A research institute at the University of Massachusetts has published a working paper presenting an updated methodology for estimating capital flight, which the authors have applied to the cases of Angola, Côte d’Ivoire and South Africa.
They concluded that misinvoicing of exports and imports, especially in primary commodities, plays a major role facilitating capital flight from these countries.
Counting the cost
The results of the report by the Political Economy Research Institute indicate that the three countries have experienced substantial capital flight over the past four decades.
It has cost Angola US$60 billion in constant 2015 dollars between 1986 and 2015. Côte d’Ivoire saw $32 billion of capital flight between 1970-2015 and South Africa lost $198 billion in the same way between 1970-2015.
“An important mechanism of capital flight is misinvoicing of exports and imports, especially in primary commodities,” the authors of the report, Magnitude and Mechanisms of Capital Flight from Angola, Côte d’Ivoire and South Africa, say.
It concludes that the fact that these outflows have persisted over a long period indicates that they are driven by fundamental structural and institutional factors pertaining to both the source countries and the global financial system.
These outflows have led to the accumulation of massive offshore wealth belonging to the economic and political elites from these countries, even as their populations continue to face deprivation in access to basic services according to the authors.
They maintain that capital flight is a major obstacle to development financing that needs to be tackled through coordinated strategies at national and international levels.
Magnitude and Mechanisms of Capital Flight from Angola, Côte d’Ivoire and South Africa can be downloaded from here.
Categories: Trade Based Financial crimes News