EXPERTS have raised alarm over the extensive illicit financial flows (IFFs) draining Zimbabwe’s fragile economy, warning that these illegal activities are undermining critical development projects meant to benefit citizens.
The issue was discussed during a recent XSpaces hosted by NewsDay in collaboration with Transparency International Zimbabwe (TIZ), under the theme: “What role are professional enablers playing in promoting and hiding illicit financial flows and ill-gotten wealth in Zimbabwe?”
Discussants looked at the role of professional enablers — such as lawyers, accountants, and financial institutions — in facilitating these flows. IFFs involve the illegal cross-border or domestic transfer of money, typically linked to activities like money laundering, tax evasion, and corruption.
National University of Science and Technology lecturer and economist Stevenson Dlamini highlighted the devastating impact of IFFs, noting how they divert resources from essential services like education, healthcare, and infrastructure development.
“Certain projects become white elephants just because there has been diversion of funds away from their core business, which is that of developing the infrastructure of the economy, infrastructure that is critical for the welfare of the citizens,” he said.
“All these are jeopardised because of the presence of these illicit financial flows that take different forms, they could be cross-border, and they could be within the domestic economy.”
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Chenayimoyo Mutambasere, a development economist from Africa Centre for Economic Justice, argued that state institutions were complicit in perpetuating these illegal activities.
She criticised the lack of transparency and accountability within these institutions, which enables corruption to thrive.
“Corruption in Zimbabwe is enabled at the state level. The very institutions that should protect public funds and prevent illicit flows are failing. In fact, they function more like a mafia under the guise of a government,” Mutambasere said, pointing out the absence of serious discussions about corruption in national budgets and the lack of citizen engagement on the issue.
Beloved Chiweshe, deputy chief of party for the New Narratives initiative at Accountability Lab Zimbabwe, said professional enablers were taking advantage of legal loopholes to facilitate money laundering and tax evasion. By exploiting weak regulatory frameworks, these enablers create opportunities for illicit financial activities.
The panellists called for tight regulations, enhanced transparency, and improved oversight mechanisms to combat IFFs.
“For Zimbabwe, there is a politically connected cabal which is also connected to other cabals in other territories that have done these illicit practices longer,” Chiweshe said.
“To add salt to the injury, the politicians have a good technical expertise to support illicit financial flows and can exploit gaps in our weak regulatory framework. For instance, someone can walk into a real estate office with US$300 000 in cash and buy a house with no traceability.”
He added that the very professionals entrusted with preventing illegal financial flows are, in many cases, aiding the problem. Lawyers, accountants, and other experts exploit existing rules to legally facilitate transactions that are otherwise illicit.
“We find them enabling and creating scenarios where they facilitate in a legal way by exploiting existing rules and legislation to facilitate the transactions that they illegally constitute,” Chiweshe said.
“We know that there are people who are well-trained and well-versed in tax law, for example. Who may advise people who have illegally attained their work to what we call treaty shopping, where they look for differentials in tax laws.”
A 2021 study on IFFs in Zimbabwe revealed that between 2000 and 2020, the country lost an estimated US$32 billion due to externalisation of funds.
This figure exceeds the country's 2021 GDP of US$26,22 billion, as reported by the World Bank, translating to an average annual loss of US$3,2 billion during that period.
The findings were published in the International Journal of World Policy and Development Studies.