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This campaign is supported by TrustAfrica.

The Campaign

Introduction

TrustAfrica, in partnership with like-minded organizations is developing a popular campaign to curb illicit financial flows out of Africa. The envisaged campaign will be rooted in African experiences, driven by African agency and hopefully, reinforced by global Africa solidarity linkages. The campaign broadens the conversation on illicit financial flows beyond specialist circles and seeks to mobilize ordinary people and grassroots social movements who are most affected by the problem in terms of lost economic benefits to be a key part of the voices for change.

In this concept note we set out the background and context on illicit financial flows and lay out the overall idea of the campaign and its key elements. The concept note also outlines key objectives and activities for the preparatory phase towards the official launch of the campaign.

Background

The much awaited Report of the High Level Panel on Illicit Financial Flows from Africa was finally presented at the 24th AU Summit in Addis Ababa and adopted by African leaders. The findings from the former South African president Thabo Mbeki led HLP echoes civil society voices from across the continent in highlighting illicit financial flows as a serious threat to inclusive development in Africa and calling for urgent practical policy action to stop the hemorrhage. One of the most notable findings of the HLP process is that illicit outflows from Africa are large and increasing at an alarming rate of 20.2% per year (according to Global Financial Integrity (GFI) calculations for the period 2002 – 2011). While observing that the dependence of African economies on natural resources extraction makes them particularly vulnerable to IFFs, the panel also point to emerging new and innovative ways of generating IFFs enabled by the digital economy and new technologies. In addition, while singling out the issue of weak national and regional capacities as a major obstacle in efforts to curb illicit outflows, the panel makes it clear that ending illicit financial flows is ultimately a political issue.

Since 2013 there has been a notable emergence of concerted advocacy efforts from various civil society based groups across the continent rallying against the issue of illicit movement of finances. Indeed, today illicit financial flows occupy a very important place in terms of advocacy actions for Africa’s development road map. For instance Agenda 2063 and ongoing processes such as the Financing for Development and the post 2015 Sustainable Development Agenda prioritize tackling illicit financial flows.  However, there is yet no coherent continental framework for tackling IFFs. A particular challenge is that some of the responses from the continent have borrowed, sometimes uncritically, concepts and solutions from mostly global north driven processes such as G8, G20 and Organization for Economic Cooperation and Development (OECD) initiatives without factoring in the specificities of the African context.

While the emerging global consensus around illicit flows is positive and indeed creates an important hook and rallying point to discussing Africa’s development challenge especially the domestic resource mobilization component. It is equally important to recognize some of the contradictions and limitations of the present discourse and put forward coherent policy solutions that effectively respond to the specific African context.

Context

Defined by the HLP as “money that is illegally earned, transferred or used”, conservative estimates are that Africa is annually losing as much as $60 billion dollars through these illicit financial outflows. While corruption (e.g. bribery of state officials and theft of state assets) and outright criminal activity (e.g. drug trafficking and human trafficking) are important contributors estimated at 5% and 30% respectively , corporate commercial activity particularly stands out as the biggest culprit – accounting for as much as 65% of all illicit outflows. The main mechanism through which corporates are bleeding the continent is through trade mis-invoicing – the practice of misrepresenting the price or quantity of imports or exports in order to hide or accumulate money in other jurisdictions. This way, companies, especially multinationals evade taxes, avoid customs duties, transfer kickbacks and launder money. According to research from GFI, trade mis-invoicing accounted for 68.8% of all illicit outflows from Sub-Saharan Africa between 2003 and 2012. Economic Commission on Africa (ECA) estimates show that between 2001 and 2010 African countries lost up to $407 billion dollars from trade mis-pricing alone.

A joint report by the African Development Bank (AfDB) and GFI, Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980 – 2009, puts the total illicit outflows from the continent at as much as $1.4 trillion for the 3 decades. The movement of capital using illicit means undermines the continent’s ability to mobilize domestic resources to address pressing challenges of growing inequality, poverty, healthcare, education, infrastructure, and other vital development priorities. These levels of Illicit Financial Flows are particularly a cause for concern given the magnitude of developmental needs across the continent and the paradox of rising numbers of people living in poverty across continent despite the ‘Africa Rising’ narrative. According to UN estimates as quoted by the HLP, the number of people living on less than $1.25 a day in Africa has increased from 219 million in 1990 to 414 million in 2010 as population growth outpaces the rate of poverty reduction. The new discoveries and exploitation of Africa’s natural resources although a very positive development are also cause for concern given the historically established systematic manner in which revenues from the extractives  have been illicitly externalized before.

Further, by undermining domestic resource mobilization, illicit outflows create dependence on outside resources thereby undermining national sovereignty and creating vulnerability to unfair conditionalities tied to development assistance, foreign loans, and aid. The dependency on various forms of foreign capital ranging from official development assistance, public and private equity loans and philanthropic support in Africa is not sustainable especially given the fact that it has become highly unpredictable in terms of sequencing and also amounts committed. It often results in additional crippling capital outflows from the continent. For instance, according to Health Poverty Action $21 billion leaves the continent annually in debt repayments for mostly loans contracted under unfavorable conditions.

We recognize that illicit financial flows are a mere symptom of a much bigger structural problem of unjust economic and power relations between Africa and the developed world that has historically impoverished Africa and enriched the West. If one looks at structural causes, it becomes clear that illicit financial flows are more than a matter of transparency in the limited sense of corporates disclosing what they pay to the state by way of taxes, royalties and other fees and the state declaring these payments in national accounts. Actually, the bigger disclosure should be what is not paid, and is illicitly siphoned out of the country. Similarly, the disproportionate power that corporates hold when it comes to the valuation systems, especially with regards to Africa’s natural resources, must come under scrutiny. In a groundbreaking study on the South African diamond mining sector, Bracking and Sharife (2014) reveal evidence of an international trading system in need of immediate reforms- the Government Diamond Valuator, instead of issuing independent assessments simply echoes `the valuations that De Beers puts forth. Their empirical studies put the “lost value” due to undervaluing of exports and over valuation of imports at over $3.3 billion dollars for the period 2004 to 2012. The weaknesses in the existing valuation system requires a more nuanced call for “tax justice” and  must be accompanied by a bold challenge to the existing disproportionate power relations between corporates and African governments.

Furthermore another real challenge is the role of the African nation state as the custodian and steward of Africa’s resources. This is particularly important in the context of the political economy of economic deregulation and the rise of finance capital (financialization) by which power has effectively shifted from the state to a rigged market that works for the interest of a few and prioritize corporate interests over citizens. In essence, we have to interrogate the new reality of the African state in terms of its potential conviction and capacity to effectively preside over the national economic domain in the interest of its people more so in contexts where capture of state power has actually perpetuated comprador forms of accumulation on the part of state elites.

Further, given historical and structural issues which make not only illicit financial flows but resource transfers in general a particular development problem for Africa, it follows that the quest for solutions to this problem in the African context must be anchored in distinct African demands deriving from the African specificities of this problem. Thus, while embracing what works from the proposals put on the table so far by groups such as the OECD, it is imperative to realize that these responses are largely based on a particular experience of the problem by Western and Global North economies. The proposed solutions therefore will not adequately respond to the specific ways that the challenge of illicit flows and its attendant root causes manifests in the African context. Therefore, a crucial task for African CSOs and partners is to properly problematize illicit financial flows in the African context and develop distinctly African policy responses.

Conceptual model

Stop The Bleeding Campaign-Conceptual Model_Page_1

conceptual model

Goals and Objectives

Given the above, specific objectives of this preparatory process towards the campaign launch are as follows:

  1. Develop a campaign strategy whose goals, objectives, key messages and demands are shared broadly among a set of civil society organizations that will anchor the campaign.
  2. Synthesize key insights from a number of IFF convenings and papers into an Africa specific problematization and conceptual framing of the challenge of illicit financial flows from the continent.
  3. Develop a set of Africa specific policy demands that will be championed by the campaign.
  4. Design and produce key materials and assets that will give visibility to the campaign including online platforms and print products
  5. Secure buy in and endorsement of the campaign from key organizations and individuals of influence in Africa and global Africa solidarity partners.
  6.  Officially launch a popular campaign to push for national, sub-regional, continental and global policy action to address the challenge of illicit outflows.


Activity Plan

Timeframe Activities Outputs
1 Feb – 31 Feb, 2015 –        Conceptual consultations on the campaign-        Development of concept note and budget-        Identification and invitation of potential participants to the campaign strategy development and launch meetings-        Identification and contracting of resource persons ( Event Coordinator, Facilitator, Rapporteur, Photographer, Communication, Videographer)-        Development of draft Campaign Strategy document

–        Constitution of Working Group on IFF and Africa Transformation

–        Consultations on key demands

–        Logistical preparations for Policy Team and Campaign Strategy meetings

–        Concept note-        Participants list-        Invitation letters-        Contracts (resource persons)-        ADPTT

–        Framing paper

–        Programme

 

1 March – 31 March, 2015 –        Consultation on key demands-        Drafting of policy demands-        Media mobilisation Draft policy demands
28 March – 30 March, 2015 –        Convening of Working Group to finalize demands and media briefing Campaign/policy  demands
1st April-30 April, 2015 –        Design and production of branded campaign material(T-Shirts, Banners, stickers, flyers)-        Development of website and social media platforms (twitter, Facebook, etc.)- -Branded t-shirts, banners ,stickers-dedicated website-twitter and Facebook accounts(draft versions)
01 April – 30 April , 2015 –        Securing buy in and endorsement of campaign idea-        Recruit key African CSOs to campaign-        Recruit targeted global north Africa solidarity CSOs-        Invite key groups to Campaign Strategy Consultation meeting and launch-        Finalize logistical arrangements for strategy consultation and campaign launch meeting
23 – 24 May 2015 CAMPAIGN STRATEGY FINALIZATION & LAUNCH PLANNING MEETING Final Campaign Strategy DocumentCampaign Launch Plan
28 April – 22 May, 2015  Finalization of campaign materials, factsheets, online platforms, media mobilizations, and campaign launch preparations.  Final Campaign material
25 May 2015(Africa Unity Day) CAMPAIGN LAUNCH Press coveragePublic event
25 May 2015 – 25 May 2016 Continental and international mobilization as per campaign strategy Continental and global buy, endorsement and actions


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