The Africa Union (AU) dependency on external sources to fund its operations will soon be a thing of the past after after some member states started to levy the 0.2 per cent tax on eligible imports.
The measure was agreed on last year during the 27th AU Summit in Kigali, Rwanda.
During the Summit, the member states had sought to find a reliable source of financing for the union to reduce dependency on external sources.
Outgoing AU Commission deputy chairperson Erastus Mwencha on Friday told the media that the agreed framework has started to bear fruit, with some countries such as Kenya, Rwanda, Chad, Ethiopia and Democratic Republic of Congo initiating action plans to implement the import levy.
The union has been facing financial constraints in the past after a number of member states failed to meet their funding commitments to attend to domestic priorities.
Mwencha said previously, only five countries used to contributes to the union’s budget.
“On average 67 per cent of the assessed contribution is collected annually from member states. About 30 member states default either partially or completely on average annually. This has created a significant funding gap between the planned budget and actual funding, something, which has hindered effective delivery of the African Union’s agenda,” he said.
“After looking at various options, the 0.2 per cent levy was considered the most viable option because it’s doable, equitable since the rate is the same across all countries, it’s sustainable and predictable,” he added.
Among the other options, the representatives of member states considered that could generate seamless financing of the Union was to impose a tourism and hospitality levy for all the countries in the continent.
The money collected from the levy will be deposited in the respective country’s central banks, which will then deposit the money is a special account created for the Union.
This fund is expected to finance 100 per cent of the Union’s operational budget as well as other expenditures like peace and security initiatives.
Last year in July the AU Assembly allocated US$325 million to the Peace Fund by the end of this year. This will raise to US$400 million by 2020. This money will be used to fully finance mediation and preventive diplomacy activities in the continent.