Tax losses and crime cost Africa ten times the money it receives in aid

Trillions of dollars have been drained out of Africa via a shadowy financial system that has left most of the cash in the hands of western financial institutions.

The report by US body Global Financial Integrity (GFI) suggested that even the most conservative estimates leave Africa with a loss of $1.8 trillion over the past four decades, or an average $989 per person between 1970 and 2008.

The figure dwarfs the vast revenues African countries receive in aid from developed countries. For every dollar given in aid $10 flows out to financial institutions.

Despite the continent's notoriety for bribery and theft by officials the report says these forms of corruption account for just 3% of the cross-border flow of illicit money around the world and the figure is likely to be the same in Africa.

Commercial tax evasion, mainly through trade mis-pricing, contributes 60% to 65% of the global total, while drug trafficking, racketeering and counterfeiting makes up 30% to 35%.

Illicit outflows from Africa grew at an average of 11.9% a year over the four decades studied in the report. It has eaten through the continent's GDP. Losses rose from around 2% of GDP in 1970 to a peak of 11% in 1987 then dropped to 4% for much of the 1990s, only to increase again to 8% of GDP in 2007 and 7% in 2008.

The capital loss has hampered development and attempts to alleviate poverty. Even the IMF and the World Bank estimate that Africa has lost $854bn between 1970 and 2008.

This would be enough to wipe out the continent's 2008 external debt of $250bn and potentially leave $600bn for tackling poverty and stoking economic growth.

Instead cumulative illicit flows from the continent increased from about $57bn in the decade of the 1970s to $437bn over the nine years 2000-2008.

GFI director Raymond Baker said: "This massive flow of money out of Africa is facilitated by a global shadow financial system comprising tax havens, secrey jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mis-pricing and money-laundering techniques."