In Angola, she is known as “the Princess”, a smart and innovative businesswoman famous for her friendships with jetsetters from all over the world and, above all, for her fortune, which makes her the richest woman on the continent. However, recently Isabel dos Santos has become the symbol of corruption among African elites, as she is accused of systematically looting public assets.

It is once again to courageous whistle-blowers and the rigorous analysis by members of the International Consortium of Investigative Journalists (ICIJ) that we owe these revelations. After the Panama Papers, the Paradise Papers, and the Mauritius Leaks, the Luanda Leaks showed this time how the eldest daughter of ex-president Jose Eduardo dos Santos – who served from 1979 to 2017 – has, together with her husband, allegedly received billions of dollars from her father’s government in Angola through a business empire spanning more than 400 companies in 41 countries, including Hong Kong and Mauritius.

As a result, according to the Luanda Leaks, she was able to avoid scrutiny and access many public works contracts, state assets and loans at the expense of Angolans.

It’s no coincidence that the 2020 edition of the Financial Secrecy Index (FSI), published by Tax Justice Network, a UK-based financial advocacy group, classifies Angola as the most secretive place of all 17 African countries included in its index. For five of the past 10 years, Angola was listed as having “strategic deficiencies” by the Financial Action Task Force (FATF), an international standard setter of anti-money laundering policy.

Angola is not alone: six months ago, another ICIJ investigation, the Mauritius Leaks, showed how, by creating an intricate network of bilateral investment, tax and trade treaties with mostly developing countries, Mauritius proceeded to build one of the most aggressive offshore regimes in Africa, thus monopolising investment flows into the continent.

In reality, no nation on the continent is in a position to congratulate itself on its good results. South Africa, for example, managed to slightly reduce its contribution to global financial secrecy, taking its ranking down from 50th on the 2018 index to 58th in 2020. But the country’s elite, South African corporations, and foreign multinational companies within its borders, keep exploiting loopholes in legislation and use other secrecy jurisdictions to reduce their tax obligations in a nation that Time Magazine referred to as “the world’s most unequal country”.

Of course, we must remember that the biggest contributors to global secrecy are not African countries. Members of the Organisation for Economic Cooperation and Development (OECD, that brings together the richest countries in the world) are responsible for 49% of all financial secrecy in the world, as measured by FSI in 2020. This contribution is either direct or through their dependencies to which they outsource some of their financial secrecy, such as the US Virgin Islands, Curaçao or the Cayman Islands, showing the remarkable hypocrisy of the world’s most fortunate countries. By using the tax havens that are part of their networks, they enable some of the worst forms of financial secrecy in the world while exercising stricter regulations within their own borders.

But it is in Africa that the situation is most tragic. Capital flight out of Africa by African elites and foreigners alike has been undermining the continent’s development for decades. In a recent report examining capital flight from 30 African countries between 1970 and 2015, James Boyce and I demonstrated that they lost approximately $1.4-trillion over the period in question ($1.8-trillion if earned interest income is taken into account). This is much more than the total of the stock of debt owed by these countries as of 2015 ($496.9-billion) and the cumulative amount of foreign aid received over this period ($991.8-billion). In short, Africa is a “net creditor” to the rest of the world and not a continent dependent on foreign aid and private investment, as typically portrayed.

The consequences are brutal. These capital outflows deprive governments of resources to invest in public services, such as education, healthcare, childcare services, clean drinking water and sanitation systems. The financial haemorrhage exacerbates gender inequality, because women are overrepresented among the poor and among the demographic groups with precarious or low-paid jobs.

In addition, they tend to take on a larger share of unpaid care work when social services are cut. Furthermore, capital flight and tax evasion erode the tax base, forcing a resort to regressive taxes on consumption, such as value-added tax (VAT), thereby shifting the tax burden to the middle class and the poorest segments of the population.

The succession of scandals such as the Luanda Leaks has generated public outrage across the world. It is hoped that this will eventually force governments to start tackling the financial secrecy industry that allows cross-border corruption networks to prosper. The 2020 FSI already shows that, on average, countries have reduced their contribution to global financial secrecy by 7% since the previous edition from 2018, which is excellent news.

We, the Independent Commission for the Reform of International Corporate Taxation (ICRICT), believe it is time for Africa to start addressing the question of transparency. South Africa, for example, has yet to implement the public beneficial ownership register it has committed to. Most African countries have not even contemplated such as a vital tool to combat secrecy, tax evasion and illicit financial flows.

Allowing the identification of the beneficial owner of an asset regardless of whose name the title of the property is under is a powerful tool to tackle tax fraud and corruption. It would also be an opportunity to engage effectively with citizens as well as earning their trust.

By being more demanding on themselves, African governments will also be in a better position to stand up to jurisdictions that block progress on transparency at the global level. The problem is not limited to the usual suspects, the financial centres such as Dubai, Singapore or Hong Kong, which are attracting more and more capital from African oligarchs, as the Luanda Leaks have shown. It is also troubling to see that major advanced economies such as the United States and the United Kingdom have seen their contribution to global financial opacity increase in the 2020 FSI.

Financial transparency is also a political emergency. By continuing to turn a blind eye to corruption and tax evasion and by persisting in responding to the lack of fiscal resources through austerity programmes, governments jeopardise their legitimacy in the eyes of the population, opening wide the door to extremist movements to advance their destructive interests. DM

Léonce Ndikumana is a Distinguished Professor of economics and Director of the African Development Policy Programme at the Political Economy Research Institute at the University of Massachusetts. He is a Commissioner on the Independent Commission for the Reform of International Corporate Taxation (ICRICT).