As regulations tighten in traditional offshore havens like Switzerland, African elites and companies are increasingly turning to financial hubs in Asia – Dubai, Singapore, and Hong Kong – according to a recent study from the University of Oxford.
A Shifting Landscape for African Capital
The continent is losing over $88 billion each year due to capital flight, as cited in the study. These three Asian financial centers are now among “the fastest growing and most significant transnational connections for Africa,” attracting substantial financial flows.
The research, authored by Ricardo Soares de Oliveira, professor at Sciences Po and a senior research fellow at Oxford, was prompted by the significant increase in African offshore links with Asian financial centers over the past decade.
Dubai’s Central Role
Dubai stands out among these hubs, with deep financial ties to Africa stemming from Emirati firms’ presence on the continent and its role in illicit financial flows and commodity-based money laundering. This proves currently the fourth largest source of foreign direct investment to Africa.
The city’s infrastructure, flight connections, and image, combined with tax incentives and financial secrecy, have made it a destination of choice for wealthy Africans. The report highlights Dubai’s emergence as a hotspot for money laundering, a development previously revealed in investigations like the Panama Papers and Swazi Secrets.
Dubai is also described as a haven for corrupt elites, offering a safe harbor from legal prosecution. Individuals like Isabel Dos Santos, daughter of Angola’s former autocrat, and the Gupta brothers, wanted in South Africa for corruption, are specifically named as residing in Dubai.
Hong Kong and Singapore’s Growing Influence
Although Dubai is a preferred residence for African elites, Hong Kong and Singapore are gaining importance in Africa’s offshore economy, offering similar benefits like lax regulation and asset protection. Hong Kong, in particular, serves as a stepping stone for Chinese investment into Africa, offering “privileged access to the Chinese mainland.”
Singapore-based firms like Portcullis TrustNet and Asiaciti Trust have been shown to facilitate shell companies and complex transactions to conceal assets, as revealed by ICIJ’s Offshore Leaks investigation. Zimbabwean mining magnate Billy Rautenbach and Nigerian politician Abubakar Atiku Bagudu are cited as examples of elites who have utilized these services.
A Global Network
The shift towards Asian hubs follows increased financial regulation in Western economies after the 2008 financial crisis. Despite this shift, Western jurisdictions and firms remain central to the offshore world, functioning in similar ways to their Asian counterparts.
According to report author Ricardo Soares de Oliveira, “There is certainly no lack of supply to meet the demand, and no reason to believe that hiding money abroad has become more difficult.”
Frequently Asked Questions
What is driving the shift of African financial activity to Asia?
The study indicates that tighter regulations in traditional offshore havens, such as Switzerland, are prompting African elites and companies to seek more permissive environments in Dubai, Singapore, and Hong Kong.
What role does gold play in illicit financial flows through Dubai?
The Oxford study found that Dubai has become “the lynchpin of gold smuggling from across Africa,” accounting for 95% of the illegal trade from East and Central Africa in 2020. Illicit gold is often smelted in Dubai before being shipped to international markets.
Has international pressure on Dubai led to changes in its financial practices?
The Financial Action Task Force placed Dubai on its “grey” list in 2024, but it was subsequently removed, a decision some attribute to geopolitical considerations, including European attempts to secure energy support from the Gulf states.
How might these trends impact the future of financial regulation and governance in Africa and beyond?
