For years African Union lived on other people's money, with that drying up it's looking for cash at home

The four richest Africans are worth $40bn. The market capitalisation of continent's stock markets is $1.3 trillion

NKOSAZANA Dlamini-Zuma leaves little doubt that she could do with some of the “Panama Papers” billions. The African Union is currently scratching its head over how to fund its 50-year growth blueprint, and with external sources of fund on which the organisation has become over-dependent increasingly erratic, the focus is shifting inwards.

But with revelations that several Africans, many of them public officers, have been keeping their wealth in opaque offshore structures, the chairperson of the bloc’s commission feels it is time the cash came back home.

“Let’s repatriate illicit flows back to the continent. You [media] keep giving them fancy names such as ‘white’ or ‘blue collar’…[but] it is all corruption,” she said in Addis Ababa Tuesday.

An AU-backed High-Level Panel on Illicit Financial Flows found that Africa loses more than $50 billion annually through such flows, or a fifth of the money the continent requires to simultaneously halve poverty and inequality.  

The 54-member bloc, backed by its think-tank the Economic Commission for Africa (ECA), has just spent the past week stitching together its 50-year development plan to that of the United Nations, including trying to figure out how to fund it.

It is also money that could come in handy for the Addis Ababa-based organisation. It last year adopted (pdf) a $416 million budget, of which over a third, or $150 million, would be spent on keeping it running.

The balance, $266 million, would go into its programmes, but significantly, is 92% funded by “partners”—essentially international donors.

They are a motley collection, the majority financier being the European Union (EU). Asia, the United Nations and the World Bank are also significant contributors to its coffers.

Its economic arm, ECOSSOC, gets just $2 million of the budget, while its advisory board on corruption gets even less, $1.3 million.

Read: 12 facts proud Africans don’t want to know about the AU’s cash situation - but we’ll tell you anyway

By comparison, just 6% of the EU’s 2016 budget will go into its administration.

It is a state of dependence that has the bloc reaching for a variety of domestically financed options, Dlamini-Zuma says.

“No continent has ever developed in a prosperous and sustainable way on aid money.”

She said the alternatives being explored range from sovereign and private wealth, equity funds to increasing the ability of member states to make more contributions. Funding is such a core issue for the bloc that it is named as one of its eight main priority areas.

Looking for money at home

Running the bloc from internal resources is doable, she said, noting that the continent is currently financing 60% of its infrastructure needs from its own funds.

The plan is to by 2020 internally fund 100% of its operations, 75% of its programmes and at least 25% of its peace and security component, following a plan adopted by African leaders last year.

Dlamini-Zuma said that African heads of state and their finance ministers are shortly set to huddle over a retreat—“a first of its kind”—on how to finance the continent’s growth agenda from its own resources.

Some of those ministers were in the Ethiopian capital to give political clout to the effort to transform the continent’s economic structure and reduce its exposure to external markets.

“We recognise that the implementation of both agendas [AU’s Agenda 2063 and UN’s Sustainable Development Goals] will require substantial amounts of financial and non-financial resources from all sources,” they said in a draft communique.

“Cognisant of the unpredictability of official development assistance, we underscore the role of domestic resources as the main source of finance of the two agendas…”

A lot of wealth around

“For some perspective, the four richest Africans are worth $40 billion; the market capitalisation of stock markets on the continent is $1.3 trillion—there is a lot of money in Africa,” Carlos Lopes, the executive secretary of the UN Economic Commission for Africa.

But the Panama leaks will have helped the push to net some of the continent’s money that is domiciled externally.

In July, rich nations slapped down African demands for more transparency on tax avoidance by their multinationals operating on the continent, many of which are accused of under-declaring their profit and shifting them to tax havens.

The official position at the Financing for Development summit in Addis Ababa was one of compromise, where rich nations would look to “enhance” transparency and “reduce opportunities for tax avoidance”, but it essentially was a watering down of the popular text that had called for full transparency.

“Both our report on illicit financial flows and the just released report on corruption insist that the international dimension is overlooked. Until now, the ones from afar passing judgment singling out Africa could get away with it. No more.” Lopes told M&G Africa earlier.

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