Welcome to While You Weren’t Looking, Foreign Policy’s weekly newsletter focused on non-coronavirus news.
Here’s what we’re watching this week: Africa is losing 3.7 percent of its GDP to illicit financial flows, an Amnesty International report details “hellish conditions” for Ethiopian migrants stranded in Saudi prisons, and a proxy war is brewing in the Caucasus as Armenia and Azerbaijan fight over disputed territory.
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Africa’s $90 Billion Problem
An estimated $90 billion flows out of Africa each year through illegal and corrupt practices, according to a report released this week by the United Nations Conference on Trade and Development (UNCTAD). The money lost annually through illicit financial flows is equivalent to 3.7 percent of Africa’s collective GDP—and almost as much as the continent receives in development assistance and foreign direct investment annually.
“Illicit financial flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions,” said UNCTAD Secretary-General Mukhisa Kituyi.
Illicit capital flows—money that is illegally generated, used, or transferred abroad—deprive countries of capital and tax revenues that could be invested by governments in other public spending. The U.N. report found that countries with high levels of illicit capital flight also had drastically reduced spending on health care and education. Women and girls are disproportionately affected by the stolen money as they are the primary beneficiaries from such investment.
If illicit financial flows out of Africa were curbed altogether—a highly unlikely prospect given the complexity of the problem—it could reduce by almost half the $200 billion annual funding gap required for African countries to meet their Sustainable Development Goals, according to the U.N.
Extractive industries such as gold, diamond, and platinum supply chains are particularly vulnerable to illicit finance: In 2015, they accounted for an estimated $40 billion in illegal outflows, according to the report. Tax evasion often motivates illicit capital flows and is often enabled by tax havens in some of the world’s wealthier countries. In 2014, Africa lost an estimated $9.6 billion to tax havens, or 2.5 percent of the continent’s total tax revenue.
“In many ways addressing illicit financial flows is a matter of ethics, and civil society organizations, whistleblowers, and investigative journalists have played a critical role in revealing the magnitude of [these flows] and the mechanisms that support them in Africa and beyond,” said Paul Akiwumi, the UNCTAD director for Africa and least developed countries.
The report comes just after the International Consortium of Investigative Journalists, BuzzFeed News, and 108 media organizations around the world published a