Illicit Financial Flows from South Africa

Decolonial Perspectives on Political Economy and Corruption

Serges Djoyou Kamga

• Publisher: Routledge
• Year: 2021
• Print ISBN: 9781032053592
• eBook ISBN: 9781000434521
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political Institutions & Public Administration
• Index: Politics & International Relations

This book examines the detrimental impact of illicit financial flows on South Africa's development, political economy, and transformation in the 21st century.

Over the years, illicit financial flows have led to the systematic looting and channelling away of South African resources, yet they are rarely studied by researchers looking to explain the country's underdevelopment and political economy. This book looks across sectors, showing that illicit financial flows cut across all the key pillars of development, frustrating the betterment of peoples' lives in South Africa. Investigating the problem from a decolonial perspective, the book delves deep into the catastrophic impacts of illicit financial flows for people and the economy, discusses how the problem is being combatted, and ultimately suggests solutions for rebuilding social trust between people and the state.

Making an important contribution to the decolonial debate, as well as to discussions of South Africa's political economy, this book will be of interest to researchers across African studies, global development, political science, law and corruption studies.

Part 1

Illicit financial flows and the political economy of South Africa

1 Insights into illicit financial flows from South Africa

Gerard Emmanuel Kamdem Kamga

DOI: 10.4324/9781003197232-1

Introduction

For the past few years, the African continent has been recording one of the highest economic growths on the planet. South Africa being the most developed country and the second-largest economy on the continent behind Nigeria, one would have expected this country to experience less poverty and various economic setbacks. The fact is that despite this astounding performance, the African continent remains ranked among the poorest and least developed in the world. This paradox is due to various factors including poor governance, inefficient socio-economic and political structures, human rights abuses, corruption, weak institutions, and, to a large extent, illicit financial flows (IFFs). In this chapter, I intend to assess and provide insights into the phenomenon of IFFs that has been threatening the African continent in general and particularly South Africa’s economic growth and sustainable development for decades. In 2015 a report by the High Level Panel on Illicit Financial Flows from Africa chaired by former South African president Thabo Mbeki found that the African continent loses an average of $50 billion annually through IFFs. This figure is increasing at an alarming rate of 20.2% per year, according to Global Financial Integrity (GFI) calculations for the period 2002–2011. With regard to South Africa, GFI further reveals that between 2004 and 2013, the country’s cumulative IFFs amounted to $209,220 million in nominal value. During that same period, GFI also ranked South Africa seventh place globally among the top ten source economies for IFFs. Like many countries that highly rely on natural resources to grow their economy, South Africa is a victim of IFF networks and has been losing an enormous sum of money as I will soon portray. On 1 April 2019, the South Africa Revenue Service (SARS) announced the preliminary revenue outcome for 2018–2019. It appears that for the financial year that ended on 31 March 2019, SARS collected an amount of R1,287.6 billion, against the 2019 budget estimate of R1,302.2 billion. This results in a deficit of R14.6 billion, which is to say –1.1%. There are several examples of deficit like this across various sectors in South Africa. I do not intend to connect all these losses to the phenomenon of IFFs but my assumption remains that IFFs are one of the main barriers to Africa and South Africa’s growth and sustainable development.

The concept of IFFs has been subject to debates as a proper and standard definition is still lacking. Nonetheless, broadly speaking, the abovementioned High Level Panel on Illicit Financial Flows from Africa defines IFFs as “money illegally earned, transferred or used” (AU/ECA, 2015: 9). In other words, one refers to IFFs when firstly, the funds are proceeds from illegal transactions and secondly, when the transfer of such funds fails to meet legal constraints pertaining to transparency, accountability, and tax deduction. It is further suggested that “these flows of money are in violation of laws in their origin, or during their movement or use, and are therefore considered illicit” (AU/ECA, 2015: 9). The main characteristic of IFFs is the flows of money and assets connected to illegal activities such as tax evasion, bribery, money laundering, contraband goods, and corruption. Moreover, it is crucial to note that “these funds typically originate from three sources: commercial tax evasion, trade misinvoicing and abusive transfer pricing; criminal activities, including the drug trade, human trafficking, illegal arms dealing, and smuggling of contraband; and bribery and theft by corrupt government officials” (AU/ECA, 2015: 23). The core of my analysis in this chapter lies in the review and assessment of IFFs as one of the major impediments to South Africa’s inclusive development. Following its ninety-seventh plenary meeting on 4 December 1986, the United Nations clarified the concept of development in the following terms:

development is a comprehensive economic, social, cultural and political process, which aims at the constant improvement of the well-being of the entire population and of all individuals on the basis of their active, free and meaningful participation in development and in the fair distribution of benefits resulting therefrom.

(UN Declaration on the Right to Development [UNDRTD])

From the above quote, it is suggested that development is not only about achieving economic growth and equitable and fair distribution of wealth but also improving the lives of individual citizens and that of the society as a whole by providing infrastructures and social services such as healthcare, housing, education, and security. The realisation of infrastructures and social services requires money but also responsible leadership. The UNDRTD was echoed by the Sustainable Development Goals (SDGs), also known as Global Goals, which came into being at the United Nations Conference on Sustainable Development in Rio de Janeiro, Brazil, in 2012. It was aimed at establishing rules to end poverty, protect the planet, and address all socio-economic and political challenges around the globe. The SDGs was defined by the Report of the World Commission on Environment and Development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.¹ The SDGs can be achieved only when there is a balance around the three key features upon which they were built, that is, economic, environmental, and social sustainability. In the current situation, such balance has been consistently threatened by IFFs that impede the development agenda of the African continent as a whole and also question the issue of development as a right. In a recent book entitled The Right to Development in the African Human Rights System, the author Serges Djoyou Kamga (2018) provides remarkable insights into the negative impacts of the Atlantic slave trade, colonialism, and the subjugation of Africa through globalisation as key factors that incited African people to claim their right to development in an attempt to address global inequities hidden in world politics and global institutions through the game of influences involving powerful actors.² Such powerful actors include individual state officials as well as multinational corporations that in one way or another play a role in illicit outflows from the continent. Having this in mind and given that South Africa is the second-largest economy on the continent, money ...

Table of contents

• Cover
• Half-Title
• Series
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Introduction and overview
• PART 1 Illicit financial flows and the political economy of South Africa
• PART 2 Illicit financial flows in South Africa: A reading from an Afro-decolonial perspective
• Index