AU financial independence: still a long way to go

As the new African Union (AU) Commission leadership takes over after the 34th AU Ordinary Summit on 6 February 2021, expectations are high that the continental body will perform better in coming years as a result of the ongoing AU reforms.

While initiatives such as the African Continental Free Trade Area are major milestones in Africa’s integration and development, they will be compromised if the AU does not fund its own initiatives and agendas.

Despite progress, member states’ financial contribution to the AU’s initiatives is still negligible, with approximately 75% of financing coming from external partners, particularly the European Union (EU) and individual European states.

African member states need to address these shortfalls if the continent is to make any headway towards financial independence.

Plans not implemented

The quest to find alternative, adequate, predictable and sustainable funding has been on the AU’s agenda for a long time. Financing issues are routinely discussed at various meetings of ambassadors and ministers, as well as at the F15 of finance ministers created to tackle financing issues.

At the June 2015 AU summit in Johannesburg, the Assembly decided that AU members would try to achieve the following financing targets: 100% of the operational budget, 75% of the programme budget and 25% of the peace support operations budget.

This was followed by the appointment of Dr Donald Kaberuka as AU High Representative for the Peace Fund in 2016. In 2014 Nigerian president Olusegun Obasanjo had also made proposals on alternative funding for the AU, but these were never adopted.

At the 27th AU Summit in Kigali in July 2016 it was decided to implement a 0.2% levy with effect from 2017 on all eligible imported goods. This was meant to finance the AU’s operational projects, programmes and peace and security operations budget.

However, the levy has not been universally implemented. As of June 2020 only 17 of the 55 AU member states have adopted the decision. And while these funds are being collected, they are not remitted in full by some member states.

The biggest challenge with the implementation of the 0.2% levy is that it was mainly a political commitment with little guidance on its implementation

The biggest challenge with the implementation of the 0.2% levy is that it was mainly a political commitment with little guidance on its implementation. However, most countries have agreed to pay their assessed contributions, regardless of the funding sources. The big question is whether these recommendations and decisions are being matched with faithful implementation.

The 2021 budget

According to the Executive Council Decisions of February 2021, the AU’s total approved budget for 2021 is US$623 836 163, of which US$203 500 000 (32%) is to be financed by member state contributions, and US$406 194 344 (65%) by external partners.

Out of this, US$359 097 502 is operating budget (with 93% to be funded by member states) and US$187 007 683 is programme budget (22.6% to be funded by member states). A total of US$264 738 661 goes to the peace support operations budget, all of which  is to be funded by external partners.

Although concerns were raised about the fact that more than half of the budget is being financed by external actors, this has been an ongoing trend for the past two decades. Figures show that fewer than 40% of AU member states actually pay their contributions to the institution. As long as these shortfalls persist, the AU’s financial independence will remain a pipe  dream.

The Executive Council has recommended that the AU Commission reprioritise its activities, cancelling any that do not have a secured budget

In its decision the Executive Council has recommended that the AU Commission reprioritise its activities, cancelling any that do not have a secured budget, which amounts to US$12 239 832.

This is the first time the council has made such a proposal, and its implications are still unclear. Although this could be considered a move in the right direction, the implementation of key initiatives – particularly Agenda 2063 – will now rely entirely on the ability of the AU to mobilise resources within the continent rather than externally. In the past this has proven to be an uphill battle, as most proposals are adopted in principle and no action is taken for their implementation.

Financing of peace support operations

The AU is becoming a stronger actor in peace operations and its coordination with the United Nations Security Council is increasing its prominence in this area. However, the financing of peace operations remains problematic.

Despite the fact that the Peace Fund currently has about US$200 million, there is no clear decision on its apportioning. A target was set of US$400 million by 2020, which has been extended by another two years. Each region is to contribute US$80 million to the Peace Fund, but there is no clarity on its apportioning to the regions.

Over-reliance on external partners in the funding of projects and initiatives ultimately undermines its decision-making capacity

Owing to this lack of consensus, it was suggested that regional consultations be held and a proper mechanism agreed upon. This mechanism was to be presented to the council in February 2020. Although there is money in the Peace Fund that can be used in the implementation of peace initiatives, there is no clear way forward.

On the other hand, there have been important changes to the way in which the EU finances peace and security initiatives on the continent. Initially, all funds were channelled through the African Peace Facility, which financed peace support operations and initiatives.

The new shift allows the EU to bypass the AU and directly fund regional and national peace and security initiatives. The exact impact of this move on the AU is not clear yet.

Clearly the AU is realising that, to gain full financial independence, it must find a way to mobilise its own financing from within. Over-reliance on external partners in the funding of projects and initiatives ultimately undermines its decision-making capacity. It also compromises its response to armed conflicts and security situations in the continent.

An implementable exit strategy from foreign aid and external financing is now more urgent than ever before.

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