$90bn Illicit Outflow: AfDB Academy’s Masterstroke

Like many other development enthusiasts on the African continent, I was shocked by the recent disclosure made by Prof. Kevin Chika Urama, Vice President of the African Development Bank Group (AfDB), that African countries lose almost $90 billion in illicit financial flows annually, and much more in illicit resource flows and resource theft, poorly implemented fiscal policy incentives, and excessive dependence on commodity exports for foreign exchange earnings.

The High-Level Panel (HLP) on Illicit Financial Flows from Africa in its 2015 report estimated that Africa lost an estiYT   mated $1 trillion or more over a period of 50 years in Illicit Financial Flows, IFFs. This sum is roughly equivalent to all the official development assistance received by Africa during the same period.

Opaque government processes, corruption and illicit financial flows create a vicious cycle of fiscal sinking holes in Africa’s public resources. As the government loses revenues, it is forced to borrow, and the borrowed funds are in turn stolen because there are no measures to stop the drain of public resources.

How to put an end to that kind of humongous resource evaporation must be of concern to countries within the continent where about 462 million people are still living in extreme poverty. To fully understand the level of estimated leakage, consider the fact that the proposed 2024 federal budget of Africa’s largest economy, Nigeria, is NGN 27.5 trillion, or about $34.70 billion.

It is a well known fact that Africa is rich in natural resources but poor in cash. Several studies have attributed this to poor management of public resources — from ineffective mobilisation and use of domestic revenue, unsustainable borrowing and lack of prudence in the use of debt resources, illicit financial and resource flows, resource theft, among others forms of leakages and corruption along the PFM ecosystems in countries.

AFDB’s Public Finance Management Academy

Now, thanks to the African Development Executive Training Program of the African Development Bank’s Public Finance Management Academy (PFMA), concrete measures are being taken to ensure the delivery of technical knowledge on PFM, which will empower policymakers with soft skills to change attitudes and mindsets. It is calculated that this will be achieved through high level policy dialogues with Leaders at all levels.

The Academy provides opportunities for African countries and experts to share practical experiences and learn from each other to improve PFM practices across the continent. By bringing together experts and practitioners from Africa and its Development Partners, the Academy encourages peer-to-peer learning among the experts and African Practitioners to ensure that PFM programs are duly embedded in the realities of countries.

The first cohort of 145 public officials nominated by 45 African countries commenced the 18-month structured capacity development (CD) program in July 2022. Of these, 52 public officials from 26 countries have successfully completed the CD program and satisfied the conditions to be certified by the Bank Group and Partners as PFM experts in their respective countries.

As a continent-wide affair, the program had the blessing and collaboration (in terms of human and financial capital to co-design and co-deliver the capacity development programs under the PFMA), of AfDB’s institutional partners, among which are the International Monetary Fund (IMF), World Bank, Africa Finance Corporation (AFC), African Tax Administration Forum (ATAF), and the Collaborative Africa Budget Reform Initiative (CABRI).

Others include the African Organization of English-Speaking Supreme Audit Institutions (AFROSAI-E), Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), Commonwealth Secretariat (COMSEC), United Nations Conference on Trade and Development (UNCTAD), Open Government Partnership (OGP), Open Ownership (OO), OECD – Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum), Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI), and others.

As Urama explained, the PFMA is an implementation activity of the African Development Bank Group’s programs to strengthen the capacity of African countries in economic governance and knowledge management to enhance wealth creation, prudential management of public finances to improve the quality of lives for Africans.

Impact

If anyone had any doubt about the possible impact of the programme and its implications for how government business is conducted all over the continent going forward, Isaac Kurasha, a South African who works with that country’s National Treasury and who was one of the pioneer graduates of the scheme testified:

“Today, I now understand how my roles in Public Finance link to my colleagues’ roles in Tax Policy, Economic Policy, Asset and Liability Management, Procurement, Public Private Partnership units, among others. I now understand why our National Treasury is structured the way it is. Its structure resembles the public financial management cycle! Now I know.

“Through this training, I have learnt to exercise more due diligence and ensure that resources are allocated where the most return on investment is. I have learnt to pay attention to detail when reviewing monthly expenditure reports from the departments and public entities and with confidence, I have begun to influence where resources can be redirected especially in the era of austerity measures.”

In this age of shifting sands in global political loyalties and ideological blocs, it is increasingly becoming clear to policy makers in Africa that the era of avoidable waste and wobbly controls which made the continent the world headquarters of illicit financial flight, must be brought to a quick end through the transmission of necessary technical skills in those who help to run the shop. It is gladdening to see that Africans are standing together to mobilize and efficiently manage the resources required to enhance productivity and create wealth on the continent.