AU chairwoman Dr Nkosazana Dlamini Zuma. Picture: Elmond Jiyane, GCIS
AU chairwoman Dr Nkosazana Dlamini Zuma. Picture: Elmond Jiyane, GCIS

AU self-funding plan cautiously welcomed

By Peter Fabricius Time of article published Jul 18, 2016

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Johannesburg - The African Union’s decision that all African countries will impose a 0,2 percent levy on their imports to enable the organisation to finance its own activities, including peacekeeping operations, has been cautiously welcomed.

The continent’s leaders made the decision at the AU summit in Kigali, Rwanda, which was due to end on Monday.

After struggling for years to agree on a formula for greater self-funding of the AU – which is now 76% financed by foreign donors – the leaders eventually agreed on the 0,2% levy on “eligible imports”.

Eligible imports would exclude essential products such as medicines, fertilisers and baby food.

AU officials estimated this levy would boost the body’s income to $1.2bn (R17.16bn) from its current $447m (R6.4bn) budget.

Rwanda’s finance minister Claver Gatete told journalists at the summit that the new funding model would be predictable and easy. “It will be collected by the revenue authorities in our countries, and it will be in an account opened in a central bank, and the money will be disbursed from that.”

He said the previous model of fees linked to each country’s GDP presented problems because some countries defaulted on or delayed payment. Under the new model, states would be sanctioned for not paying their contributions.

Earlier proposals for an oil levy, or a $2 per stay hotel levy and a $10 per flight air ticket levy, as well as SMS levies, were all rejected by specific countries which felt their own economic interests would be unfairly harmed by one or other of the levies.

Eventually the AU decided just to raise membership tariffs, according to a formula where the biggest economies paid the most. Member states could then decide for themselves how to raise the necessary finances to pay these increased dues.

The aim was for the AU states to fund 100% of the AU Commission’s own operations, 75% of its programmes and 25% of its peacekeeping operations.

But some countries also complained the new membership fees were too high and so officials were tasked with researching the import levy which the leaders agreed to implement next year.

However, analysts have raised several questions about the import levy.

“Will the revenue authorities and central banks in all the countries have the necessary systems in place to implement this quickly?” one asked.

“Who will ensure that the levies are paid over to the AU? Gatete said finance ministers would do it, but can they? Some also speak about the African Development Bank (AfDB) being tasked to do the job.

“And what about the small countries that have small economies or are in conflict like the Central African Republic (CAR)? On the AU side, what guarantees are there that the money will be well spent?”

It is also not clear why the sanctions which have now been proposed for defaulters – which have not been spelt out – would work any better than the present sanctions.

Liesl Louw-Vaudran, a researcher at the Pretoria-based Institute for Security Studies (ISS), said: “African leaders seem to be optimistic that this is a ‘historic’ decision that will end the AU’s dependency on outside funding in one fell swoop, but it seems very ambitious to have this implemented in just six months.”

The AU has been trying for many years to reduce its dependency on foreign funders, but South Africa’s Nkosazana Dlamini-Zuma gave the project new impetus when she took over as AU Commission chairperson in 2012.

She professed herself shocked to discover just how much of the AU’s work was funded by foreign donors. The AU’s concern is that this gives foreigners too much influence over AU policies and actions.

If the new import levy works, it could come to be regarded as an important part of Dlamini Zuma’s legacy. She was due to stop down from the chair soon after this summit, but on Monday the AU leaders could not agree on a successor so she will remain in office until the next summit in January.

African News Agency

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