Financial Crime World

Zimbabwe’s Illicit Finance Crisis: A Hidden Threat to Development and Transparency

In the shadow of global efforts to combat corruption and promote transparency, the problem of illicit finance continues to plague developing countries, including Zimbabwe. This article explores the prevalence and impact of illicit financial flows (IFFs) in the Zimbabwean context, highlighting the challenges of managing this covert economic activity in an environment marked by instability and complexity.

The International Stage: Escalating Global Problem of Illicit Finance

  • The global community’s struggle against corruption has taken center stage after the COVID-19 pandemic.
  • Precedented scrutiny on government spending and public resources has led to a focus on promoting transparency and accountability.
  • Illicit financial flows persist, hollowing out institutions, diverting resources from critical development needs, and enabling illegal activities.
  • Estimated $2.6 trillion is lost each year to corruption, equivalent to 5% of the world’s Gross Domestic Product (GDP). (WEF, 2018)

The Distinctive Challenge of Illicit Finance in Zimbabwe

  • Zimbabwe’s fight against illicit finance presents a complex challenge.
  • As a developing country with a long history of isolation from international financial systems due to economic sanctions, Zimbabwe’s economy is deeply affected by hidden financial flows.
  • Half the population lives in extreme poverty, up from 26% in 1991.
  • While international financial flows and technical best practices are essential, local context and solutions are equally important.

Drivers and Manifestations of Illicit Finance in Zimbabwe

  • Complex web of factors contributing to the prevalence of illicit financial flows in Zimbabwe.
  • Long history of extractive state, where wealth has been steered towards a privileged minority.
  • Army’s role in state control post-independence creates a quasi-military state.
  • Clientelism is a significant aspect of Zimbabwe’s political economy.

Impunity, Weak Institutions, and the Role of Beneficial Ownership

  • Impunity for political and economic crimes is a significant issue in Zimbabwe.
  • Perception of risk for elites lies not in violating formal laws but in challenging powerful political patrons.
  • Opaque, poorly governed public institutions increase the risk of corruption.
  • Key processes such as public procurement operate with minimal oversight.
  • Anonymous companies used as vehicles for corruption.
  • Beneficial ownership register not public, limiting its impact.

The Importance of Public Awareness and Local Solutions

  • Reasons for optimism exist for Zimbabwe’s future.
  • Increasing public awareness of the harm caused by illicit finance is crucial.
  • Civil society actors pushing for reforms and promoting transparency.
  • ZANU-PF’s commitments to good governance, accountability, and transparency offer opportunities for progress.
  • Organizations like Pact expanding knowledge through research and analysis.
  • Shining a light on the complex issue of illicit finance can lead to progress and awareness among the public.