Political will to inform success of new African Union funding model, says expert

African Heads of State and Government decided at the 27th African Union Summit that took place in Kigali in July that a new funding model for the organisation will start next year with all the 54 member states contributing some $1.2 billion to the Union’s coffers every year through levying 0.2 per cent tax on eligible imports.
Dr Mehari stresses a point during in the interview with The New Times. / Faustin Niyigena.
Dr Mehari stresses a point during in the interview with The New Times. / Faustin Niyigena.

African Heads of State and Government decided at the 27th African Union Summit that took place in Kigali in July that a new funding model for the organisation will start next year with all the 54 member states contributing some $1.2 billion to the Union’s coffers every year through levying 0.2 per cent tax on eligible imports.

Dr Mehari Taddele Maru, assistant professor of Law and Governance at Addis Ababa University and member of the AU High Level Advisory Group, spoke to The New Times’ Eugene Kwibuka and Ritah Mukamurenzi about the new model and what’s at stake for its implementation.

 

Excerpts:

 

How much on average is the AU’s annual budget for the day-to-day business for the organisation?

 

The total amount every year changes by an average 20 per cent increase; this percentage means about $150 million to $180 million. So, there is between 15-20 per cent of budget increase every year if we compare with 2013 where we had a budget of around $508 million and in 2016 it became about $620 million.

The recent approved one is about $782 million for 2016/17.

But that’s money for both running costs and programmes?

This money is for both running costs and programmes which include peace support operations for the AU Mission to Somalia (AMISOM). Half of this budget actually goes to AMISOM; about $335 million.

And another big part goes to the African Union Commission at the Executive Board of the AU. Another part of the money goes to the New Partnership for Africa's Development (NEPAD) and agencies such as the African Court of Human Rights and other specialised agencies.

Since 2013, you have had more than $500 million in annual budget and more than half of that comes from partners. If you take last year’s figure for 2016, it’s about 62 per cent from donors and if you go to the programme budget it becomes even more than 90 per cent of the budget.

So, you would say the AU is actually able to finance its running costs from member states but so far the budget for programmes comes from donors?

More than 90 per cent of the budget for programmes so far is coming from partners and about $200-205 million comes from member states’ contributions. So, the members’ contribution most of the time goes to running costs; mainly paying salaries and other expenses of the AU.

Who are those donors giving money to the African Union?

Several; from western countries to eastern countries like China. You have contributions from Scandinavian countries (Norway, Sweden and Denmark). The US contributes large amounts, the UK government, and also the European Union. Beyond that, we have Turkey, India and others that contribute a small amount like Korea and Iran.

Why do they give this money to the AU?

Some of them are clear. For example, the US has a partnership on peace and security and other political affairs and they are most of the time upfront like the European Union telling you ‘we want peace and security established in the region because any conflict anywhere will affect the stability or economic processes of other places’.

So, there is mutual concern for transitional aspect of peace and security issues. That justifies their involvement.

Of course, there is also humanitarian consideration in addition to national interests or regional interests of the EU, US or others like China and India, who have also financial and economic interest in the region.

They want to influence policy-making in Africa and most of the policy-making at continental level comes through the AU as a platform for norm setting and policy formulation. That’s the best way to influence 54 countries instead of sending diplomats and negotiating with each of these countries. Most often they prefer to come through the AU. So there’s also influence through diplomatic means.

What’s your overall view about the new funding model for the AU, which would see 54 member countries of the union contribute about $1.2 billion to its coffers every year by levying 0.2 per cent tax on eligible imports?

That is an assumption. That member states will effectively collect the money; that they have the capability to collect, the willingness to collect, and the determination to transfer the money that they collect from importers to the AU. This is the biggest assumption that this formula has.

The second assumption is that indeed member states know how much they import and have the system and the database to determine how much they get and that means if they know they have to inform how much they are importing and then at the same time they have to transfer what they collect.

The initiative is noble; there is no question about that. It was done by prominent Pan-Africanists like Dr Donlad Kaberuka and his colleagues from the UN Economic Commission for Africa (UNECA) like Carlos Lopez (Executive Secretary of UNECA) and others but its assumption is more sound on the economic basis.

Its economic merits and advantages are to take this contribution as also encouraging import substitution by increasing the taxation but it doesn’t take serious consideration on what I call the fundamental flaws of the AU contribution system that is dependent on member states.

So, you don’t think it’s feasible?

The biggest and key question I have is: “what is different in this proposal than the others on the issue of member states’ determination to contribute?” Previously, it’s not because of the lack of money that member states were not contributing but the lack of determination, capability, propensity, willingness, energy and commitment of the leadership to contribute to the African Union so that it can stand on its own feet. So, that is lacking.

Do you think some countries collect this money and not hand it to AU?

Even in the discussions and decisions of AU, it is indicated that some member states default as they used to do before.

What hope is there that they will be able to pay money from the taxes under the new funding model?

Previously, some of the countries were justifiable to default. For example, countries in total state failure or poorly performing states, such as Somalia, and some other countries that were facing protracted conflicts such as DR Congo. They were facing problems of finance and were not able to contribute.

There were also countries that were determined and contributing on a timely basis even if they don’t have the resources.

Others didn’t see the relevancy of the AU directly so they didn’t contribute. So, the assumption that we take in this new model of contribution is the biggest challenge and sanction system has to be there for member states who fail to contribute. On a positive note, the AU member states have been contributing on time in the recent years.

In the past five or six years, not many are defaulting; only those under sanction were pressurised to pay. Even Somalia has been contributing.

So, which member countries of the AU have been defaulting?

On average, it’s difficult to tell but generally about three to five countries default most of the times.

Apart from Somalia, in north Africa, we recently have had countries like Libya, because of the crisis there they have reduced their contribution amount from 15 per cent of the budget of the AU to a small amount but they have failed to contribute on a timely basis.

Previously, we had countries like Madagascar, DR Congo, Equatorial Guinea, and others who were late in paying their contributions.

Can you expound more on the challenges that the new funding model is likely to face at the implementation level?

The implementation will be the problem for many reasons. The first one like I said is member states’ determination in general; political determination, which includes the willingness to pay and the capability to collect the money on a timely basis and transfer it.

The second reason is the capacity of the AU Commission to oversee the contributions on a timely basis. It has to have the capability to know which country has this kind of imports and how much this country is contributing and if it doesn’t contribute then follow up with member states to ensure that they contribute based on their imports.

You don’t think the AU has enough staff and resources to follow up on this programme?

It didn’t have enough staff or money before. On the money that it gets from partners every year it has been returning about 40 per cent minimum or 48 per cent to the donors because it was not able to absorb the funds it gets.

This is huge amount of money that partners kept rolling every year and this, shows going back to the first question that you asked, the capability of the AU Commission is limited and it doesn’t have the absorption capability.

So, the capability to absorb is dependent on the human resource capacity and the leadership capacity. On human resource capacity, they have about 38 per cent of permanent staff every year and they have more than 40 per cent of the Maputo human resources structure, with which the AU Commission should have had staff members since the past almost eight years but is not having it.

So, it’s operating under 50 per cent (of the human resources requirement) and as a result it’s been hiring consultants who are supposed to stay for two years but end up staying for ten years.

Given national tax laws in different member states, what chance is there that levying the taxes to fund AU will start next year? Doesn't this have to be fast ratified through national parliaments?

There are two parts to this question. The first one is what guarantee or procedure we want to ensure that in 2017 this formula will be implemented. My suspicion is that, as usual, as all decisions of the AU, this will be short of time and I think in many ways it’ll be related to the reform agenda that was put under President Paul Kagame’s supervision.

That reform has to come first to appropriately implement this new funding model and there will be an office that will follow up on the implementation of this decision. There will also be a committee of finance ministers (about 10 finance ministers drawn from five regions of the AU) to follow up on the implementation of this decision.

So, my suspicion is that it will be delayed for some time but the decision has to be taken now, you don’t start with what you don’t have; you have to start with what you have and you try to fulfil that.

The second part of your question relates to basically the agenda of reform in the AU. That has to relate to what legal standing does the AU decision has in Africa. AU assembly decisions are binding by law on member states. In some cases if it’s a treaty or convention, or protocol, it has to go through what we call mono or duo ratification process.

Some countries have one process while the others have two processes to respect. Now, this (new funding model) is a decision of the AU Heads of State summit and it doesn’t have to go through parliament because it’s not a protocol or an instrument that requires the legislative process of every country.

It sounds like there is a positive future for this new funding model for the AU but then it has to be tied to reforms within the organisation?

Exactly. The reforms have to be focused on implementation capability; it’s the implementation capability that was the problem. AU has to have the capability to follow up with the member states to see whether they are following the decision and member states have to go beyond the capability to implement or collect the levies but also have the willingness and determination on the part of leaders to pass on what they collect to the AU Commission.

Can you also explain how this reform is tied to President Kagame’s new role?

I think in many ways there are three fundamental problems in the AU Commission. The first one is that the Commission doesn’t control its own wallet. Half of its own wallet or more than 75 per cent of its own wallet and pocket is controlled by donors.

If you don’t control at least the basic inherent functions of your staff; if you can’t pay the salaries of your staff, then they can’t be accountable to you. You shouldn’t allow salaries of public servants at the AU Commission to be paid by partners.

Secondly, the inherent core functions or core business of the AU Commission should be covered by its own resources. That way, you will have independence of action and decision and that is the first challenge that the AU Commission has.

So, the reforms will remove one of the key challenges that the AU has been facing for a long time; excessive dependency on external resources.

The third one is, if you have money, you have implementation capability. If you have money, talent follows money, infrastructure follows money, and incentives to different kinds of capability follow money.

So, if AU has this amount of money, a billion dollar per year, then it will be able to attract the brightest and most capable of all Africa’s minds to the AU Commission and its shortcomings on norm setting, oversight, and implementation will be removed.

So, President Kagame will be involved in all of these discussions in the next few days?

Exactly. President Kagame has been burdened with the highest possible responsibility that any head of state could have and that is reforming a 50-year-old institution.

editorial@newtimes.co.rw

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