Taxation for Resource Mobilisation


Donald Kaberuka, African Development Bank President, applauds G8 countries for their emphasis on greater transparency in taxation of Africa’s natural resources

By Maureen Chigbo  |  Jul. 1, 2013 @ 01:00 GMT

GREATER transparency in the taxation of Africa’s natural resources is the only way African countries will be able to find the financial resources they need to fund infrastructure and trade corridors. Until now, they have been very dependent on donor funding. This is why Donald Kaberuka, president, African Development Bank, AfDB, on June 17, applauded the G8 for its emphasis on the issues around resource mobilisation through greater transparency in taxation of Africa’s natural resources.

“The African Development Bank is very much fully behind this agenda. That is why we put in place the African Legal Support Facility, a legal technical assistance facility to help low income countries address a growing problem of litigation by vulture funds as well as a technical advisory facility to help regional member countries negotiate extractive resource contracts and create an appropriate, enabling environment with modern legal and regulatory frameworks for the extractive resource sector, Kaberuka said.

He added that: “The African Legal Support Facility has been instrumental in assisting a number of countries negotiate complex contracts, unbundle others, with the aim of ensuring that the countries get what they deserve, that investors get the return they look for, and that everyone is a winner.”

But he also acknowledged that internal governance of the natural resources sector in Africa also needed to be improved. He spoke on the importance of trade as a driver against poverty and stressed that if Africa wanted to trade its way out of poverty,  a paradigm shift in its relationship with the G8 was necessary at a time when donor funding for the continent had dropped 20 per cent – the first decline in a decade.

Trade among African countries stood at $47 billion a decade ago, representing 11 percent of total African trade compared to about 16 percent now. That excludes informal trade, which some sources say might bring the figure closer to 20 percent. Trade levels stood around $108 billion in 2011. The continent has more than 40 currencies, and the world’s largest number of landlocked countries. Regional cooperation would not only add $45 billion a year – equivalent to half of all Overseas Development Aid, ODA, but it would also improve the diversity of our supply chains.

According to Kaberuka, “Nations in history throughout the world have prospered through trade and investment. This applies, even to those rich in natural endowments. Africa, too, seeks to trade her way out of poverty. But Africa must deal with the issue of the cost of doing business, the risks of doing business, and the challenges of small fragmented markets – all of which are extremely high. Some nations are better endowed in natural resources. That does help if carefully managed and invested in creating real wealth.”

The AfDB currently committed almost $2 billion annually on economic integration, and focused on support to the regional economic communities in planning and strategy; on investments, trade related infrastructure, transport and optic fibres; trade facilitation and soft infrastructure; electricity power pools; the development of transport corridors; and the management of shared waterways.

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