The African Union (AU) member states’ Ministers of Finance, Monetary Affairs, Economic Planning and Integration have recommended the establishment of a regulatory institution in Africa.
This is to strengthen mechanisms for tax transparency, effective and prudential fiscal management, and combating illicit financial flows.
The Ministers of Finance and Central Bank Governors further underscored the need to establish an African Credit Rating Agency based on self-sustainability as well as political and financial autonomy.
During the closing ceremony of the 5th Ordinary Session of the Specialized Technical Committee (STC) in Lusaka, Zambia, the Ministers adopted the Tax Strategy and the Strategy on curbing Illicit Financial Flows (IFFs).
The STC meeting accepted the proposal of Afreximbank and ATIA to be designated as Specialized Agencies of the African Union.
The STC requested African Union Member states to ensure a significant proportion of their annual budgets are committed to the financing of industrialisation projects, supported by prudential taxation policies and practices to enhance domestic resource mobilisation and to minimise rigidities in credit creation.
Low national incomes
In a speech read for him, the Zambian President, Hakainde Hichilema, observed that the national incomes for African countries have remained low, coupled with high inequality and poverty rates which he noted as partly due to huge infrastructure deficits, low levels of human development, and low levels of private investment.
To address this, he underscored the need for Africa to access low-cost capital and establish a predictable, competitive, and stable economic policy environment.
“I am greatly convinced that the importance of the African Union Financial Institutions has been well established and very well-articulated in a way that it has now become common knowledge amongst the wide variety of stakeholders involved in this inspiring and expected ground-breaking journey. To address longer-term challenges and achieve financial stability and autonomy, there is a need to speed up the operationalisation of African financial institutions as indicated in Article 19 of the Constitutive Act of the African Union,” President Hichile said.
According to the Tax Transparency in Africa 2021: Africa Initiative Progress Report, financial resources available for the continent’s development are limited and have been decreasing since 2010 with the sharp decline of commodity prices after the global financial crisis.
Accelerating domestic resource
The AU Commissioner for Economic Development, Trade, Tourism, Industry and Minerals, Albert Muchanga, reiterated the need to accelerate domestic resource mobilisation to reduce reliance on foreign capital.
“Agenda 2063 stipulates that for it to be fully and effectively implemented, 75-90 percent of financial resources must be mobilised domestically across Africa. Harnessing the spirit of innovation, one key issue to realise is that the African Union is a source of value creation. It is a brand that is lucrative politically, diplomatically, strategically; and, inter-alia, commercially,” he said.
“Therefore, African Union policy organs like this Specialized Technical Committee need to come up with ways and means of transforming this source into value capture to drive progress as a continent, and in this way, relying on Africa’s resources.”
Structural reforms
Chair of the Bureau of the STC and Deputy Minister of Finance, Dr. John Ampontuah Kumah, noted that additional structural reforms such as debt restructuring and reprioritising public spending are required to ensure long-term debt sustainability.
“We need to collectively work together to transform Africa into a global powerhouse of the future. Reconfiguring the global debt relief architecture, including reinstating the Debt Service Suspension Initiative (DSSI), will be crucial in supporting debt-ridden African countries’ transition towards a path of sustainable debt in the medium to long term,” he said.
The Ministers concluded their deliberations focused on “Improving Africa’s access to Capital: Debt Management and the Rising Influence of Credit Rating Agencies.”
Other far-reaching recommendations on assessments by member states, on the state of the debt crisis in their respective countries as a way of promoting transparency and accountability, which in turn facilitates debt restructuring and reduces vulnerabilities.
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