An institute based at the University of Massachusetts has published a paper examining mechanisms, actors, enablers, and the institutional environment that facilitate capital flight from South Africa and the resulting accumulation of private wealth in offshore financial centres.
The paper published by the Political Economy Research Institute (PERI) estimates that from 1970 to 2017, South Africa lost over US$300 billion through capital flight, including through over-invoicing of imports and under-invoicing of exports.
Net trade mis-invoicing amounted to US$146 billion over the 1998-2017 period alone according to the report, Capital Flight from South Africa: A Case Study.
It says export under-invoicing appears to be especially rampant in the case of mineral resources such as gold, silver, platinum and diamonds.
On the increase
While capital flight is not a new phenomenon in South Africa, it has accelerated substantially over the past decades, a period marked by aggressive liberalisation of the national economy and rapid integration into the global economy says the report.
It goes on to say that capital flight should be a concern in a country such as South Africa that faces deep financing gaps, high multidimensional poverty, inequality and unemployment.
An important challenge faced by South Africa is the emerging phenomenon of state capture orchestrated by an intricate network of private ‘enablers’ with deep connections within the state and in the global economy says the report.
It concludes that the adverse effects of capital flight on economic development, state institutions and governance call for urgent attention to prevent even more devastating consequences for the country’s political and social instability.
The report, Capital Flight from South Africa: A Case Study, can be downloaded from here.
Categories: Trade Based Financial crimes News