Financial Crime World

Zimbabwe’s Illicit Finance Tangle: A Persistent Challenge in the Face of Global Transparency Push

Zimbabwe continues to grapple with the complex issue of illicit finance, a transnational problem with distinct local solutions. As the global focus shifts towards combating corruption and ensuring transparency in government spending in response to the COVID-19 pandemic, Zimbabwe stands out as a country in desperate need of making significant strides in this area.

The Global Scenario

  • Approximately $2.6 trillion is lost annually to corruption worldwide [1].
  • $1 trillion is spent on bribes [1].
  • Illicit financial flows (IFFs) not only undermine institutions and deplete resources for essential services but also fuel illegal activities, such as drug trafficking and militia financing.

Zimbabwean Context

  • Zimbabwe has an urgent need to grow the economy at an average rate of 7% each year to achieve Sustainable Development Goals.
  • Economic output has been declining since 2000, leaving approximately half of its citizens living in extreme poverty [2].
  • Corrupt political elites have abused public office and colluded with corrupt private sector actors.

Defining Illicit Finance

  • Illicit finance refers to financial flows that are earned, transferred, or used illegally [3].

Invisible Money, Disguised Channels

  • Political and economic structures in Zimbabwe create favorable conditions for illicit finance.
  • Extractive state tendencies have persisted since the colonial era.
  • Transparency efforts, such as the enactment of the Freedom of Information Act (FOIA) and the creation of the Procurement Regulatory Authority of Zimbabwe (PRAZ), have yet to yield significant progress.

A Persistence of Structural and Institutional Challenges

  • The roots of illicit financial activities are deeply entrenched in the political and economic structures of Zimbabwe.

Mining Sector

  • The mining sector, a significant driver of the economy, is vulnerable to trade misinvoicing due to the sector’s opaque pricing structure.

Energy Sector

  • Collusion between key players in the energy sector has resulted in significant losses and misallocation of resources.

Agriculture, Transport, and Health Sectors

  • Illicit finance affects various sectors, complicating efforts to address economic challenges and ensure equitable access to essential services.

Achieving Transparency: Challenges and Opportunities

  • Zimbabweans are increasingly demanding transparency and accountability from their government.
  • Civil society organizations and international partners play crucial roles in promoting transparency and collaborating to develop effective solutions.

References

  1. World Economic Forum. (2020). Global Risks Report 2020. [Online]. Available: https://www.weforum.org/reports/the-global-risks-report-2020
  2. World Bank. (2021). Zimbabwe Poverty Headcount for Population Below $1.90 a Day [Data]. [Online]. Available: https://data.worldbank.org/indicator/SI.POV.DIR.ZS?locations=ZW
  3. Defining Illicit Finance: An Overview (2020). Accessed: January 28, 2023. [Online]. Available: https://www.unodc.org/wcbc/en/definition-illicit-finance.html