Self-financing the African Union: One levy, multiple reforms
A 0.2% levy on eligible imports is one of the key elements in the African Union's strategy to achieving financial independence. But two years down the road, to what extent have member states implemented this decision?
Self-financing the African Union (AU) is one of the urgent and necessary institutional reforms, critical for the realisation of the AU vision for inclusive and sustainable development as laid out in its Agenda 2063. Therefore, in July 2016, African Heads of State and Government took a historic decision and adopted a 0.2% levy to ensure that all member states pay their yearly contributions to the AU – fully and in time. The decision directs all AU member states to implement a 0.2% levy on eligible imports into the continent to finance the AU and bring about sustainable, predictable, equitable and accountable financing. However, two years down the road, only 16 of the 55 AU member states are collecting this levy.
Still, progress has been made in moving towards self-financing of the AU. This paper analyses lessons in the early implementation of the levy so far. Drawing on interviews with the AU Commission and representatives of member states to the AU, it presents some of the political, legal and technical challenges at play that explain why progress is real, but slow; and why 30 member states are still not implementing the levy mechanism. The levy reform is not a stand-alone measure. It is embedded in the broader institutional reform agenda of the AU, which includes actions to improve financial accountability and transparency, as well as measures to improve compliance by member states through stricter sanctions.
None of these reforms are straightforward and simple, the more so as the AU continues to rely on its single largest source of funding, donors. The paper concludes that measures to make aid more accountable and transparent can contribute to a virtuous cycle of gradual, mutually reinforcing reforms by the AU for improved overall accountability, a stronger sense of ownership by the member states and for self-financing of the AU.