Mobilising Domestic Resources for Africa’s Development

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Paul Okolo

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By Paul Okolo  |

THE Africa rising narrative may be heading against a headwind as current global economic uncertainties continue to undermine recent gains. In the past decade African nations like Nigeria, Zambia, Angola, Ethiopia, Rwanda and Kenya recorded some of the world’s fastest-growing economies as a result of high commodity prices. But owing to the halving of commodity prices in the past year, that growth has become greatly subdued.

Nigeria, Africa’s largest economy, is one of the hardest hit nations. Prices of crude oil which is the mainstay of the economy are currently hovering around 50 dollars per barrel from over 100 dollars per barrel a year ago. The execution of infrastructure projects such as roads, schools and hospitals designed to create jobs, and boost sustainable development have slowed if not been totally abandoned. The government no longer has the funds to pay contractors. Also, workers and pensioners are owed a huge pay backlog.

Meanwhile, donors and development partners that in the past would have readily stepped into help are themselves unable to lend much of a helping hand, partly because they, too, are faced with their own economic predicament. Despite the gloomy outlook, however, Africa can still mobilise sufficient resources from within the continent to keep the momentum of development going, according to the Africa Capacity Building Foundation, the body charged with developing local expertise on the continent. The Harare, Zimbabwe-based Foundation, whose preoccupation is to create a pool of skilled human resources and institutions needed to ensure sustainable development, has over the past 24 years invested in training and developing indigenous African expertise. It has equally helped to establish and fund think tanks which are today spearheading the development of critical skills on the continent.

The ACBF believes that it’s still possible for African countries to continue with their development programmes despite the economic crunch. This can be achieved by boosting their internally generated revenues through alternative sources. One of these means is by tapping into funds sent home by Africans living outside the continent. For a country like Nigeria, these funds could plug the big hole in state coffers arising from falling oil prices. The so-called Diaspora funds fetch the country about $20 billion annually — the continent’s largest recipient of such funds.

Enlarging the tax bracket by simplifying the tax system and encouraging more businesses and individuals to pay tax is another way of raising funds for development purposes. The Muhammadu Buhari-led administration seems to be making the correct move in this area. The government recently appointed Mr. Babatunde Fowler to head the Federal Internal Revenue Service in the hope of revolutionizing the country’s tax administration in the same way he transformed tax collection in Lagos state. According to Mr. Fowler, of the 450,000 registered businesses in Nigeria, only about 30 percent are currently paying taxes. He has been quoted as saying that the FIRS would soon record a big increase in the number of corporate organizations and individuals paying tax.

Similarly, as in Nigeria, most African countries are not collecting all collectible taxes. The average receipt is put at 20 percent, according to some experts, according to the ACBF. Despite having a huge staff, tax administrations in Africa collect relatively small amounts because of capacity challenges. Firstly, they have insufficient qualified accountants who can competently look at the books of multinational companies without being intimidated. Secondly, lawyers involved in engaging cannot match their capacity of lawyers representing multinational companies with whom they have to deal. Also, exemptions from taxation enjoyed by foreign investors doing business in Africa constitute a loss of large tax revenues.

Perhaps one of the biggest problems confronting the continent is that of illicit financial flows which cost Africa no less than $50 billion annually. The ACBF says this is approximately double the official development assistance (ODA) that Africa receives.  To underline the serious nature of the problem, the African Union raised a panel headed by former South African President Thabo Mbeki to tackle it.  “We’re working with the Mbeki Panel on illicit financial flow,” said Prof. Emmanuel Nnadozie, the Nigerian who is the Executive Secretary of the Foundation. “What is required is the strengthening of societal, institutional, regulatory and human capacity,” he said in Addis Ababa on Sept. 4. “Illicit financial flows out of Africa have become a matter of major concern because of the scale and negative impact of such flows on Africa’s development and governance agenda,” he added.

Most crucially, however, the ACBF believes until the problem of corruption on the continent is successfully dealt with, it will continue to drain Africa of the funds needed to finance its development. “We have huge capacity challenges and ACBF has the power to solve all the issues,” Nnadozie said.  The Foundation is ready to help Africans build capacity to tackle corruption before it will bring the continent to its knees. Africa also needs to improve the business climate as well as raise the level of governance in their countries. The result will be a much improved economy in which businesses will thrive, create jobs, and increase the pool of tax payers.

  • Paul Okolo is a development communications professional based in Abuja

— Oct 19, 2015 @ 01:00 GMT

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