“Corruption is bleeding Africa to death and the cost is borne by the poor. Some estimates put money corruptly leaving the continent at greater than that arriving as aid. Much of the money is banked in Britain or our overseas territories and dependencies and sometimes British citizens or companies are involved in corrupt deals. We want our government to get tough on corruption.” Hugh Bayley MP, Chair of the United Kingdom’s House of Commons Africa All Party Parliamentary Group, 29 March 2006 “Quiet corruption does not make the headlines the way bribery scandals do, but it is just as corrosive to societies,” World Bank, African Development Indicators 2010

Infrastructure spending needs for Sub-Saharan Africa, $ billion, estimates Total needsCurrently financed Remaining gap $ billion934548

EnergySSASouth AsiaEast Asia Electrical generating capacity * Access to electricity ** Power production costs/kwh $0.14$0.04$0.07 SSA’s energy deficit compared to Asia Source: Yepes et al Notes: * MW per 1 million people (2003). ** Percent of households with access ( ).

The problem is not only bout ‘raising’ the money, but also ‘keeping’ the money Africa’s development financing problem

Africa and capital flight: Three problems Large volumes, in absolute & relative terms The grabbing hand and the helping/receiving hand -Transparency; -Willful blindness -Incumbency privileges

(bn 1996 $)(bn 2008 $)(bn 2004 $)(bn 2008 $) Capital Flight (assets) Debt (liabilities) Net Assets Cumulative ODA Capital Flight - ODA # of countries 25 LICs33 SSA Cumulative capital flight exceeds cumulative Debt and cumulative ODA

The Discovery Problem Grabbing hand Corruption (willful blindness; banking secrecy) Receiving hand Corruption (incumbency privilege)

The Recovery Problem Corruption Incumbency privileges National strategic interests Incumbency privileges Secrecy laws Profit motives

Human cost of capital flight and debt service KF and debt reduce public revenue Lower public spending on health Every $ of DS associated with 29 cents less PHE SSA: PHE/capita = $26 SSA: DS/capita = $23 Increased mortality $1m increase in PHE reduces infant mortality by 25 DS translates into about 6% of infant mortality KF = capital flight; DS = debt service; PHE = public health expenditure.

Asymmetric effects of illicit flows – Africa relative to other regions

What should be done? Reforms to attract licit flows Combating corruption Responsibilities of African Governments Enforce own transparency laws Avoid double standards “Aid additionality” critical for aid effectivenessUse aid to build capacity to mobilize resources: “Aid additionality” critical for aid effectiveness Responsibilities of Western governments Reporting of suspect transactions, esp. PEPs Reporting to African tax authorities Responsibilities of Western banks

Comments and Suggestions welcome