May 28th 2017

World / East Africa

Illicit financial outflows hampering Africa’s efforts to reduce inequalities

Inequalities in Africa could be greatly reduced if illicit financial outflows, which are costing the continent an estimated $60 billion annually are stemmed, says Carlos Lopez, executive Secretary for Economic Commission for Africa.

By Shadrack KaviluFriday, 20 May 2016 14:20 EAT

Inequalities in Africa could be greatly reduced if illicit financial outflows, which are costing the continent an estimated $60 billion annually are stemmed, says Carlos Lopez, executive Secretary for Economic Commission for Africa.

Lopez 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, Mr. Lopes said inequality should never be accepted as a way of life.

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

Addressing illicit financial outflows, Mr. 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.”

Mr. 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.

Mr. 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.

 

“Structural transformation through industrial development is no longer one option but the option for Africa to address the current economic vulnerabilities it faces,” said Mr. Lopes. “We have been promoting such a path aggressively.”

He said the ECA will continue to advocate for inclusive structural transformation in Africa to reduce inequalities, among other issues, adding improving access of vulnerable groups to financial services was vital for unleashing their entrepreneurial potential and empowering them economically.

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

These include the role of progressive fiscal policies in redistributing income, public financing for good quality universal free health and education, decent work and wages and political participation for all.

Shadrack is a business writer at the Kenya Free Press.





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