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Longer, analytical article.  The AU starts to put its money (closer to) where its mouth is

Summary & Comment: For a long time Africa has always had its activities largely funded by foreign donors, but with a little innovation, the continent can fund itself. The proposal to charge US$2 hotel levy and US$10 airfare levy could shore up the coffers of the body. MM

Author: Peter Fabricius Date Written: 12 February 2015
Primary Category: AU/NEPAD Document Origin: ISS Today
Secondary Category: Africa General Source URL: http://www.issafrica.org
Key Words: African Union, ICC ,Ebola,

African Charter Article #22: All peoples shall have the right to their economic, social and cultural development within the common heritage of humanity . (Click for full text...)



Printable Version

http://www.issafrica.org/iss-today/the-au-starts-to-put-its-money-closer-to-where-its-mouth-is

The African Union (AU) has been proclaiming its independence since its birth, as the Organisation of African Unity, in 1963. Yet, even as it was shaking its one collective fist at meddling neo-imperialists and the like, the AU was taking their money with the other.

AU member states currently contribute only about 28% of the budget, and donors the remaining 72%. Now, with South Africa’s no-nonsense Nkosazana Dlamini-Zuma in charge of the AU Commission, it is at last starting to put its money closer to where its mouth is. Or is it?

Dlamini-Zuma was shocked, when she took up her position three years ago, to discover the extent of the AU’s dependence on donors, which she said allowed them to dictate the AU’s activities. She vowed to wean it off this dependence.

Olusegun Obasanjo – then the Nigerian president – was soon appointed to chair a high-level panel to investigate alternative sources of funding to enable AU member states to substantially increase their share of the budget.

After mulling various possible levies – including an oil levy, which was promptly rejected by oil-producing states – it eventually recommended that member states should all impose a US$2 hospitality levy per hotel stay and a US$10 airfare levy on each international flight entering or leaving Africa.

The AU leaders approved Obasanjo’s report – in principle – at their May 2013 summit in Addis Ababa. They tasked their ministers of finance and economic planning and the United Nations Economic Commission on Africa (UNECA) to propose ways of implementing the report’s proposals. After meeting in Washington last September, they submitted their report to the AU summit in Addis Ababa last month.

They recommended that AU member states should increase their overall contributions, so as to fund 100% of the operating budget, 75% of the programme budget and 25% of the peace support operations budget. The increases would be phased in over five years. Because this formula would lead to a substantial increase in contributions from member states, the report suggested that they should mobilise non-treasury resources. In addition to the US$2 hotel levy and US$10 airfare levy proposed by Obasanjo, the report proposed a US$0.005 per SMS levy.

The report said: ‘Member States could potentially raise in 2015, 2016 and 2017, respectively, $431 million, $485 million and $546 million from the $10 levy; $151 million, $167 million and $184 million from the $2 hospitality levy; and $872 million, $1.17 billion and $1.6 billion from the $0.005 SMS levy.’

In the meantime, though, tourism-dependent countries had raised objections to the hotel and airfare levies, complaining they would inflict considerable damage on their economies. So in the end, the report simply proposed an increase in the contributions of members to meet the new funding targets, leaving it up to them whether they raised this money from the proposed levies, or directly from the fiscus.

The report proposed a new formula for distributing the pay load, based on four principles of ‘fairness, predictability, flexibility and compliance.’ Member states would be grouped in three tiers. Sixty per cent of the budget would be paid for in equal shares by countries with economies that represented above 4% of Africa’s total Gross Domestic Product (GDP); 25% of the budget would be paid for equally by countries with shares between 1% and 4% of the total African GDP; and 15% of the budget would be equally shared by countries with shares of less than 1% each of Africa’s GDP.  

That meant six countries – Algeria, Angola, Egypt, Libya, Nigeria and South Africa – would be in the first tier, so would each pay 10% of member states’ share of the AU budget. The next 12 countries – Cameroon, the Republic of the Congo, Ethiopia, Equatorial Guinea, Gabon, Ghana, Kenya, Sudan, Tanzania, Tunisia, Uganda and Zambia – would each pay about 2.08% of the budget, and the remaining 36 member states would each pay about 0.4% of the budget.

This formula would slightly decrease the proportional contributions of the largest contributors, South Africa, Nigeria, Egypt, Libya and Algeria, which each now pay about 12.9% of the budget, largely because oil-rich Angola would join them in the top tier of contributors. However, everyone’s absolute contributions would increase steeply. After the phasing-in period of five years, total members’ contributions would have risen from the present level of about US$131 949 million to a total of about US$600 million, Dlamini-Zuma said.

And so for South Africa that would mean an increase of about 352%, from some US$17 million a year at present to about US$60 million a year. Some officials are grumbling about that. Dlamini-Zuma said at the end of last month’s summit that the minister’s report on alternative funding had been ‘adopted unanimously’ by the Assembly of Heads of State and Government.

‘This is a big breakthrough,’ she enthused, as the AU had been trying for 14 years to agree to finance itself. ‘It’s important that we must do what we want to do and not what other governments give us money to do.’ She explained that the AU would only fund 25% of peace support operations, because that was really the responsibility of the UN Security Council. She did not explain why the AU was not even aspiring to pay 100% of its programmes budget, except perhaps implicitly when she said that the AU was not seeking to isolate itself because this was a globalised world.

However the summit decision on the report looks, on its face, rather less enthusiastic than she was. First of all, it says the summit ‘takes note of’ rather than ‘adopts’ the report. And then it apparently provides member states a rather large escape hatch when it reaffirms the principle of alternative sources of financing the union by its member states, provided that ‘Member States are given the flexibility of its implementation, in accordance with their national imperatives, laws and regulations and constitutional provisions as appropriate…'

The heads of state also delegated to a ministerial committee the task of pursuing consultations ‘in an open-ended manner’ about the details of implementing the recommendations. None of this sounded very mandatory. The decision, however, did also urge all member states to pay their dues.

That was of course an admission that even at the comparatively low present levels of members’ contributions, several have not paid, and the 2015 budget of US$522 121 million had a shortfall of US$149 266 million, before the AU managed to collect another US$20 million from donors, before reducing the budget to $393 037 million. The debilitating impact of this delinquency on the AU’s operations – and on ordinary Africans, it must be said – was underscored last September when the AU’s Executive Council (of foreign ministers) met to respond to the Ebola crisis.

Afterwards, the council stressed ‘the critical importance of the timely payment of assessed contributions to the AU Budget for the implementation of all AU programmes, including confronting all humanitarian challenges such as the Ebola crisis…’ It also expressed ‘concern over the current financial situation of the AU’ and once more called upon member states ‘to pay up their due contributions to the AU Budget in a timely manner to enable the Commission carry out effectively its mandate.’

Some veteran AU watchers believe that the AU is a little too far from home for many African states to see the benefits of membership as clearly as they do those of their own regional economic communities, which generally have greater success in collecting members’ dues. The AU has always suffered from a large credibility gap between its vast ambitions and its restricted means.

The move towards greater financial independence is in principle an important step towards closing that gap. But a big question remains about why and how members will pay the much larger dues that are now being proposed when many have not paid the much smaller dues? Do they all share Dlamini-Zuma’s enthusiasm for financial independence from donors? Or are many quite happy to receive hand-outs because they don’t really feel, as she strongly does, that donors are using their money to impose their will?

Libya remains in deep crisis and has not been paying even its current dues while Egypt, also struggling to emerge from crisis, is grumbling about its large share of the present bill. The AU also needs to attend to the demand side of the credibility gap. At the same summit last month, for example, it also gave a big new push towards arming the African Court with international criminal jurisdiction, largely to circumvent the International Criminal Court (ICC) which the AU has pretty much rejected (in practice, if not yet in theory) because of its indictment of sitting African presidents.

Yet, as the ICC itself could surely testify, international criminal prosecution is a very expensive business. Where will that money come from? Will the AU tap the usual donors - the very ones it is trying to become independent of by strengthening the African Court? Or will it dig deeper than ever into its pockets? Or will the African Court, in its criminal mode, remain a paper tiger, scaring no one because it’s simply too expensive to operate?

Peter Fabricius, Foreign Editor, Independent Newspapers, South Africa

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Disclaimer: Opinions expressed in this article are those of the writer(s) and not do necessarily reflect the views of the AfricaFiles' editors and network members. They are included in our material as a reflection of a diversity of views and a variety of issues. Material written specifically for AfricaFiles may be edited for length, clarity or inaccuracies.

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