This policy brief provides a broad introduction to illicit financial flows (IFFs), some key IFF mechanisms, and how these flows serve to undermine industrial development, particularly in developing countries. IFFs are usually connected to tax havens, and serve to maximise income for a handful of people while eroding the tax base, undermining government capacity and harming industrial development. There is strong evidence to suggest that IFFs are happening at significant scale in South Africa. This is likely to have a negative effect on the country’s existing industrial base and industrialisation efforts via a number of channels that require policy attention. Government departments and agencies with the authority to act on these illicit channels, including via industrial, competition and procurement policy, need to develop the capacity to do so. The brief concludes with recommendations of industrial policy measures that can be implemented to limit the extent and impact of illicit financial flows on industrial development in South Africa.
This policy brief is based on the Working Paper Illicit financial flows, tax havens and industrial development in South Africa. It can be accessed at the following link: main report.