By Tom Oniro Elenyu
African countries are capable of raising adequate resources domestically to fund their development. Africa, as a continent, is a net creditor to the rest of the world, were it not for an estimated US$60 billion investable capital spirited out of the continent annually in Illicit Financial Flows (IFFs). “But of course we are not unaware of the fact that the mechanisms for moving IFFs mostly involve non-African private and public actors, and are sometimes the result of policies and laws adopted by intergovernmental bodies and governments outside Africa,” the Thabo Mbeki-chaired AU/ECA High Level Panel on IFFs said in its 2015 report. Leakage from Africa, meanwhile, has now surged to an obscene US$100 billion annually in IFFs.
Commercial activities by the private sector are by far the largest contributor to IFFs, followed by organized crime, then public sector activities. Corrupt practices play a key role in facilitating these outflows. According to the report, Multinational Corporations (MNCs) shift profits to subsidiaries in low-tax or secrecy jurisdictions where in many cases, those subsidiaries exist on paper only, mostly with one or two employees, while the bulk of the activities of the company occur in another country. IFFs from Africa are large and increasing.
“Uganda is estimated to lose roughly UGX 2 trillion per year (about ≈ $500 million-$550 million) to illicit financial flows, including money laundering and other illicit outflows of capital. Other civil society figures put the annual loss at about $509 million (≈ UGX 1.5 trillion-1.88 trillion) per year due to illicit financial flows overall. These annual figures represent significant amounts relative to government budgets — for example, one estimate says the average yearly IFF loss is roughly 10 % of Uganda’s national budget,” Makerere University-based Economic Policy Research Centre (EPRC), Research Fellow, Emmanuel Erem, told Pan African Visions exclusively in a February 5 interview. EPRC is Uganda’s leading think-tank in economics and development policy-oriented research and analysis.
According to Erem, trade mis-invoicing and trade-based money laundering are the dominant channels driving IFFs in Uganda, with money laundering, tax evasion and smuggling—especially in natural resources like gold—also playing significant roles. “A scoping study on IFFs in Uganda,” he recalled, “found that potential trade mis-invoicing accounted for an estimated 18 % of total trade between 2006–2015, highlighting its scale relative to other channels. Trade mis-invoicing is often difficult to detect and enforce against because it can resemble legitimate business transactions, especially where customs and financial oversight are limited.”
IFFs, according to Global Financial Integrity (GFI)’s report published on January 28, 2026, represent a formidable barrier to Africa’s inclusive growth and economic sovereignty in which it presents estimates for trade-related value gaps for all Sub-Saharan African nations from 2013 – 2022. The report highlights how over the last decade, vast sums have been illicitly drained from African economies largely through manipulated trade transactions at great costs to public welfare and development prospects. The Africa-specific data and analysis presented show both the concentration of this issue in certain countries, and its pervasive impact across the entire continent.
“In effect,” GFI reports, “the continent has been a net creditor to the world, as cumulative illicit flight capital has exceeded Africa’s external debt stock in recent years. Moreover, these estimates are likely conservative given the hidden nature of illicit transactions; actual losses could be significantly higher.
“Trade mis-invoicing, the deliberate under- or over-statement of export and import values on invoices is widely recognized as a dominant channel for IFFs. Earlier studies suggest that trade mispricing alone may account for $30–$52 billion in financial flow value gaps in Africa’s trade each year, representing a large share (possibly over half) of total IFF volumes. High-value commodity exports (oil, gold, diamonds, etc.) are particularly vulnerable to mis-invoicing, given the opacity in pricing and power imbalances between African exporters and the multinational buyers of these commodities.”
Committed to leading the way in efforts to curtail IFFs and enhance global development and security, the Washington-based GFI reports that total value gaps in Sub-Saharan Africa are estimated at $152.9 billion in 2022 with South Africa bleeding the highest cumulative (i.e. 10-year) dollar amount of value gaps with all trading partners during the period at $478.0 billion. Gambia had the highest cumulative value gaps as a percentage of total trade with all trading partners during the period at 44% under review.
In trade transactions with Advanced Economies during the period, South Africa had the highest cumulative value gap in USD at $238.4 billion
“During the 10-year period, Gambia also had the highest geometric mean value gap with Advanced Economies as a percentage of total trade during the period at 37%.
“No country,” according to GFI, “in the region appears to have made much progress in limiting trade value gaps during the period. As a region, Sub-Saharan nations averaged $112.97 billion in trade-value gaps during the 10-year period studied.”
According to Erem, a GFI analysis (covering roughly 2006–2015) estimated
that over that decade, about US$8.39 billion flowed illegally out of Uganda due to trade mis-invoicing, with another US$0.46 billion flowing in. Total gross illicit flows were about US$8.84 billion over that period.
“In the mining/extractive sector”, he said, “reports indicate Uganda lost around US$652 million between 2014 and 2018 due to trade mis-invoicing and exploited tax incentives by multinational firms. These estimates typically include: Trade mis-invoicing — declared values that differ from actual transaction values to shift capital illicitly across borders; money laundering outflows — funds moved illicitly through financial systems; tax base erosion and profit shifting, especially by multinational firms in mining and commerce; smuggling and informal export channels, particularly in minerals.
“Because illicit financial flows are inherently covert and difficult to measure precisely, all figures are estimates based on indirect methods (e.g., mirror statistics, customs mismatches, econometric models) rather than exact counts of illicit transfers. However, even these estimates consistently show that IFFs represent hundreds of millions of dollars annually and several billions over longer periods for Uganda.”
In an April 19, 2016 joint statement, Mbeki and the Organisation for Economic Cooperation and Development’s Secretary General, Angel Gurria, said; “In the wake of recent revelations in the media exposing the use of secrecy, shell companies, and offshore accounts for illegal activities, there is an urgent need for the international community to come together; as money-laundering, tax evasion and international bribery which form the bulk of IFFs, affect all countries.” They conferred: “In addition, we recognise the importance for all countries to tackle Base Erosion and Profit Shifting (BEPS) and welcome the opening up of the BEPS project to all interested countries.”
In 2010 alone, according to Oxfam International’s report; Africa: Rising for the few, released on June 2, 2015, “multinational companies [MNCs] avoided paying tax on US$40 billion of income through a practice called trade mis-pricing – where a company artificially sets the prices for goods or services sold between its subsidiaries to avoid taxation. With corporate tax rates averaging out at 28 percent in Africa, this equates to US$11 billion in lost tax revenues”.
GFI reported in 2013 that the developing world, Africa included, lost US$5.9 trillion in 10 years; averaging US$590 billion per annum. In 2011, the loss was US$967.7 billion; 80% of which emanated from commercial tax evasion, noting that IFFs far exceed aid funding to the developing world.
A new study, however, published by GFI on December 15, 2014, indicate that crime, corruption, tax evasion drained a record US$991.2 billion in IFFs from developing countries in 2012. IFFs from developing and emerging countries growing at 9.4% annually as US$6.6 trillion stolen from the developing world from 2003-2012. Trade mis-invoicing is reportedly responsible for 77.8% of illicit outflows with Sub-Saharan Africa still suffering the biggest illicit outflows percentage of its GDP.
The commercial tax evasion element is often referred to as trade mis-pricing or abusive transfer pricing.
MNCs seeking to minimize their tax bill can manipulate pricing in their transactions with subsidiaries. They can, for example, overprice their imports or under-price exports as a method of shifting profit from one country to another, as well as manipulating fees for services, the use of intellectual property, etc. In this way, they can move profits from a high-tax jurisdiction to a low- or no-tax jurisdiction, it is discovered.
And Sylvain Boko, then Principal Regional Adviser and Head of Development Planning and Statistics at the ECA, in July 2018, while at a three-day High-Level Policy Dialogue on Development Planning in Africa; Cairo, Egypt, said it was unacceptable that Africa’s development agenda continued to be hampered by such illegal actions.
“It is estimated that US$100 billion a year, about four percent of Africa’s GDP, have been illegally earned, transferred, or used, much of it due to mis-invoicing. This retards Africa’s growth; weakens public institutions and rule of law; discourages the culture of paying taxes and value-addition to natural resources; and results in countries over relying on official development assistance,” Boko reportedly said.
Separately, Dr Abdalla Hamdok, the then Deputy Executive Secretary of UNECA, and later Sudan’s post-Omar Bashir regime prime minister, noted: “If you are going to fight corruption, the illicit financial flows stand out as a major component. Africa is losing about US$100 billion per year and we need to look at this at a different perspective in terms of how the illicit outflows affect our development progress as a continent,” he was reported to have said.
UNCTAD, too, in a report, says Africa is fleeced US$100 billion annually by MNCs. Another separate 2015 report contends that Africa lost US$1.4 trillion in IFFs between 2012 and 2015.
The Mbeki Panel was set up to address challenges of Domestic Revenue Mobilisation in Africa; ability severely disabled and drained by IFFs. The Panel was congregated in February 2012—the same year, records US Africa Network, when Africa received US$39.9 billion in development assistance but ironically lost US$68.6 billion to IFFs—following a resolution of the 4th Joint Annual Meeting of the AU/ECA Conference of Africa’s Finance ministers in March 2011. On January 31, 2015, African Heads of State and Government adopted the Mbeki Panel report at the 24th Session of AU Summit in Accra, Ghana.
The adoption served as Africa’s resolve not only to minimise but eliminate the crippling outflow of investable capital from Africa. The report blames commercial activities, organised crime and public sector activities with corruption playing a central role in facilitating IFFs.
Central to the commercial component of illicit flows, according to the report, are trade mis-pricing, transfer mis-pricing and base erosion and profit shifting. The report’s observation on base erosion and profit shifting is corroborated by Uganda Revenue Authority (URA)’s selected Domestic Tax Collections 2014/15-2016/17. URA’s statistics indicate that although there has been an increase in the contribution of PayAs You Earn (PAYE) which increased by 17.3% in FY 2016/2017, collections from corporation tax have stalled at an average of about US$197 million in the past three FY 2014/15-2016/17. “This is…attributed tothe fact that many of the multi-national companies have often avoided and evaded tax by taking advantage of loopholes within the domestic tax laws and tax treaties that have been signed by Uganda with other countries.
“In 2015, Finance Uncovered, a global network of investigative reporters, revealed how Africa’s biggest cellphone company, MTN, was shifting billions of dollars from its subsidiaries in Ghana, Nigeria and Uganda to Mauritius. Mauritius is a tax haven, which means that taxes are levied at a very low rate,” URA collections state regrettably.
URA implements the central government tax regime. Established by the URA Act, 1991; it serves as the central body for the assessment and collection of specified tax revenues.
When URA published a list of leading tax defaulters in the country in mid-May 2018, Ugandans were shocked but not surprised that MNCs were leaking resources unabated. In an editorial, the state-owned daily, New Vision, cried thus; “What was even more disturbing is that most of the defaulters were foreign companies. This was like a slap in the face to tax-paying businessmen, as these same defaulters that are mostly trading companies undercut local businessmen,” the leader comment admonished on May 29, 2018: “Now it turns out that they may be competing unfairly in the market by dodging taxes.”
A four-day consecutive effort to reach Samuel Were Wandera, the executive director of Uganda’s Financial Intelligence Authority—the statutory organ mandated to fight IFFs in the country— was fiercely suffocated. However, in an exclusive November 9, 2018 interview, his predecessor, Sydney Asubo, told this writer: “MNCs state their visions and missions along the lines of promoting legitimate trade in countries of their operations for various reasons. Most do works that promote the same [i.e. legitimate trade expected of MNCs].”
“However,” Asubo hastened to add: “Some [MNCs] lay various plans to ensure that funds are repatriated out of the country through under-declaration of sales/revenues in order to understate income and attempt to avoid taxes, employment of more foreigners to local labour even for jobs whose expertise is readily available in Uganda; rewarding foreigners with hefty salaries as a way of reducing their tax burden as well as repatriating profits back to their countries of interest,” Asubo explained.
The Mbeki Panel report, in addition, blames poor governance, weak regulatory structures, double taxation agreements and tax incentives for driving IFFs in Africa.
According to a 2017 article titled; Africa Is Not Poor, We Are Stealing Its Wealth, by Nick Dearden, ‘over 203 billion dollars leaves the continent… some of this is direct, like [US$] 68 billion in, mainly, dodged taxes’. Essentially, it is said MNCs steal much of this — legally — by pretending yet they are really generating their wealth in tax havens.
In 2016, the Panama leaks also revealed how billions of dollars had been hidden by wealthy figures and Uganda was no exception. The leaks also showed how Heritage decided a month to the execution of its Sale and Purchase Agreement with Tullow to move its domicile from Bahamas to Mauritius with a view of avoiding to paying Capital Gains Tax.
Whereas it informed Ugandan courts that the move was for ‘better time zones’ in England in its case with Tullow, Heritage admitted that the purpose was to avoid paying capital gains tax. At the time, Anglo-Irish Tullow Oil had frustrated discussions on the Final Investment Decision—an agreement on capital investments on a long-term project—on commercial oil production in Uganda because Tullow wanted to dodge paying Capital Gains Tax on the US$900 million worth of assets it sold to French Total E & P and China National Offshore Oil Company.
Tullow’s protracted tax-dodging antics and tactics postponed commercial oil production from 2020 to 2022; then to-date. Both Tullow and Heritage got involved in Uganda’s budding oil sector.
The Mbeki Panel report discovered that the East African region alone loses over US$2 billion annually through tax incentives to MNCs. Although tax incentives are not illegal, they serve the same purpose as illegal activities in undermining the revenue potential of states, and by extension depriving citizens of basic social amenities. Losses through negative tax incentives compound the losses by individual countries.
A 2016 report, Still Racing to the Bottom released by Action Aid International and Tax Justice Network-Africa exonerated the Mbeki Panel report when it estimated that the East African region loses US$2 billion annually through tax incentives. The tax concessions, according to the report, are often offered before business entities employ aggressive tax planning measures—instituted through tax avoidance and evasion— which further undermine the potential revenue generation capacity of African economies.
This allows MNCs to reduce their taxation obligations by shifting their profits to states that do not tax them, or tax them very lightly. Sometimes, they can avoid paying tax altogether.
Indeed, the current dispensation places the tax burden squarely on African citizens who bear the brunt of back-breaking taxes to finance the State at the respite of corporate entities who continue to unabashedly enjoy social services and infrastructure without a commensurate proportion in contribution towards tax revenue.
In October 2015, a joint investigation by the Observer and Finance Uncovered shows how between 2003 and 2009, telecom’s MTN Uganda had shifted three per cent of its revenue every year to MTN International in Mauritius under the disguise of ‘management services’ even when the company itself [MTN] confirmed that the Mauritian company employed no staff at all.
MNCs will therefore do whatever they can to make as most as they can. Further, legitimate trade requires efforts not only of MNCs but also of the countries in which MNCs operate. Unfortunately, for developing countries like Uganda, a plethora of systemic loopholes exist, that give room for MNCs to compromise legitimacy in exchange for higher profits. In other words, there are plenty of opportunities for tax evasion and avoidance in countries like Uganda, and the lack of political will to combat it makes it even [more] easier for MNCs to exploit these opportunities.
“Uganda’s high level of corruption has created an atmosphere of a shared expectation that government officials or even citizens are more likely to accept or offer bribe for private gain. This makes it easy for MNCs to grease the system to their own benefit. A report by Global Financial Integrity, to which EPRC contributed, shows that in Uganda, tax officials and government institutions are perceived as one of the most corrupt. According to Transparency International, 46% of Ugandans reported paying bribe to tax officials and Uganda’s tax agency (Uganda Revenue Authority) has many times been named on corruption issues. This has made Uganda’s tax administration system susceptible to compromise by MNCs,” EPRC Research Fellows Job Lakal and Corti Paul Lakuma, said a November 2018 exclusive interview.
Tax avoidance is a practice of seeking to minimise the tax one pays by arranging affairs in a way that is technically legal, according to Taxation in Uganda, a February 2017 research report. It says tax avoidance is mainly common with MNCs that use transfer pricing and tax havens to avoid paying all taxes. A global financial report published in 2013 revealed that Uganda loses an average of US$509 million every year in illicit outflows. It indicates that one of the vehicles used by MNCs to effect capital flight is by establishing branches in low-tax jurisdictions, and then manipulatively arranges their profit determination and tax affairs in such a way that profits arise from therein are taxed in the low-tax country.
Curbing IFFs
According to Erem, Uganda’s efforts to limit trade value gaps involve a mix of stronger laws and penalties to deter false trade reporting, modernized customs systems and digital platforms to increase trade transparency and Inter-agency and international cooperation for data exchange and enforcement.
In addition, border infrastructure and regional integration to monitor cargo accurately; and sector-specific measures to track high-risk goods (e.g., minerals) more effectively.
“These mechanisms collectively help authorities better detect and prevent the mis-reporting of trade values that fuel illicit financial flows,” Erem says.
“In my opinion [to curb IFFs],” Asubo said at the time, “there is need to be as transparent as possible at all stages even during the process of negotiating contracts and all technical officers from respective government MDAs [Ministries, Departments and Agencies] need to be involved for their input.”
The MNCs’ interest is in influencing policies that improve their business environment—including bankrolling and bribing ruling elites— to suit and benefit their business ends. They have no interest in pressing for good governance like individual citizens would do.
