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sharing in governance of extractive industries

Down the drain? The economic costs of illicit financial flows in Africa’s extractive sector

Resource-rich African countries are facing significant economic headwinds. Nigeria, Africa’s largest oil producer, depends on oil for over 90% of its foreign exchange earnings and three-quarters of government revenue. The slump in oil prices has adversely affected Nigeria’s economic prospects, pushing GDP growth into negative territory to -1.5% in 2016.

Zambia, the second largest producer of copper in Africa, has also registered an increase in fiscal deficits to about 10% of GDP in 2016. This is due to falling prices of copper, which contributed about 73% of total exports in 2015. In both countries, rents from extractive resources have failed to leverage sustainable economic growth and development. In Zambia, for example, the incidence of poverty did not change, at 60%, during 2000–10, despite a doubling of economic output.

But there are more to the challenges that low commodity prices presents to the economies of Nigeria and Zambia. Trade misinvoicing represents an additional challenge to both economies too.

Read the full article on the website of the African Development Bank.

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Comment by Mulya Jules on July 26, 2017 at 16:01

HI Stephen

I've enjoyed reading this. It always takes 2 to tango...locals politicians who often are paid to keep quiet as their people are starved to death and those big companies, as Holdger says, which take full advantage of the situation to engage in immoral practices while the whole world is watching. The closest example of this type of situation I can think of found in nature is what happens among those species of birds i.e. waxbills which are manipulated by kleptoparasites/brood parasites, such as whydahs, to take care of their young at the expense of their own. Quid faciendum to put an end to this?...Get ICC involved because what goes on is simply criminal.

Comment by Stephen Yeboah on July 25, 2017 at 14:03

Thanks for the read, Holger. I agree to the other practices that equally drain finance in the extractives. I have read your report co-published with the Transnational Organised Crime. It tackles a key aspect of the extractive chain: activities of armed groups particularly in the small-scale mining sector. I look forward to reading your upcoming report on Mongolia and Philippines. 

Comment by Holger Grundel on July 25, 2017 at 10:33

Very interesting article, Stephen. Essential to shed light on the vast sums that aren't captured by resource-rich economies because of illicit and immoral practices at international and global levels. Equally important, I think, to look closely at behaviours and networks at local and national levels where illicit flows can perpetuate the hold corrupt individuals, criminal networks and even armed groups have over some aspects of the mineral sector, esp. precious materials.  The Global Initiative against Transnational Organised Crime and Estelle Levin Limited have analysed the gold sector in Sierra Leone (http://globalinitiative.net/portfolio-posts/giff-illicit-financial-...), Mongolia and the Philippines (both reports about to be published) and put together a tool kit to facilitate further analysis. 

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