Africa is experiencing a clear economic paradox: it is the continent with the greatest need for resources for its development and, at the same time, it loses over $587 billion annually due to capital flight. This complaint emerges from the African Economic Outlook 2025 report by the African Development Bank (AfDB), presented recently in Abidjan, Ivory Coast.

Professor Kevin Chika Urama, chief economist and vice-president of the African Development Bank, presented alarming data based on 2022 surveys. Capital flight occurs through various channels, each of which represents a drain on the continent's economy.

Multinationals transfer capital irregularly

Irregular transfers of profits by multinationals are the most significant item, with as much as $275 billion illegally exported each year.

This is followed by proceeds from corruption, which absorb $148 billion, while illicit financial flows – often through price manipulation in international transactions – cost the continent $90 billion.

Another $79 billion is lost due to inappropriate risk perception by international investors.

The contrast with inflows

In the face of these massive losses, Africa receives only $190.7 billion from abroad through foreign direct investment, debt, diaspora remittances and official development assistance. The net balance is stark: the continent is a net creditor of approximately $400 billion per year to the rest of the world.

The decline in external sources

As Urama points out, ‘in 2023, external sources of financing, such as foreign direct investment, diaspora remittances and official development assistance, declined, with the exception of portfolio investment (purchase of financial instruments such as shares, bonds or other securities traded on the stock exchange, ed.). This trend further exacerbates the situation of a continent that should instead be attracting massive resources to finance infrastructure and economic development.

The role of multinationals: an underestimated problem

Despite the evidence provided by the data, the role of multinationals in the diversion of tax resources still receives little attention in official analyses. Non-governmental organisations such as the Tax Justice Network have been denouncing this phenomenon for decades, highlighting how the global financial system facilitates the reduction of tax bases through its opacity.

Multinationals operating in Africa cause the loss of hundreds of billions of dollars in taxable income, a phenomenon that goes far beyond the alleged ‘poor capacity of tax administrations’ often cited in official reports as the main cause of Africa's modest public budgets.

Ineffective solutions

African countries have attempted to adopt the solutions proposed by the OECD, including accounting transparency requirements for multinationals and the introduction of a global minimum tax.

However, these measures have proved ineffective, even for the G20 countries that promoted their implementation.

Professor Urama proposes a more incisive approach, which includes strengthening transparency rules in the financial system at national and international level.

Outlook for 2025

According to the latest data from the African Development Bank, the African economy is expected to grow from 3.3% in 2024 to 3.9% in 2025, reaching 4% in 2026.

However, this growth remains insufficient compared to the continent's potential.

The African Economic Outlook 2025 report estimates that, with ‘appropriate policies, Africa could mobilise an additional $1.43 trillion in domestic resources through efficiency gains in tax and non-tax revenues’.

The most recent estimates of illicit financial flows, published by the Carnegie Endowment for International Peace in November 2024, confirm annual losses of $88.6 billion, equivalent to 3.7% of the continent's GDP.

The imperative for change

The situation described above represents not only an economic loss, but a real threat to African economic sovereignty. These resources could finance infrastructure and welfare development, reduce dependence on imports, limit inflation linked to external factors, reduce debt costs and strengthen resilience to climate change.

The paradox of a rich continent that remains poor is not a geographical or cultural inevitability, but the result of international financial mechanisms that urgently need to be reformed. Only through greater transparency, more effective regulation of multinationals and a review of risk assessment parameters will Africa finally be able to retain and use its wealth for the development of its peoples.

See, Multinazionali e corruzione: come l’Africa perde 587 miliardi di dollari all’anno 

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