Drivers of Debts and Illicit financial flows, my perspective for Anglophone Africa Radio Presenters and Managers

 

Globalization is driving some waves across international fields of cooperation among States on trading and developmental issues despite emergence of international intergovernmental and non-governmental organizations that also operate within and through their borders. The traditional responsibilities of States as sovereignty are being stretched by these entities including food security governance structures which form one of the central parts of the cooperation. This has brought some opposite dimensions of opportunities to various developing countries, especially Africa. Even though, the continent enjoys some bilateral or multilateral dividends from entities in the international system. The malicious illicit financial flows activities have not been controlled by developed countries in the structures of their foreign policy to Africa. 

Morgenthau (1948) emphasized that foreign policy is used as means to create balance of power among States, adopt imperialist approach and political dominance in the international system. One of the categories of foreign policy is rational; this considers calculation of benefits and costs to other alternative available policies to achieve power of maximization of profits.

Hobson (1902) further gave more insight into what imperialism entails as foreign policy, he equated it to capitalism where government machinery is used for private interests to achieve economic advantage beyond State boundaries and this approach are the root causes of wars in modern times.

Illicit financial flows happen through global financial apparatus. The discovery of billions of dollars in assets through complex mechanisms adopted by some companies like shell and dualistic structures of economic avenues used by some States especially extractive industries have become channels to be exploited by Multinational Enterprises and to facilitate illicit businesses with other sectors of the economy which involved the use of State machinery to empower private businesses across the borders in Africa at the expense of the masses and their economic and food security.

The system of Westphalia that consisted characteristics of state formation on its sovereignty, territory, principle of non-interference and equality which became the basics of international law and recognition at international domain were expounded during sixteenth and seventeenth centuries by some scholars (Osiander, 2001 and Picciotto, 2013). Some economists reverted to the conventions adopted by States on taxation, since 1923, in the time of the League of Nations and when Africa States were still under the authority of their colonial masters are still used as the basis for most of modern tax regulation.

Although, there were some reforms in some international agreements concerning investments in Africa with regards to taxation but Multinational Enterprises (MNEs) operate in the continent are not subjected to these regulations rather the headquartered countries (UNCTAD, 2020).

During 20th century, there were number of non-state actors or multilateral governmental organizations that started to operate above the levels of States in the aftermath of World War two such as European Union, United Nations, Multinational Corporations and International Non-governmental organizations, meanwhile their activities were earlier recognized in the 19^th century (Yearbook of International Organizations, 2001).

Multinational Corporations (MNCs) also tripled in the 14 richest countries in the world with 7,000 during 1969 and 24,000 for 1994. In the year, 1992, the leading number of ten MNCs sales were more than the total Gross Domestic Products (GDPs) of 100 countries combined and also their Foreign Direct Investments (FDI) increased eight times in trade in between 1985 and 1995(Reinicke, 1997). Similarly, International Non-Governmental Organizations INGOs grew from 10000 to 40000 in 1978 to 1997(Cusimanom, 2000).

Activities of International Non-Governmental Organizations, INGOs grew positively or negatively in the influence of international cooperation and development. Through the INGOs, official development assistance doubled during 1980s from States to States but 4000 Non-Governmental Organizations, NGOs were headquartered in advanced countries. Organization for Economic Cooperation and Development, OECD used them as channels to disburse billions of dollars to developing countries.

Also the structural adjustment championed by World Bank in 1994 was adopted by 29 Africa countries but 17 did not complied with the directives (International Food Policy Research Institute, 2002).

These were as results of debts incurred through loans and grants from international intergovernmental financial institutions such as World Bank and IMF and their given regulatory procedures to the developing States on how to control agricultural input supply to farmers, privatisation of State enterprises and reduction of employment in agricultural sectors and lessen restrictions on currency exchange rates. 

As President of Nigeria, His Excellency Muhammadu Buhari squarely stated it, “Like the concept of migration, they have countries of origin and destination, and there are several transit locations. The whole process of migrating illicit financial flows, subsequent cuts across several jurisdictions. These jurisdictions may protect fake charitable organizations, facilitate money-laundering, warehouse disguised corporations and conceal anonymous trust accounts. Ironically, the fact remains that the funds involved often come from jurisdictions with scarce resources for development financing, depleted foreign reserves, drastic reduction in collectable revenue, tax underpayment or evasion and poor investment in-flows.”

Unfortunately, these money or assets that are illegally transferring from Africa virtually become deposits in developed economies, banks due to their motivating tax haven granted to Multinational Enterprises (MNEs), Charitable Organizations (NGOs) and other transnational organizations, which are headquartered in advanced countries and also the stabilization of dollars, pounds sterling or Euros against weak currencies from developing countries in the global market incentivize these phenomena (GFI, 2020).  

Within Africa, political classes are more concerned about private wealth creation at expense of holistic economic development of the masses, this lead to more illicit businesses and exploitation of extractive sectors. This serves as the principles of extreme capitalism and adds more woes to the status of economic challenges through decades and contributing largely to development issues and forcing majority of youths into violence, prostitution and terrorism.

 

Excerpt from my research “The Nature of Foreign Policy and Its Effects on Food Security in Africa”