Call for proposals: Assessing the extent and impact of illicit financial flows in key economic sectors in Southern Africa

By Masego Madzwamuse | June 11th, 2015

Deadline: June 22nd, 2015

TrustAfrica, in partnership with Open Society Initiative of Southern Africa (OSISA), is currently accepting proposals under the auspices of the “Assessing the extent and impact of illicit financial flows in key economic sectors in Southern Africa” project. The project seeks to address the problem of substantial knowledge gaps on illicit financial flows in Southern Africa. It specifically covers the lack of in-depth sectorial research, data and analysis on the patterns, dynamics, actors, channels, magnitude, and development impacts of illicit financial flows in the sub-region. The ultimate goal of the project is to expand the data, knowledge and analysis available to advocates and policymakers, and thereby prepare the ground for synergy-based communities of practice that can provide effective responses to curb illicit financial flows from Southern Africa. The initiative also seeks to contribute to strengthening the capacity of researchers and policy advocates. The project will also contribute to sharpening the methodologies in the study of illicit financial flows in Southern Africa.

The purpose of this Call for Proposal (CFP) is to solicit proposals from various organizations, individuals and/or consortiums to undertake in-depth research studies on how resources are being illicitly transferred in the following sectors:

1)    Agriculture

2)    Mining

3)    Wildlife and Tourism

Context and Background

The “Africa rising” narrative has dominated headlines in the past few years. This discourse is fuelled by the continent’s rapid economic growth with the GDP of sub-Saharan Africa growing at a much faster rate than the global average over the past decade. Growth rates have averaged 5% over the past 10 years. In 2012, several countries grew by at least 6%. Resource-dependent countries registered the highest levels of growth. If properly managed, this encouraging economic performance could contribute positively to poverty reduction and development in a variety of ways. According to the Economist magazine, FDI into Africa increased from $15 billion in 2002 to $37 billion in 2006, and then to $46 billion in 2012. UNCTAD reports that this figure rose to $56 billion in 2013. Meanwhile, trade with China alone rose dramatically from $11 billion in 2003 to $166 billion in 2012 and $193 billion in 2013.

Southern Africa is well endowed in natural resources accounting for 31% of the continent’s land mass and with 8 out of the 20 African countries classified by the IMF as resource rich found in the sub-region.  Yet, Southern Africa is characterized by extreme poverty and deepening inequality. The boom in trade and investment has not contributed to socio-economic transformation. Ongoing economic growth has not generated sufficient economic diversification, job growth or social development to effectively fight poverty.  In particular, resource-rich countries rank low in almost all human and social development indicators. Southern African countries such as the DRC, Mozambique and Angola are amongst the best endowed yet they remain at the bottom of the human development index (HDI) with the largest gaps between human development and income distribution.

The IMF has projected that, if these resources were properly utilized, countries such as Mozambique and Angola, could mobilize sufficient domestic resources to eradicate poverty. While some others, such as Tanzania could close the gap by three quarters. In these countries, anticipated revenue flows are very large in relation to the estimated costs of closing the national poverty gap, transforming the provision for education and reducing child mortality, among others." name="_ftnref1" title="">[1] While there are many reasons for the failure to translate returns from natural resources into social and human development, attention has recently been drawn to the problem of illicit financial outflows in the continent.

Illicit financial flows are now widely acknowledged as harmful to economies all over Africa. This is particularly confirmed by the recently released Final Report of the High Level Panel on Illicit Financial Flows from Africa. The findings from the High Level Panel (HLP), led by former South African President, Thabo Mbeki, echo calls made by civil society organizations from across the continent to view illicit financial flows as a serious threat to inclusive development in Africa and to take urgent practical policy action to stop the haemorrhage. One of the most notable findings of the HLP process is that Africa is losing up to $60 billion annually" name="_ftnref2" title="">[2] through illicit financial flows and the figure is increasing at an alarming rate of 20.2% per year, according to Global Financial Integrity (GFI) calculations for the period 2002 – 2011.

For African countries, in particular, the massive outflows undermine an already precarious financial resource base, with negative effects on resource mobilization for equitable development. Recent studies suggest that cumulative illicit financial outflows from the African continent over the last 30 years ranged between US$1.2 trillion and US$1.3 trillion in real terms. As a result, the cumulative net resource outflows from Africa, between 1980 and 2009, ranged from US$597 billion to US$1.4 trillion" name="_ftnref3" title="">[3]. Of the different fraudulent mechanisms used for these practices, the biggest is trade mis-invoicing – the practice of misrepresenting the price or quantity of imports or exports in order to hide or accumulate money in other jurisdictions. In this way, companies, especially multinationals, evade taxes, avoid customs duties, transfer kickbacks and launder money. The phenomenon is facilitated by the extensive use of offshore companies, the high levels of intra-company trade and the commercial secrecy surrounding foreign investment activity.

The HLP observes that the dependence of African economies on the extraction of natural resources makes them particularly vulnerable to IFFs. Illicit financial flows are driven by organized crime, corruption, tax evasion, illegal trade in natural resources, money laundering and manipulation of international trade frameworks. Ultimately, illicit flows result from many converging factors, such as weak economic governance, lack of accountability, oversight and efficiencies, as well as capacities to monitor revenue and taxes.

African governments consequently incur significant revenue losses as they lack the human, financial and technical resources needed to ensure tax compliance, and the commercial market intelligence needed to evaluate the taxes that companies are liable for. The HLP report also points to emerging new and innovative ways of generating IFFs, enabled by the digital economy and new technologies. These outflows rob the continent of resources that could, otherwise, be used to finance public services and development strategies for significant cuts in poverty levels. The UN estimates that the number of people living on less than $1.25 a day in Africa increased from 219 million in 1990 to 414 million in 2010, as population growth continued to outpace the rate of poverty reduction.

The illicit siphoning of capital from Africa forces many African countries to depend on foreign loans to finance development. Out of desperation, African countries accept debilitating conditions for development assistance under practically un-repayable terms. In the end, more money flows out of Africa to pay back interest on these loans than the continent invests in basic social services and development. One example, reported by Health Poverty Action, is that $21 billion leave the continent annually mostly to service foreign debts contracted under unfavourable conditions. In some cases, African countries are forced to use natural resources to securitize foreign loans, thus undermining sovereignty and mortgaging future generations.  Illicit financial flows from Africa represent a major threat to inclusive development and economic transformation in Africa. The scale and impact of these illicit flows must not be underestimated.

The challenge posed by IFFs has gained prominence in policy circles, as attested by the AU High Level Panel on IFFs. Additionally, it was a subject of the 2013 Africa Progress Panel Report and the various advocacy efforts driven by civil society organizations. The other platforms include Agenda 2063, led and framed by the African Union as “A global strategy to optimize use of Africa’s resources for the benefits of all Africans”; the post-2015 Sustainable Development Goals; and the UN Finance for Development process. There are also other related continental processes, such as the Africa Mining Vision and the AU Land Policy Framework, which further highlight the increasingly imperative effort to optimize domestic resources for economic transformation in Africa.

Countries in Southern Africa, like most of Sub-Saharan Africa, have the economic potential to address their major developmental challenges. The increasing poverty and widening inequality they experience is a poor reflection of their abundant wealth. Southern Africa’s substantial resources tend to flow outwards, leaving most people in poverty. This resource drain takes place in many ways including through debt, outflow of natural and human resources, falling terms of trade and to a very large extent, illicit financial flows. The major problem is that substantial knowledge gaps exist in the body of information available to advocates and policymakers working to curb illicit financial flows from Southern Africa. This is partly because illicit flows are a relatively new area of focused study and policy advocacy. The highly technical character of the subject area, coupled with the limited availability of data and knowledge, imposes more constraints on policy responses and advocacy efforts. In particular, there is not enough in-depth research, data, and analysis that fully unpacks the complexity of illicit financial flows in terms of the form, character, actors, magnitude and impact on development in real terms, and on communities facing poverty and inequality. Country level analysis is lacking, as most of the available data focuses on the global and continental levels.

In light of the above, this project seeks to address identified critical knowledge gaps on illicit financial flows in Southern Africa. It will do so through in-depth research on three key economic sectors – 1) mining; 2) agriculture; and 3) wildlife and tourism. The research will contribute towards expanding the general and specialist understanding on the problem of illicit financial flows in the sub-region and its impact on socio-economic development. Further, the proposed studies will significantly strengthen advocacy and policy responses.

Project Scope

The scope of this project includes relevant literature review, the research methodology design, data collection, data management and analysis, and the writing of research reports.

Structure of the Proposal and Submission Guidelines

This CFP represents the requirements for an open and competitive process. Proposals should be concise, and outline the context for the particular economic sector and the proposed methodological framework. All proposals should be submitted in Word Format. The deadline for submission is 22 June 2015. TrustAfrica will contact the successful bidder by 5 July 2015.

Where the organization submitting a proposal must partner, outsource or contract any work to meet the requirements outlined here, this must be clearly stated in the proposal. Additionally, all the costs included in proposals must be all-inclusive to cover any outsourced or contracted work. All proposals must be submitted with an accompanying budget outlining all fees and costs. The budget should not exceed US$40,000.

Bidders should also provide the following items as part of their proposal:

  1. Description of experience undertaking research of a similar nature
  2. Resumes of key staff/personnel available for the project
  3. One sample research paper/report
  4. Proposed timeframe for completion of the project

TrustAfrica will award a total of three research grants (one per each economic sector). Specific contract terms and conditions including scope, budget, project timelines, and other necessary items pertaining to the project, will be discussed and finalized with the winning bidders.

Selection Criteria

All proposals will be evaluated based on the following criteria:

  • Overall proposal suitability: proposed research project and methodological framework must respond to the context, needs and scope set out above and be presented in a clear and organized manner.
  • Organizational Experience: Bidders will be evaluated on their experience as it pertains to the scope of this project.
  • Previous work: Bidders will be evaluated on examples of their work pertaining to the scope of this project as well as credible references.
  • Value and cost: Bidders will be evaluated on their proposed budget based on the work to be performed in accordance with the scope of this project
  • Technical expertise and experience: Bidders must provide descriptions and documentation of staff technical expertise and experience.

To apply, please submit your complete proposal to TrustAfrica at the following email address: iff@trustafrica.org. For further clarification, bidders can write to TrustAfrica on the same email address.




" name="_ftn1" title="">[1] Africa Progress Report: 2013.

" name="_ftn2" title="">[2] Final HLP Report on IFF from Africa.

" name="_ftn3" title="">[3] GFI, AfDB (2013) “Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009.”

 

ShareThis

our hCard

Building vibrant and tolerant democracies
1 Hood Avenue/148 Jan Smuts; Rosebank, GP 2196; South Africa
E 28° 2.1600000000001" S -26° 8.7420000000001"
Telephone: +27 (0)11 587 5000
FAX: +27 (0)11 587 5099

Twitter Feed

Our newsletters

Sign up for our newsletter to receive stories, research, and news, delivered periodically to your inbox.