The African Development Bank has urged Botswana to explore innovative ways of mobilizing resources to boost revenue.
“Such efforts also involve tackling illicit financial flows. Improper invoicing led to high level of such flows for the mining sectors in Botswana, South Africa, Zambia, and Zimbabwe,” the bank says in a report on Southern Africa’s economic outlook and references research work that has been done on IFFs from those countries.
The research was done by Vusi Gumede of the University of Mpumalanga and David Fadiran of the University of Cape Town. In terms of their research, “Botswana is among Southern African countries that are prone to IFFs with up to P200 billion estimated to have been moved illegally over 10 years up to 2013. The Global Financial Integrity (2015) also notes that between 2004 and 2013, a whooping sum of US$ 20 billion might have been transferred out of Botswana in the form of IFFs.” Using the Global Financial Integrity methodology, calculations by Brookings Institution in the United States show that since 1980, an estimated $1.3 trillion left sub-Saharan Africa in the form of IFFs.
The research names the mining sector among the main culprits. They found that there is a discrepancy between the reported data by the exporting country and importing country. Generally, they found reported export quantity and weight to be lower than the reported import quantity and weight.
According to the researchers’ calculations, a negative difference signals that the values declared by the exporting country are smaller than the value declared by the importing country and implies that a possible under-invoicing has occurred. A positive value implies the opposite. For the 2000 to 2015 period and in the diamond sector alone, the researchers obtained -93 for Botswana. In terms of said discrepancy, they found “approximately 12,509 KGs and US$ 19 billion for the net weight difference and trade value difference for Botswana.”
The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) has also identified dealers in precious and semi-precious stones among those who pose high money-laundering risk. ESAAMLG assessors found that while dealers in precious and semi-precious stones are required to be licensed and supervised for Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) requirements, they were yet to be supervised due to lack of supervisory capacity.
“Since the Financial Intelligence Agency has not yet started supervising this sector for AML/CFT, it means the dealers are, for now, to a large extent, left to self-regulate themselves as most of them, being foreign owned or controlled have to implement AML/CFT obligations obtaining in the home jurisdiction of the parent company,” reads the 2016 ESAAMLG report.