The impact of Illicit Financial Flows on the South African political economy under Jacob Zuma, 2009–2018

Abstract

South Africa has also fallen a victim of a greater major concern over the scale and negative impact of Illicit Financial Flows (IFFs) on the country's governance and developmental agenda. However, there is an unjustified observation that as one of Africa's biggest economies, South Africa is not a victim of IFFs. This observation shows that scholars and academic practitioners have not yet uniformly come to a cul‐de‐sac on this subject, and as such, this confusion constitutes a huge dichotomy on the subject matter. Based on Afrocentricity as the alternative lens, this article argues that there are after effects of the practice of IFFs in South Africa and that IFFs need to be given a special attention in order to curb them from destabilising South Africa's economic and political stability. Although this article discusses IFFs in general and how they come about, the central focus of this article is to unpack the impacts of IFFs under the Zuma administration and provide possible solutions. Methodically, this article relied on the prevailing continental and South African discourse circulating and thematic content analysis on conversations.

Strategies for preventing illicit financial flows in developing countries

“…Breaking the secrecy of financial flows to and from African countries by providing data and mandating each country to publish information about its debt profile, foreign direct investments and other financial transactions and at the same time transparently showing the usage of these funds have surely reduced illicit financial flows (Nkurunziza, 2012; Cobham, 2014; Bohoslavsky, 2018). Developing countries that are participating in the worldwide movement towards Automatic Exchange of Tax Information or Exchange of Information (EOI) as endorsed by Organisation for Economic Cooperation and Development (OECD) and G20 countries have information about companies (OECD, 2014; AU/ECA, 2015; Cobham, 2014; Schlenther, 2016; Bohoslavsky, 2018; Rapanyane and Ngoepe, 2019; GFI, 2019). Policymakers in jurisdictions that have MNCs to disclose information about revenues, profits, sales, tax payment, group, subsidiaries and staff on a country by country basis for purposes of transparency are achieving these objectives (Perez et al , 2012; Nkurunziza, 2012; Cobham, 2014; AU/ECA, 2015; Bohoslavsky, 2018; GFI, 2019; Rapanyane and Ngoepe, 2019).…”

“…Developing countries that are participating in the worldwide movement towards Automatic Exchange of Tax Information or Exchange of Information (EOI) as endorsed by Organisation for Economic Cooperation and Development (OECD) and G20 countries have information about companies (OECD, 2014; AU/ECA, 2015; Cobham, 2014; Schlenther, 2016; Bohoslavsky, 2018; Rapanyane and Ngoepe, 2019; GFI, 2019). Policymakers in jurisdictions that have MNCs to disclose information about revenues, profits, sales, tax payment, group, subsidiaries and staff on a country by country basis for purposes of transparency are achieving these objectives (Perez et al , 2012; Nkurunziza, 2012; Cobham, 2014; AU/ECA, 2015; Bohoslavsky, 2018; GFI, 2019; Rapanyane and Ngoepe, 2019).…”

“…Empirical studies conducted have shown the effects of illicit financial flows on development and in some instances the risks and measures for curbing illicit financial flows; but these studies were not focussed on developing countries (Ortega et al , 2017; Naheem, 2017; Rapanyane and Ngoepe, 2019; Sotande, 2019). These studies concentrated on the effects of illicit flows and not effective strategies to prevent illicit financial flows to and from developing nations; hence, the literature gap.…”

A Country-Level Analysis of Worldwide Official Financing by International Financial Institutions

“…Osberghaus, (2019) investigated twenty-one studies of eighteen independent research teams including twelve empirical studies on the impact of natural disaster on financial flows and fluctuations on international trade, and revealed that foreign aid inflows and remittances slightly increase after disasters. Rapanyane et al (2020) stated that illicit financial flows have a negative effect on country's developmental and governance agenda that must be addressed to curb political and economic instability. Summers (2000) conducted a compressive study on causes, prevention, and cures of international financial crises.…”

The effects of illicit financial flows on oil and gas revenue generation in Nigeria

“…The study did not focus on FDI in the oil and gas sector. Rapanyane and Ngoepe (2019) in their study the impact of IFFs on the South African political economy under Jacob Zuma, 2009-2018 using thematic content analysis; found that tax evasion highly reduced the public revenue, which was availed for developmental agenda because of IFFs. The study focussed on the political economy and how tax evasion affected revenues, but it was not specific to any industry in particular and was in South Africa.…”