The African Union is reaping from a 2016 financing model that requires partner states to use 0.2 per cent of their international levy collections to fund its activities.

A briefing report by independent think tank European Centre for Development Policy Management (ECDPM) shows that, following adoption of the model the AU doubled its collections to at least $205.1 million from partner states in 2017.

The amount is expected to increase to $318.3 million in 2018. in 2015, before launching the financing model, AU collected $131.1 million from member states.

Faki Mahamat, the African Union Commission Chairperson says the biggest beneficiary of the increased funds is the programme budget, which alongside the peacekeeping budget is the least funded.

“In 2018, member states will be funding almost 40 per cent of the African Union programme budget compared with less than five per cent in 2015 when the initiative was launched,” he said.

Overdependence on aid

The programme budget, which has for years largely relied on donor agencies covers activities approved by the AU Assembly.

These include programmes like the Continental Free Trade Area (CFTA) and the maintenance of continental readiness to deploy teams to settle violent political confrontations like those that took place in Mali, Burundi and Central African Republic (CAR) in recent years.

Maintenance of readiness teams also carters for social emergencies like the 2013 Ebola crisis in West Africa. 

The operational budget finances running of the Union and its specialised agencies, like the New Partnership for Africa’s Development (NEPAD) and the African Peer Review Mechanism (APRM). This budget is largely funded by member states’ assessed contribution.

Olusegun Obasanjo, former Nigerian President, who also chairs Tana Forum Board, says that although there has been some progress, the current financial structure of the AU, where partners cover 60 per cent of the budget questions how African member states are expected to have ownership over their security while at the same time remaining reliant on external donors.

“We cannot talk about security without talking about financing,” he says.

100 per cent funding

The AU had determined that by 2017, the continent would be collecting $1.2 billion from the 0.2 per cent levy on goods imported by its member states, so that it could fund 100 per cent of its operational budget, 75 per cent of the programme budget and 25 per cent of peacekeeping operations which are also largely funded by donors.

The AU hasn’t managed to meet the targets set in Kigali by the heads of state, because some partner states are not comfortable with implementing the 0.2 per cent levy proposal in its current form.

Questions that have been asked include feasibility in the face of international trade agreements, member states ability to oversee the prudent use of the ceded resources and whether the AU’s budget process prioritises the right programmes.   

In a report that could explain why AU partner states have always been reluctant to meet their accessed contributions, Philomena Apiko and Faten Aggad who work at ECDPM, say it is important that the discussion on the financing of the AU is placed in the broader context of the management of Union’s budget, as opposed to a mere focus on the 0.2 per cent levy.

AU priorities

On a continent where most countries rely on either debt or donor community to finance their budgets, the two also say that priorities of the AU have to also act as incentives for member states to meet their assessed contribution quotas.

African states rarely fully meet their AU obligations. Statistics show that AU on average collect 67 per cent of the assessed contributions per year. About 30 AU member states partially or completely default per year.

In addition to challenges of lack of willingness, the 0.2 per cent levy is also experiencing challenges of practical implementation.

The United States of America and Japan have raised concerns at the World Trade Organisation, arguing that 0.2 per cent levy wasn’t compatible with some tariff and trade rules.

And since the CFTA is not yet in place, each African state would have to individually defend the AU levy.

Ms Apiko and Ms Aggad however, argue in their report that countries should embrace their ingenuity and figure out ways to implement the AU levy.

By December 2017, 13 countries including Rwanda, Kenya and Ethiopia had already managed to figure ways to collect the AU levy and deposit it in a designated account.

Donald Kaberuka, the AU’s Special Envoy on sustainable financing, says the most straight forward way for Africa to implement the 0.2 per cent was for the continent to quickly operationalise the free trade area so that the levy is no longer discriminatory under World Trade Organisation rules.

Even if a number of African Union member states have raised some objections to the framing of the self-financing model that the heads of state agreed on in June 2016, at their 27th Summit in Kigali, some progress in collections has already been registered.