The 4th Joint African Union Commission/United Nations Economic Commission for Africa (ECA) Conference of African Ministers of Finance, Planning and Economic Development was held in 2011. This conference mandated ECA to establish a High Level Panel on Illicit Financial Flows (IFFs) from Africa. 

According to the Report of the High Level Panel on IFFs from Africa, the continent is estimated to be losing more than $50 billion annually due to IFFs. A significant portion of this is through the misuse of transfer pricing.

Transfer pricing is the setting of the price for goods or services sold between related legal entities within a multinational group of companies. This usually takes place in a cross-border scenario. 

As is commonly misunderstood, transfer pricing is not, in itself, illegal or necessarily abusive. The manipulation of transfer prices or abusive transfer pricing, however, may be illegal. Transfer pricing manipulation is the practice of obscuring the actual value of transactions to generate the most profit for the businesses involved. This can be effected through the artificial setting of prices in transactions between businesses and also through variations in the actual and declared quality and quantity of goods and services. Companies are therefore able to shift profits to jurisdictions with low tax rates.

The ECA held a sub-regional workshop on curbing IFFs in Nairobi on 14 and 15 September 2015. The workshop dealt with important issues such as the matter of IFFs in the context of global financing for development and how the OECD Base Erosion and Profit Shifting (BEPS) and other global processes impact on Africa. The delegates were tasked with increasing momentum for advocacy, recommending and piloting practical actions towards implementing the recommendations of the High Level Panel. Action plans were agreed upon and the continent is planning tackling IFFs which are currently leaving Africa.

The conventional international approach to dealing with transfer mispricing is through the "arm’s length" principle. This entails that a transfer price should be the same as if the two companies involved were indeed two unrelated parties negotiating in a normal market, and not part of the same corporate structure. The OECD and the United Nations Tax Committee have both endorsed the "arm’s length" principle, and it is widely used as the basis for bilateral treaties between governments and although many companies strive to use the arm’s length principle faithfully, many companies strive to move in exactly the opposite direction.

It is essential for all governments to draft and implement adequate transfer pricing legislation. It is recommended that the rules are based on the tried and trusted OECD Transfer Pricing guidelines. Where a regime is unregulated, companies are able to illegitimately transfer funds between jurisdictions. Taxpayers require certainty and the introduction of regulations will provide a degree of it.  Even if rules are in place, tax authorities need to carry out and apply the law in a consistent manner. Companies will find it easier to comply where the law and its application are complimentary of one another.

Documentation requirements are essential in assisting revenue authorities to examine and assess transfer pricing policies. According to the OECD's BEPS initiative, countries should adopt a standardised approach to transfer pricing documentation. A two-tier structure consisting of: 

  1. a master file containing standardised information relevant for all MNE group members; and 
  2. a local file referring specifically to material transactions of the local taxpayer should be enforced.

Country-by-country reporting is required to determine whether the African entity has complied with the arm's length principle. A group report would not contain the detail required to adequately analyse the performance of the African entity.

The recent significant local media exposure on transfer pricing indicates that Africans are fed up of being taken advantage of through transfer pricing manipulation. On 28 September 2015, supporters of the Right to Know (R2K) campaign protested against corporate corruption outside the Johannesburg Stock Exchange (JSE). R2K spokesperson Dale McKinley said that corporate corruption is overlooked in South Africa: "We believe that there is a great deal of corporate secrecy in our country that is not being paid attention to, specifically around issues of transfer pricing, taking money illegally out of the country and share ownership. We’re in the dark. " 

IFFs were also addressed during the Unite Against Corruption marches involving thousands of demonstrators in Pretoria, Cape Town and Durban on 30 September 2015.