The African Union faces a litmus test in its quest to be self-reliant as it moves to implement a new funding model that will see member states fund the organisation using a share of their international tax collections beginning next year.Under the new model approved during the recently concluded 27th Heads of States AU Summit in Kigali, member states are expected to surrender 0.2 per cent levy on eligible imports to fund operations of the organisation with a hope of making its funding sustainable and predictable.
Considered the most ambitious undertaking of the organisation in recent years, AU hopes to raise approximately $1.2 billion beginning 2017 under the new funding model crafted by a team led by former African Development Bank president Dr Donald Kaberuka.
In the current financial year, of AU’s $416 million budget, the lion’s share is funded by external donors to a tune of $247 million or 59 per cent while it also faces difficulty in mobilising member states’ contributions which are based on the country’s total output (gross domestic product) to a tune of $169 million or 40 per cent.
For instance, as of May this year, The EastAfrican has learnt that member states had contributed less than 30 per cent.
The initiative also comes at a time when the Union has been under scrutiny for failing to implement agreed key resolutions and not doing enough to improve the welfare of its citizens.
“When there is political will you can have a whole range of technical solutions but the opposite is true — if there is no political will no technical solution works,” Mr Kaberuka told The EastAfrican, underscoring that the initiative has strong political backing.
A technical committee composed of Finance ministers and central bank governors was also selected and is expected to come up with a roadmap in the next three months to ensure that by fiscal year 2017, the new funding model is executed.
It will be included in the finance law of the respective member states.
“We are not going to change the regulations (Customs) and rules of each country. We are simply going to adopt them to ensure that they provide 0.2 per cent of that money to AU account located at the national central bank,” Dr Kaberuka said, adding that the model has been tested and proven to be successful as it is currently implemented by Economic Community of West African States (Ecowas) for the past 12 years.
The financing model is also being implemented by the European Union, where it is collected mainly on Customs duties on imports from outside the EU and sugar levies.
EU governments keep 25 per cent to cover the cost of collection.
However, African leaders are demanding institutional reforms at AU including better accountability, greater value for money, priority setting and rigorous management of the fund.
At the summit, Rwanda’s Paul Kagame was selected to lead the transformation agenda at AU.
“It’s not a blank cheque, they are demanding reforms,” Dr Kaberuka said, adding that leaders are demanding prioritisation and less dependency on supply donor-driven programmes. On the administration budget they are demanding more discipline and rigorous reforms he said.
Insufficient and unreliable contributions from member states as well as internal reliance on a few countries who pay close to 66 per cent of the budget has undermined implementation of key programmes of the Union.
The few countries include South Africa, Egypt, Algeria, Nigeria, Angola and previously Libya before its political crisis.
Yet when there were issues of political transition in North Africa, like the war in Libya, suddenly because of the dependency on a few countries the organisation found itself with limited means. Kenya, Ivory coast and Ethiopia agreed to step in.
“In the past, countries would meet in Addis Ababa vote a budget and they have a formula of sharing the burden but the result is that for instance this year…the organisation by May had only received less than 30 per cent ,” he said.
Currently, funding of the organisation remains unpredictable and unsustainable due to heavy dependency on external donors especially for its peacekeeping operations.
For instance, the 22,000-strong African Union Mission in Somalia (Amisom) created by the African Union on January 19, 2007 as a regional peacekeeping mission with the approval of the United Nations has been fully funded by the European Union African Peace Facility.
However, recently EU cut funding by 20 per cent, a decision that prompted threats of withdraw from some troop-contributing countries specifically Kenya and Uganda.
EU has demanded that the AU should cover the difference.
Peace Fund
During the AU summit, African leaders agreed to operationalise the Peace Fund to finance peace and security operations of the Union through the provision of $65 million by each of the continent’s five regions annually through the import levy.
They plan to increase this to $80 million per region by the year 2020. However, AU is expected to negotiate with the UN in September to raise 75 per cent of the cost of peace support operations since the Union has committed to contribute 25 per cent.
The objective of the Fund is not only peace support missions but also preventive diplomacy which is currently funded by donors.
“It has not yet been concluded, it has to be negotiated, it will not be easy but everyone understands now that supporting peace in Africa requires a combination of different institutional abilities and capabilities,” said Dr Kaberuka who also doubles up as the AU High Representative for the Peace Fund.
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IN SUMMARY
Fact Box
- During the June 7-15, 2015, AU Summit in South Africa, African Heads of States endorsed measures for alternative funding as follows;
i) The new scale of assessment will be based on the principles of solidarity, equitable payment and capacity to pay and in a way that ensures no single country bears a disproportionate share of the budget;
ii) It aims at members financing
$416 million (total)
The operational budget of $150 million in full.
Three quarters of the programmes budget of $266 million; members will hence contribute $199.5 million
A quarter of the Peace and Security Budget (not disclosed)
Two per cent of the Amisom budget through voluntary contributions from member states.
Donors presently fund 59 per cent of the budget or $247 million
iii) The contribution will be based on a tier system as follows:a) All countries with GDP above 4 per cent – tier 1;
b) All countries above 1 per cent but below 4 per cent – tier 2;
c) All countries from 1 per cent and below – tier 3.iv) The achievement of the targets are phased over 5 years starting January 2016.
