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By: Nghiinomenwa Erastus

The deputy governor of the Bank of Namibia, Ebson Uanguta, said Namibia has agreed to participate in a pilot study to measure Illicit Financial Flow.

Namibia joins 12 other countries on the continent.

Uanguta revealed Namibia’s participation during the Capacity Building Workshop on Illicit Financial Flows (IFF) in Namibia last month at the coast.

The workshop was themed “Defining, Estimating and Disseminating Statistics on Illicit Financial Flows (IFFs) in Namibia.

Uanguta said IFFs need to be measured to understand the related flows, destinations, and motivations thereof.

He explained that the illicit financial flows include many concepts, from tax avoidance and tax evasion to money laundering and corruption that continue to frustrate economic development efforts globally.

Uanguta said Namibia is not immune to IFF.

Namibia is not exempted from illicit flows and behaviours that pose a significant threat to the developmental agendas of the country by corroding resources mobilisation.

According to the country Development Finance Assessment (DFA) 2019 report, it is difficult to obtain data on transnational criminal activities and corruption.

As such, analysis of illicit financial flows focuses only on two tax-related illicit financial flows: trade mis-invoicing and base erosion and profit shifting (BEPS).

The report indicated that in 2015, illicit financial outflows through trade mis-invoicing amounted to N$10,6 billion) in Namibia.

Between 2004 and 2013, the average trade mis-invoicing outflows were about N$10.3 billion) the report revealed.

“In particular, import trade over-invoicing and export trade under-invoicing have remained the main drivers of illicit financial outflows,” the country DFA highlighted.

The assessment went further that transfer pricing – especially in the transport and mining sectors, has remained one of the avenues for shifting capital out of the country.

The report also recommended that it is important that solid policies are instituted to curb IFFs and secure resources for sustainable development.

However, Uanguta highlighted that policy action to curb IFFs require better data and a better understanding of IFFs (their types, volume, channels, origins and destinations), which was the objective of the Swakop capacity building workshop.

He explained that the current estimations and occurrence of IFF in most if not all jurisdictions measured by a common approach b apportion a percentage usually of 2-5% of GDP to crimes that generate proceeds.

Most of the assets are destined to be laundered through the financial sector in particular.

Uanguta said Illicit Financial Flows negatively impact the maximisation of domestic resource mobilisation, thereby reducing infrastructure and other developments at the national level.

He said the “Mbeki Report” on Illicit Financial Flows has called upon countries, specifically African countries, to develop a realistic and accurate assessment of the volumes and sources of IFF.

Moreover, countries can better understand IFFs and ensure that the specific recommendations are practical and realistic.

Having considered the Mbeki Report and other reports on IFFs from global institutions, the Bank of Namibia, the Ministry of Finance and the Financial Intelligence Centre established a task team to commence with groundwork on how to best deal with IFF domestically.

Erongo governor, Neville Andre who also delivered remarks at the workshop, highlighted that tax crime, money laundering, and illicit flows are complex phenomena.

He said the illicit flows undermine good governance, ethical politics, government and civil society programs to promote inclusive growth.

Andre added that corruption, crime, and tax evasion reinforce each other. As a result, tools must be mobilised to address them.

“Tax evasion but also dubious financial transactions are often rooted in a country’s legal, economic, and financial system,” said Andre.

In recognition of the matter, He said Namibia prioritised the need to identify, stop, and eliminate these flows out of Namibia.

Andre said the diversion of money from development priorities such as health and education is bad enough, in itself- but equally damaging are the activities that enable these outflows.

Illicit financial flows cover a wide range: from undeclared profits from multinational companies, the proceeds of corruption and bribes; to the earnings of traffickers of drugs, weapons, and people.

“These activities erode the rule of law and perpetuate impunity for the powerful. This is why addressing – and stopping – illicit financial flows is not a choice but a necessity for every economy, large or small. It means going to the heart of the issue,” he said.

Rachel Odede, the UN resident coordinator, indicated that IFFs are multi-dimensional.

They include financial flows originating from illicit activities, illicit transactions to transfer funds with a lawful origin, and flows stemming from the licit activity being used illicitly.

She highlighted that IFFs constitute a drain on Africa’s revenues by diverting resources from social spending and productive investment. Since 1980, an estimated US$1,3 trillion has left sub-Saharan Africa in the form of IFFs.

As a result, this poses a central challenge to development financing.

Odede explained that in line with the 2030 Agenda for SDGs, combatting IFFs is a crucial component of strengthening resource mobilisation for enhanced investments in the socio-economic development of countries.

She highlighted that Namibia had been experiencing a decline in revenue collection from 34.2% of GDP in 2017/18 to an estimated 31.7% in 2020/21.

On average, public revenue has plummeted to an estimated 28.2 per cent of GDP in 2021, from the pre-pandemic average rate of 30.5 per cent of GDP.

According to the plummeting revenue collection underscores the need for the country to strengthen its financing architecture to mobilise resources from all possible sources efficiently.

At the same time, this unplugs all resource leakages, including through illicit means.

She said the workshop outcome should inform policy reforms to curb resource leakages and boost the country’s fiscal space for growth-enhancing investments in socio-economic infrastructures. Email:

Julia Heita

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