Mining sector leads in IFFs

BUSINESS REPORTER

The mining sector is leading in illicit financial flows (IFFs) amid calls by experts for the government to tighten legislation to fight the scourge.

A report by the UN Conference on Trade and Development estimates that Africa loses US$88.6bn (3.7% of GDP) annually in illicit financial flows.

Social and economic justice activist Precious Lupahla told a recent workshop of journalists that 70% of IFFs are coming from the mining sector, which is “a bit worrying”.

She said poor legislation in the mining sector has made it susceptible to IFFs.

“A lot of porous legislation when we talk of the mining Act. We have failed as a country to adopt the extractive industry transparency initiative which could be a step towards improving transparency and accountability on issues of natural resources governance,” Lupahla said.

Reginald Chaoneka, project consultant in the Debt Management portfolio at the African Forum and Network on Debt and Development, said the global financial architecture was fuelling IFFs as it was in favour of developed countries.

“These are the same countries that encourage us to open our current account and our trade. Once we open our current account, we have weak controls; it offers a breeding ground for IFFs because we do not have capacity to have open trade,” Chaoneka said.

He said the developed countries leave African countries on the periphery of the global value chain and consigned to being suppliers of raw materials and consumers of manufactured products, which are four, five times more expensive than the raw materials supplied.

“By leaving us in the periphery of the global value chain, we are supplying commodities. The same commodities are the major areas where IFFs are arising,” Chaoneka said.

“A lot of IFFs are arising from countries that export a lot of commodities, be it minerals or natural resources. By staying at the periphery of the global value chain, we are more vulnerable to these IFFs.”

He said Africa has taken steps to stem IFFs through the creation of the African Mining Vision, which pushes for industrialisation, value addition, and beneficiation of our natural resources.