Small tax base stifles Africa's self-financed growth
Thursday March 21 2019
Construction works on Phase 2A of the Kenya's standard gauge railway at Suswa. The Kenyan infrastructure project, like many others in Africa, are financed with loans from China. PHOTO | GEORGE SAYAGIE | NMG
A majority of African countries collect only about 16 percent of their GDP in taxes undermining their capacity to fund development projects.
South Africa and Rwanda are some of the few countries that have been able to leverage new technologies to expand revenue collection to at least 25 percent.
Ms Vera Songwe, the UN Economic Commission for Africa (ECA) executive secretary, said the ability to increase revenue collection is key to the continent’s capacity to finance its own development, in particular Agenda 2030 for sustainable development and Africa’s Agenda 2063.
She was speaking at the opening session of the 38th meeting of the Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development in Marrakesh, Morocco on Thursday.
“The potential of Africa is, and has always been, promising. With a growing working-age population; abundant arable land and a multitude of other resources, the continent has all the pre-requisites for rapid economic transformation in the next decade,” she said.
“However, ensuring the availability of adequate public resources and quality investments to drive structural change requires responsive policies that promote fiscal sustainability, optimise returns from economic activity, and enable economies to fully participate in an increasingly interconnected and globalised world.”
At the conference, delegates are expected to discuss modalities of how to better finance Africa’s growth and ways to ensure that the young populations participate in the economies.
Adam Elhiraika, the director of the macroeconomics and governance at ECA said African countries greatly needs policies to diversify and structurally transform economies to support industrialisation and enhance intra-African trade.
“To reduce vulnerabilities from global economic conditions, such as the tightening of global financial markets, currency fluctuations, capital outflows and volatility of commodity process, African countries need to enhance resilience through the appropriate combination of fiscal, monetary, exchange rate and prudential policies to maintain their growth momentum,” said Mr Elhiraika.
“There is also a need for policies that can help improve debt management on the continent and to harness urbanisation as a strong vehicle for generating fiscal revenues to finance sustainable development.”