While state capture in SSA remains difficult to measure, corruption scandals, selected audits and investigations, and anecdotal evidence provide basic empirics on its scope and patterns. State capture takes different forms, ranging from embezzlement to rent-seeking and patronage. It plays out through the privileged access of politically connected elites to state resources, public employment as well as policy decisions, including privileged access to permits and licenses, land, public contracts, grants/subsidies or tax breaks (Fiebelkorn 2019). For example, external audits and investigations during the 2014 Ebola Crisis revealed the misuse of large sums of Red Cross funds in Sierra Leone and Liberia, which amounted to up to 2.7 million dollars in the latter case. A stark example was the relationship between South Africa’s former President and leader of the African National Congress, Jacob Zuma and the Gupta brothers. Over several years, the parasitic relationship between the President and donors resulted in widespread looting and state capture, which the country is still coming to grips with.<sup>13</sup> Perhaps one of the most daunting challenges faced by SSA countries is capital flight, a large share of which is estimated to be illicit financial flows – this is financial flows that are either illegally earned or used (e.g. embezzlement, inflated payments through fraudulent invoices), and/or illegally moved or diverted (e.g. to evade taxes),<sup>14</sup> Empirical evidence about the relations between offshore centers, African elites and capital flow remains limited, but the release of the Pandora Papers, among others, showed the African connection to be robust.<sup>15,16</sup> Ndikumana and Boyce (2021) provide estimates of capital flight from 30 African countries over the period 1970-2018 and show that these countries lost a combined $2 trillion (in 2018 dollars), representing 94 percent of their total combined GDP in 2018. More worryingly, they show that capital flight from African countries has been steadily increasing since the turn of the century. Aid is at risk of being diverted by such forms of corruption. As documented by Andersen et al. (2020), aid disbursements to highly aid-dependent countries coincide with sharp increases in bank deposits in offshore financial centers, but not in other financial centers.

Grand corruption has dramatic fiscal and macroeconomic implications. State capture, whereby for example politically connected firms are granted preferential access to land, subsidies, public contracts or tax exemptions, has a demonstrated negative impact on productivity, job creation and growth in developing countries (see for example Diwan et al. 2019). Grand corruption also has distortive redistributive effects: patronage dynamics translate, for example, into the misallocation of public funds and inefficient public investments that benefit narrow political constituencies over general public welfare (Canen and Wantchekon 2022). In addition, the flow of corruption proceeds toward offshore centers represents a substantial loss in revenues from African treasuries, at a time when the burdens of debt and

> 13 Chipkin, Ivor, et al. _Shadow state: The politics of state capture_ . NYU Press, 2018.; Budhram, Trevor. "Political corruption and state capture in South Africa." _Political Corruption in Africa: Extraction and Power Preservation_ (2019): 155-74.

> 14 Note that IFFs do not all proceed from corruption; some may proceed from criminal activity (e.g. mafia extortions).

> 15 See OECD (2023), Governing through transparency: Corruption, accountability and illicit financial flows in oil trading, Development Co-operation Directorate, OECD Publishing, Paris.

> 16 Soares de Oliveira (2021) has identified a number of key themes, about which we know very little: the politics of finance and banking; the extractive industries and commodity trading; the political economy of metropolitan service providers; the engagement of African elites with the offshore world; and the increased salience of Asian financial centers in Africa’s global offshore linkages. See also Oppong et al. (2020).

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