From Rev Doors to Trap Doors: One Good Turn for Africa’s

Development Financing

Melvin Ayogu & Tendai Gwatidzo

Standard Bank Group & University of Witwatersrand,

South Africa

28 March 2010

The views here do not represent those of Standard Bank Group 1

Main Points

• Consequences of Capital Flight

• What we are doing• What can you do?

2The views here do not represent those of Standard Bank Group

Context

• Flight of “people’s money” is serious

• But seriousness does not thereby imply policymakers care enough to curb the problem

• Depends on linkage between consequences of asset stripping and political fortunes of policymakers

3The views here do not represent those of Standard Bank Group

As men have learned to shoot without missing, so have birds have learned to

fly without perching−Crime should not pay−Acquire competency in process

of asset recovery just as “they have become adept at stripping”

−International Cooperation [leverage StAR, Basle Institute for Governance, GFI]

The views here do not represent those of Standard Bank Group 4

Development Financing Issues

• Colour of Money (form of financing)• Ideology of Resource Gaps: Aid &

Resource Gaps; Debt & Resource Gaps; Theft & Resource Gaps

• Sources: Foreign Aid, Debt Forgiveness; Lending; Asset Recovery

• Revolving Door Syndrome: (plus ca change..plus …)

The views here do not represent those of Standard Bank Group 5

Debt-Capital Flight Nexus

• Debt-driven Flight• Flight-driven Debt• Debt-fuelled Flight• Flight-fuelled Debt

6The views here do not represent those of Standard Bank Group

The views here do not represent those of Standard Bank Group

Table 1: African Flows

1980 1990 2000 2005 2008e ODA (All donors to Africa in USD billion) 10.42 25.08 15.58 35.53 40.00 FDI in USD billion 0.40 2.81 9.69 29.65 61.90 Private capital flows, net(USD billion) -0.38 3.78 -3.48 27.42 54.73 Remittances* (USD billion) 1.40 1.86 4.62 9.97 20.42 Total External Public Debt ( USD billion) 85.10 228.90 237.05 239.27 n.a Total debt service: interest and amortization paid (USD billion) 18.19 30.28 29.42 38.93 33.00

Source : ODA Data extracted from OECD.Stat ; World economic outlook ,October 2008; AFDB Database and World Bank staff estimates based on the International Monetary Fund's Balance of Payments Statistics Yearbook 2008 (Remittances) e: Estimates ; * Sub-Saharan Africa

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The views here do not represent those of Standard Bank Group 8

Adobe Acrobat Document

The views here do not represent those of Standard Bank Group 9

Microsoft Office Word Document

Intra-Africa Flows

The views here do not represent those of Standard Bank Group

1

Figure 1

East - 16.91%Southern - 76.17%Central - 0.10%

West - 0.14%North - 1.64%Rest - 5.26%

Intra-African Foreign InvestmentSouth Africa Inflow Year 2000

East - 30.65%Southern - 53.80%Central - 0.41%

West - 10.35%North - 0.03%Rest - 4.76%

Intra-African Foreign InvestmentSouth Africa Outflow Year 2000

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The views here do not represent those of Standard Bank Group

1

Figure 2

East - 9.41%Southern - 85.04%Central - 0.03%

West - 1.09%North - 0.31%Rest - 4.11%

Intra-African Foreign InvestmentSouth Africa Inflow Year 2004

East - 30.36%Southern - 49.18%Central - 0.12%

West - 15.39%North - 0.01%Rest - 4.94%

Intra-African Foreign InvestmentSouth Africa Outflow Year 2004

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The views here do not represent those of Standard Bank Group

1 Figure 3

East - 9.41%Southern - 85.04%Central - 0.03%

West - 1.09%North - 0.31%Rest - 4.11%

Intra-African Foreign InvestmentSouth Africa Inflow Year 2004

East - 30.36%Southern - 49.18%Central - 0.12%

West - 15.39%North - 0.01%Rest - 4.94%

Intra-African Foreign InvestmentSouth Africa Outflow Year 2004

Figure 4

East - 10.02%Southern - 70.66%Central - 0.31%

West - 1.60%North - 0.67%Rest - 16.74%

Intra-African Foreign InvestmentSouth Africa Inflow Year 2007

East - 33.69%Southern - 24.97%Central - 1.80%

West - 31.52%North - 0.84%Rest - 7.19%

Intra-African Foreign InvestmentSouth Africa Outflow Year 2007

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Opportunity to Upscale

• If flight capital can be stemmed, the trend in figures 1 2 3 shows potential benefits to regional investment flows

• -

The views here do not represent those of Standard Bank Group 13

Evening befriends the Spider

• www.CapitalConservator.com

The views here do not represent those of Standard Bank Group 14

The views here do not represent those of Standard Bank Group 15

The views here do not represent those of Standard Bank Group 16

Illicit Flows & offshore havens

The views here do not represent those of Standard Bank Group 17

Moving Forward

• More Noise• Acquire core competency in Process

• StAR• Basle Institute for Governance

The views here do not represent those of Standard Bank Group 18

Meanwhile

Whether there is the political

will or not?The views here do not represent those of

Standard Bank Group 19

The views here do not represent those of Standard Bank Group 20

ICAS Cape Town 2009

The views here do not represent those of Standard Bank Group 21

ICAS Cape Town 2009

The views here do not represent those of Standard Bank Group 22

Radio Broadcast

The views here do not represent those of Standard Bank Group 23

The views here do not represent those of Standard Bank Group 24

Microsoft Office Word 97 - 2003 Document

The views here do not represent those of Standard Bank Group 25

Adobe Acrobat Document

Community of Practice: Advocacy

Sharing information among researchers/ experts: research outcome, resources

Letting the world know what the problem is and the need to do the investigations

Encourage researchers to do more investigation on the problem: Attract researchers to do more investigations

Publish events that might be of interest: conferences, workshops, talks, seminars

The views here do not represent those of Standard Bank Group 26

Resource repository: Publications, findings, recommended readings

Forum for sharing ideas: on line meetings, Web conferencing, message board

Easy way of managing information: have different topics of discussions

The views here do not represent those of Standard Bank Group 27

Maintain information sharing ethics: every one who joins must agree to terms and conditions. People join by invites only (to avoid abuse). Initial group should be ICAS participants

Members of the network/community to find each other: knowing who else belongs to the community

The views here do not represent those of Standard Bank Group 28

The views here do not represent those of Standard Bank Group 29

The views here do not represent those of Standard Bank Group

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