Zambia losing $3bn annually through illicit flows

MINERS processing copper at one of the mines on the Copperbelt.

KABANDA CHULU, Johannesburg
ZAMBIA could have avoided negotiating for an International Monetary Fund (IMF) bailout if adequate measures to stop illicit financial flows had been implemented, the Center for Trade Policy and Development executive director Isaac Mwaipopo has said.

Mr Mwaipopo has since challenged security wings and other public institutions to urgently act on findings of the Financial Intelligence Center report, which revealed how multinational mining companies are robbing Zambia of billions of Kwacha through illicit financial flows.
The latest Financial Intelligence Center suspicious transaction report indicates that Zambia loses about US$3 billion annually through illicit financial flows (IFF) and is mainly perpetrated in the minerals sub sector.
The mines are alleged to be involved in transfer pricing, thin capitalisation, mis-invoicing and over-invoicing, and utilising loopholes in double taxation treaties, among other things.
Mr Mwaipopo said the resources that Zambia keeps losing outstrip the financial aid of US$1.6 billion it is seeking from the IMF and other international finance institutions.
“Zambia is currently negotiating a bailout package from the IMF to help address the current economic challenges.
“But these are development paths the nation would have avoided if adequate measures had been taken to curb illicit financial flows,” Mr Mwaipopo said.
He said continued leakage of resources through IFF and money laundering is robbing Zambia of the resources for financing the country’s development agenda.
“We will be shocked as an institution if the findings from the FIC report are treated as a mere academic exercise like has been the case with the Auditor General’s report, where misappropriation of public funds are reported, but no meaningful action is taken,” he said.
Mr Mwaipopo said some of the findings that may need immediate follow-ups include the observed increase in the repatriation of funds to and from off-shore centres.
He said another malpractice activity that should be stopped is the externalisation of corporate funds through over-invoicing of goods and services provided by foreign suppliers, who are given preference over local suppliers.
“This needs to be addressed as it takes away the opportunity for local suppliers to benefit from the extractive sector. There are also cases of purchase of copper ore from small scale miners on the Copperbelt that is being exported to tax havens,” Mr Mwaipopo said.


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