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Financing of the Union: By Africa for Africa

The African Union has adopted a new financing strategy to assure reliable funding for its programmes and make it less dependent on external partners.

The African Union (AU) was launched in 2002, succeeding the Organisation of African Unity (OAU, 1963–99), with the aim of driving Africa’s growth and economic development by focusing on increased cooperation and integration of African states.

This marked a departure from the goals of the OAU, which had focused on the fight for decolonisation and ridding the continent of apartheid.

The successful implementation of the AU programmes requires adequate, predictable and sustainable funding to better harness the continent’s vast natural and human resources to deliver future growth and development as envisioned in Africa’s Agenda 2063.

Currently, activities are funded from contributions from treasuries of African states and developmental partners on an annual basis.

However, 72 per cent of the AU budget is funded by external partners, which creates risks associated with fiscal constraints experienced by the economies of these partners and overdependence, thereby undermining ownership of programmes by Africans.

The goal is therefore is to have adequate, reliable and predictable financing, to implement the AU’s programmes.

Resources mobilised from the continent through non-treasury means provide the alternative sources of financing required to reverse the current trend where external partners continue to inject more resources to fund the AU.

In 2016, Heads of State and Government of the AU decided to adopt a new approach towards financing the programmes of the African Union.

Structured within the concept of Alternative Sources of Funds (ASF) this change in strategy aims at easing the pressure faced by national treasuries by proposing binding and non-binding non-treasury funds to be applied across all member states. Funds collected from these sources will leverage treasury funds for supporting the running of the AU and fund its programmes.

Specifically, the decision on financing of the AU will:

  1. Provide reliable and predictable funding for continental peace and security initiatives through the Peace Fund;
  2. Relieve the pressure on national treasuries with respect to meeting national obligations for payment of assessed contributions of the Union;
  3. Reduce dependency on partner funds for implementation of continental development and integration programmes; and
  4. Provide an equitable and predictable source of financing for the Union.

What is being proposed?

In order to streamline the implementation of non-treasury resources and make it equitable and more efficient to collect, it is proposed that member states agree to one common source to apply universally to all parties.

For ease of collection and in terms of yield, an import levy of 0.2 per cent will be imposed on eligible imports. This will yield up to $1.4 billion annually with almost 50 per cent of it to be retained at country level.

An oversight and accountability mechanism that was approved by the Executive Council will be strictly implemented to ensure the proper utilisation of the funds.

In addition, visibility to African citizens through various mechanisms will ensure that African citizens have a greater say in the use and accountability of the funds.

Benefits of the new strategy

Funds collected will form a pool to enable the AU to finance programmes of continental importance that would be less cost-effective to implement at individual country level or are of high policy relevance to the continent, especially in its dealing with international partners, and require unified action.

These include:

  • Financing peace and security operations: The successes of the AU-led African Union Mission in Somalia (Amisom) is helping to contain the insurgent activities of Al Shabaab and other terrorist groups in Eastern Africa.
  • Rolling out flagship projects: such as the Continental Free Trade Area (CFTA), and energy projects, like the Grand Inga Dam, which if financed from pooled resources, could supply electricity to virtually the entire continent. Equally important are road and rail infrastructure projects to improve connectivity.
  • Funding national development initiatives: Where there is excess collection of non-treasury funds, member states will be allowed to retain 95 per cent to be used at country level for developmental initiatives. The remaining 5 per cent will be placed in a Reserve Fund. The excess collection will therefore leverage the treasury funds in financing important programmes at national level.
  • Supporting education: The Pan African University trains youth in various disciplines in a culturally diverse environment. So far 500 youth have graduated from the various campuses in the sciences and other disciplines.
  • Provision of e-services: The Pan African e-Network Project connects member states by satellite and fibre optic network and provides services of tele-education, tele-medicine, and diplomatic communication, benefiting over 48 member states. To date, 20,000 students have been enrolled from 39 participating countries in various undergraduate and graduate disciplines in different universities. A total of 600 tele-medicine consultations are conducted annually, and about 4,600 continuous medical education sessions were done through the satellite network, saving thousands of lives across in the process.
  • Support for management of health crises: The establishment of the Africa Centres for Disease Control (Africa CDC), which will work to safeguard Africa’s health, is an indication of Africa’s determination to take charge of health-related matters on the continent by building the capacity and capability of member states to manage health crises.
  • Advocating African common positions in the global arena on matters sensitive to the development and social stability of the continent, such as climate change, migration and intercontinental partnerships.

Find out more about the AU Institutional Reforms, by visiting www.au.int.

By AFRICAN UNION

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