Illicit financial flows (IFFs) of various kinds, and the role of tax havens in facilitating these flows, have come under increased scrutiny since the global financial crisis of 2007-2009. A series of high-profile scandals and leaks of sensitive information about how corporates and individuals organise their financial affairs to escape their social obligations have contributed to this interest.
This report explores the relevance of these for South Africa. It looks at definitions and basic mechanisms, and provides an overview of methodologies used to estimate IFFs. It presents a set of case studies that illustrate how these mechanisms operate in practice, and provides an indication of the scale of IFFs and which tax havens play a significant role in facilitating these. It then explores the channels through which IFFs and tax havens affect industrial development, and makes the case for an active role for industrial policy in protecting South Africa’s industrial base from IFF and tax haven exposure, setting out a number interventions that the Department of Trade, Industry and Competition and other government agencies may develop to reduce the impact on industry in South Africa, accompanied by research proposals aimed at enhancing such efforts.