accepted as a way of life.

“Imagine the impact these illicit resources in reducing inequality through social transfers and investments in productive and job creating initiatives,” he told the symposium.

Addressing illicit financial flows, Lopes said, requires the collective efforts of both national governments and the international community.

“It is an African problem with a global solution,” he said. “Western countries cannot turn a blind eye to tax avoidance and transfer pricing activities of their trans-national corporations while at the same time lecturing African countries about good governance.”

Lopes said the Panama papers leaked recently to the media vindicated the ECA which for some time now has been calling for action against illicit financial outflows from Africa.

“The revelations by the Panama papers laid to rest any doubts by skeptics about the prevalence and gravity of the problem.”

The Executive Secretary cited Latin America as a continent that has been successful in reducing inequality while experiencing high economic growth at the same time.

“Economic growth created greater demand for domestic goods, moving more people - particularly the poor – into the labour force, driving wage increases,” he said.

This, he said helped reduce the gap between college-educated workers and those without a college degree.

African leaders, said Mr. Lopes, are taking the issue of inequality seriously and are working hard through a number of instruments with partner organisations to address the problem.

Universal access to primary and secondary education was also instrumental in reducing inequalities in Latin America, he said.

Lopes said the low level of formal employment associated with growth has been one of the major drivers of poverty and inequality in Africa due to dependence on primary commodities earnings which represent the bulk of Africa exports.

As a result African countries now prioritize value addition underpinned by commodity-based industrialization as key development objectives.

The symposium also assessed possible policy solutions to use in charting a way forward for equity, democracy and social stability in the global south.

By Shadrack Kavilu, Saturday, May 28th, 2016


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