Nicholas Gumbo, the AFROPAC chairman. PHOTO | FILE
Africa’s parliamentary watchdogs have gathered in Nairobi to ponder laws to seal loopholes which allow illegal transfer of funds.
Through their lobby, the African Organisation of Public Accounts Committees (AFROPAC), the legislators reckon that multinationals account for 65 per cent of firms responsible for illegal flow of Sh50 billion out of the continent every year.
“Over the last 36 years, $1.6 trillion (Sh160 trillion) has been taken away from Africa which is equivalent to the combined Gross Domestic Product (GDP) for Africa,” said AFROPAC secretariat chairman Nicholas Gumbo.
Mr Gumbo, who chairs Kenya’s Parliamentary Accounts Committee, told delegates attending a week-long conference at Safari Park that the illicit financial flows from Africa are more than four times Africa’s foreign debt.
“If we can successfully curb illicit financial flows Africa doesn’t need a single coin in donor aid,” he said at a meeting officially opened by President Uhuru Kenyatta.
Mr Kenyatta asked the parliamentarians to rise to the challenge of ensuring accountability in the management of public finances.
“There is a need for leaders across the continent, including MPs, to work together to meet demands of leadership. This conference provides a platform to find ways of holding the Executive to account in the management of public resources,” Mr Kenyatta said.
“Curbing illicit flows is a timely theme that has come when our people are increasingly becoming intolerant of corruption which has crippled countries across the continent. The citizens are angry for change”.
At the function, Auditor-General Edward Ouko warned that the extractive industry was beginning to be the greatest source of illicit financial flows from developing countries including Kenya.
He said the discovery of new mineral wealth provides a perfect opportunity for transfer pricing issues by companies contracted to explore or extract the minerals.
‘‘We are finding new resources that we never knew existed, like oil in Kenya. This is where we can have serious transfer pricing issues if we are not careful of how we draft and execute extraction contracts,” he told AFROPAC delegates attending the second annual general meeting at Safari Park Hotel.
Mr Ouko said transfer pricing clauses could be embedded in contracts that government officials sign with companies that extract resources.
“These companies will want to hide under these opaque contracts and ensure they reap maximum benefits through transfer pricing.’’
“Our negotiators at time of signing the contracts for ether exploration or production don’t act in the best interest of our countries. We ourselves could at this time be providing a source of illicit financial flows through existing mineral exploration contracts,” Mr Ouko said.
Mr Ouko who delivered on curbing Illicit Financial Flows (IFF) said the poor resource governance structure, weak tax regimes and the existence of tax heavens outside the jurisdiction of Africa has compounded to illicit capital outflows in the continent.
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