Illegal financial flows drain African economies: How tax havens fuel corruption

An estimated US$88 billion (€76 billion/Sh13.2 trillion) leaves Africa every year through tax evasion, money laundering, and corruption, the African Union (AU) reports.

In 2015, the figure was US$50 billion (€43 billion/Sh7.5 trillion). Analysts say this deprives governments of revenue that could be invested in vital public services such as healthcare, education, and infrastructure.

Elites shifting money to tax havens

Christoph Trautvetter, coordinator of the German organisation Network for Tax Justice, told DW that Africa loses billions because “digital corporations and commodity traders shift their profits to tax havens and corrupt elites stash money in anonymous offshore accounts.”

“The direct damage is even greater because this system promotes corruption and crime and weakens states that are supposed to ensure development,” Trautvetter said, adding that the “rich and powerful in both Africa and the global North ultimately benefit from this system.”

“There is enormous resistance to ensuring greater transparency and better cooperation and to fundamentally reforming it,” he added.

While Trautvetter believes too little is being done to curb these losses, he noted some progress.

Most notably, in 2017, over 100 countries agreed to automatically exchange information about bank account owners.

“This means that banks in many tax havens now automatically report information about account owners to the tax authorities in their home countries,” he said.

More transparency in data controls

Many African countries are still implementing this agreement, so comprehensive data for evaluation is not yet available.

“But this will definitely lead to significant improvements in the coming years,” Trautvetter says.

Another positive development has been a United Nations global framework agreement, effective August 2025, which aims to address issues ranging from “global tax justice and the taxation of large digital corporations, to the detection of illegitimate financial flows.”

Despite these steps, the AU notes that global geopolitical changes over the past decade have left Africa increasingly vulnerable. Factors include the rivalry between the United States and China, the Covid-19 pandemic, the war between Russia and Ukraine, and climate-related geopolitical consequences. Additionally, some African nations carry enormous government debts.

The AU has created several instruments to combat illegal financial flows. These include a pan-African cooperation platform, working groups to recover stolen assets abroad, and mechanisms to monitor sectors like mining, which are particularly prone to undeclared exports.

Other Topics To Read

• Corruption
• Tax Justice Network
• Africa's financial loss
• Illegal financial flows
• tax havens
• Africa tax evasion
• Illegal financial flows drain African economies: How tax havens fuel corruption
• Africa

At the national level, many African countries have established financial investigation units or specialised tax authorities. However, AU findings show that these institutions have not been as effective as hoped.

Illegal financial flows draining Africa

Idriss Linge from Cameroon, Advocacy Officer for the Tax Justice Network (TJN) in Bristol, UK, acknowledges that tax losses have hit Africa particularly hard.

“Illegal financial flows exist worldwide, but Africa is the most affected because budgets are already stretched,” he told DW.

“Multinationals exploit extractive industries, tax havens enable them to underpay tax, and a lack of transparency hides it all. Illegal financial flows are like a life-threatening condition, draining Africa's blood,” said Linge.

Most exposed

Resource-rich countries such as Nigeria, Angola, and the Democratic Republic of Congo are most exposed. In Nigeria alone, billions have been lost through profit shifting in the oil sector.

“That money could provide clean water for 500,000 people, sanitation to 800,000, schooling for 150,000, and could save over 4,000 children through better healthcare. Illegal financial flows are not abstract – they deny people their rights,” he said.

Although the AU estimates Africa's financial loss from illegal flows at around US$88 billion (Sh13.2 trillion), Linge believes this is likely a severe underestimation.

“At the same time, Africa is forced to service debts at high interest rates,” he noted, highlighting that African countries often pay higher interest rates on the capital market than wealthier economies.

Deprived of revenue through tax evasion and burdened by high debt repayments, many African nations face severe restrictions on their budgetary and fiscal policies.

This hampers efforts to pay teachers and doctors, build climate resilience, or finance development. Experts say that stemming illegal financial flows would also mark a first step toward greater sovereignty for African governments.