Imported rice at the port in Abidjan.
The little-understood practice of misinvoicing or re-invoicing relies on legal grey areas and financial secrecy and costs the continent dearly.
Lately, the media has been replete with stories about how Africa is losing billions of dollars a year through a process called "trade misinvoicing." The concept of trade misinvoicing is simple:
companies and their agents deliberately alter the prices of their exports and imports in order to justify moving money out of, or into, a country illicitly.
The practice is very common in Africa. To name just a couple instances, it has allegedly been used to avoid paying import duties on sugar in Kenya and to shift taxable income
out of Zambia and into tax havens abroad.
The amount Africa loses to trade misinvoicing is astounding. Global Financial Integrity (GFI), a Washington, DC-based think tank, estimates that
$286 billion worth of capital was extracted out of Africa using this process over the past decade. Between 2002 and 2011, due to illicit financial flows, sub-Saharan Africa lost
5.7% of it's GDP, a 20.2% increase. Of these illicit financial flows, 62% were due to misinvoicing.
The good news is the issue of trade misinvoicing has found its way to the forefront of development talks.
Former UN Secretary General
Kofi Annan, Nigerian Finance Minister Ngozi Okonjo-Iweala, and former South African President
Thabo Mbeki are just a few African heavyweights who have been trying to urge the international community to begin addressing the problem of illicit financial flows and trade misinvoicing.
Comment: Just because someone listens and enjoys Wagner's music doesn't exactly make them a Nazi.