Tag Archives: ECONOMIC GOVERNANCE

Help us collect our taxes — African MPs

21 Nov

tax_africaMultinational corporations doing business in Africa are finding it all too easy to circumvent taxation — and that loss of tax revenue just makes countries even more dependent on foreign aid.

Stemming from underdeveloped tax administration systems, tax avoidance is one of the biggest obstacles toward achieving transparency as a catalyst for development in the continent, Tanzanian MP Zitto Kabwe told Devex.

Africa is losing $50 billion every year from illicit financial flows, while at the same time receiving around $30 billion in foreign aid. That means Africa is losing out on tax revenues equivalent to almost twice the amount it gets in official development assistance from overseas, noted the deputy opposition leader and shadow finance minister.

Kabwe is one of 10 African experts on a fact-finding mission to look at tax and transparency issues in Europe. Organized by the European Network on Debt and Development, the initiative is taking the experts — among them several MPs — to discuss national taxation issues and challenges with representatives of EU member state governments, the United Nations, the Organization for Economic Co-operation and Development, EU institutions and civil society groups in Brussels, London, Oslo and Paris.

“We are here in the developed world to engage with various organizations, discuss and present our [side] of the story, in order to get their views on how some of these problems can be addressed,” explained Malawian MP McJones Mandala Shaba.

Transparency
African countries see the issue of improved tax revenues as part of a long-term strategy to become less dependent on foreign aid. But multinational corporations need to be willing to change their ways and start paying taxes, the MPs asserted. For that to happen, they explained, help would be required from the governments of the countries in which these companies are based.

“If developed countries support us in our effort to ensure we don’t lose our own revenues, we won’t need foreign aid and we’ll have a partnership of equal footing, rather than the donor-recipient relationship that has lasted more than 50 years,” Kabwe noted. “We just need our taxes: companies must come, invest in Africa, get their profits, but pay their taxes in Africa. Once we have our own revenues, we’ll be able to finance our development, we’ll build our schools, facilities, infrastructures, pay our teachers well, and have a good health system.”

But how can this goal be met? With more transparency, argue the MPs. First of all, explained Mandala Shaba, donor governments should demand that multinational corporations report the profits they make in the country where “real economic activities take place,” not only in the country where the headquarters is located.

Kabwe agreed with Tax Justice Network senior analyst Marcus Meinzer, who recently suggested to Devex that the main issues to tackle illicit financial flows concern transparency of ownership (concerning shell companies and trusts registered and created in the EU on behalf of residents of developing countries), better exchange of financial account-related tax information, and transparency of multinational corporations’ annual accounts.

“I totally agree with his analysis. In a country like Tanzania, minerals exported over a period of 10 years were valued at $11.3 billion, but the taxes paid were around $440 million, less than 4 percent of the total. A similar situation [occurred] in Zambia … It clearly shows how transparency in the accounts is crucial for the extractives industry,” said the lawmaker.

Information access
Kabwe argued that the first step to assess, monitor and prevent incoherence is to set up a system of automatic exchange of information.

“Various initiatives [have been undertaken] by the EU and the OECD to set a convection of mutual exchange of information. I call on developing countries, especially African countries, to sign up to this convention. Signing it is the first step to have access to information, automatically or by request.”

He added that a global intergovernmental body is also needed to provide rules and guidelines, and a system implementing a single convention on tax avoidance.

“Having one single convention, ratified by all countries of the world, would be easier and even sanctions could [imposed] to countries that are not providing information.”

Archaic legal framework
However, the tax administration in Africa lacks the capacity to come up with specific legislation that would ensure “getting as much as possible” from the investments of multinational companies, pointed out Mandala Shaba. “One of the challenges we face … is that we have outdated, odd and archaic legal policy frameworks and legislation.”

He gave the example of Malawi’s mines and mineral act, enacted almost 40 years ago, but never reviewed since to be brought more in line with current social economic developments.

“Companies are taking advantages of this particular aspect. We should come up with an appropriate legal framework, which would guide the management of natural resources, in particular mines.”

Corruption
On tax issues in Africa, there is almost always the same elephant in the room: corruption, in the form of powerful bureaucrats who appropriate revenues from natural resources and hide the money abroad in tax havens.

“We recognize that corruption in most African countries is like the way of life — corruption in the street with the traffic police, all the way to the top executives and politicians,” said Kabwe. A solution to address the problem, he argued, would be to bring the fight to offshore tax havens.

“Corrupt money needs a place to hide, so we have to create an environment where if you are corrupt you don’t have any place to hide … so that corrupt politicians have less incentives to engage in stealing.”

Kabwe mentioned that another solution is to establish accountability mechanisms — ways of holding everybody responsible through the actions they commit, while ensuring that the citizens are empowered to inform on acts of corruption.

Both solutions would be music to the taxman’s ears.

SOURCE: https://www.devex.com/en/news/help-us-collect-our-taxes-african-mps/82336

ASSESSING THE DELIVERY OF WATER AND SANITATION IN AFRICA: THE CASE OF THE AFRICAN WATER FACILITY

14 Nov

AWF2013
Africa has over 50 significant water basins spanning across nearly all of the 54 countries. For 14 of these, practically their entire national territories fall within shared river basins. Apart from these, there are also large inland water bodies such as lakes Victoria, Chad, Malawi, and the Kariba Dam. In Sub-Saharan Africa (SSA) however, international river basins constitute the principal source of water resources and about one-third of the world’s river basins. Thirty five countries in the region share 17 of the aforementioned river basins. However, even with these water resources Africa has the lowest total water supply coverage of any region in the world. As of the year 2008, only about 60% of the total population in Africa had access to water and sanitation. About 300 million people in Africa do not have access to safe water and about 313 million have no access to sanitation thereby exerting a heavy toll on the health and economic progress of African countries.

Therefore, due to the realisation that 40% of SSA’s total population do not have access to clean drinking water and safe sanitation services , African leaders across the continent took it upon themselves to address this urgent and long standing problem. The leaders declared their commitment to achieving universal access to clean water, through their development blue-print, the New Partnership for Africa’s Development (NEPAD), and through their support for the Millennium Development Goals (MDGs), adopted by world leaders in 2000. However, if the international coverage targets of the MDG for 2015 are to be met in Africa, approximately 210 million people in urban areas will need to be provided with access to water supply services, 211 million people with sanitation services, while a similar number of people in rural areas will also need to gain access.
In this report AFRODAD analyses the Africa Water Facility (AWF) project portfolio hosted by the African Development Bank (AfDB) on behalf of the African Ministers Council on Water (AMCOW). The objective of this analysis is to: i) understand how the AWF contributes to fulfilling the objectives of the AfDB in water supply and sanitation ii) assess its effectiveness iii) identify areas for improvement in order to achieve its objectives and mandate.
The report notes that since inception of its operations, the AWF has been active in 50 of the continent’s 54 countries and had by end 2012 approved and funded 66 national and regional projects at a total cost of €79 million. The AWF approved projects are distributed across the continent’s five main Sub-regions i.e. North, South, East, West and Central Africa. All grants have so far been given to the public sector, and no public/private partnerships (PPP) were ever forged from inception of the projects to the time of the publication of the report.

Read or Download the FULL report below
ASSESSING THE DELIVERY OF WATER AND SANITATION IN AFRICA THE CASE OF THE AFRICAN WATER FACILITY

Call to consider domestic funding

13 Nov

Flag-map-of-ZimbabweTHE single biggest challenge to efforts aimed at setting Zimbabwe back on a sustainable path to economic recovery and growth after a decade of recession to 2008 is lack of access to affordable medium and long term funding. Zimbabwe faces a peculiar situation where it has to deal with a multiplicity of problems including power deficit, external competition, high cost of labour, utilities and raw material scarcity as it battles to bring the economy back on the rails.

Economic analysts believe that no matter how brilliant Government policies will be, without access to reasonably priced long term finance economic will not succeed. Billions of dollars are required to rehabilitate and put new infrastructure from water and sanitation to roads, airports, railway lines, power stations, electricity transmission lines to industrial machinery and equipment to enhance productivity.

Other productive sectors of the economy namely agriculture, mining and tourism equally require significant funding to escape the quagmire of the decade of recession. While the economic problems are varied and distinctly separable, the bottom line is that their size and magnitude has been fermented by lack of access to affordable medium to long term funding especially after dollarisation of the economy.

The scenario has constrained the country’s capacity to regenerate its productive capacity. One of the questions that have popped up is whether it is not possible to vigorously pursue innovative ways to enhance domestic liquidity mobilization to support productivity with as much as US$3 billion thought to be speculating informally.

This is not however to underestimate the amount of money required to revive the economy. Infrastructure alone, according to the African Development Bank needs US$14 billion, agriculture US$2 billion annually, industry US$2,5 billion for retooling and mining requiring US$5 billion to US$7 billion over a 7 year period.

It should be noted that building confidence in the country’s financial system will be key to efforts Government will undertake to mobilise domestic resources considering the critical intermediary role of banks in oiling economic activity. Apart from exports the other source of liquidity would be foreign direct investment. But due to Zimbabwe’s perceived risk profile, this has not worked despite the Southern African region having received over US$10 billion in FDI in 2012.

Whereas under normal circumstances Zimbabwe like many other members of multilateral lenders could also turn to global lenders for funding assistance the avenue is shut out as the country is not eligible due to arrears from previous loans. Further, most other bilateral lenders take a cue from the International Monetary Fund and the World Bank that obviously are controlled by Western countries with which Zimbabwe currently does enjoy very cordial relations since the fall out in 2000 when it redistribute whites occupied land to majority blacks.

It means Zimbabwe might not be getting any funding from Bretton Woods institutions and related lenders remote controlled from the West for as long as it will also not be able to freely deal with the countries minus the economic embargo.

But with such a scenario, Finance Minister Patrick Chinamasa has pleaded with the global lenders to at least consider shifting from insisting on the country clearing its arrears first before being eligible for low priced long term funding once again. But without ruling anything out, this remains a tricky issue.

SOURCE: http://www.herald.co.zw/call-to-consider-domestic-funding/

Most African nations ‘will not achieve Millennium Development Goals

12 Nov

MDG_monitorAddis Ababa, Ethiopia: Most African countries will not achieve Millennium Development Goals (MDG) by the 2015 deadline, women leaders have said.

The women raised the red flag in Addis Ababa Ethiopia during a meeting that brought together leaders from across the continent.

They observed that among MDGs that will not be achieved are those focusing on gender issues and affirmative action. “MDGs have contributed significantly in advancing development, but they have failed to fully address issues to do with gender. Most African countries will not achieve the goals because they did not own them,” said Judith Ameso of UNECA.

She noted the MDG that focused on social development, for instance, has not addressed the root cause of poverty, but only symptoms.

“What we should now focus on is post-MDGs because African countries are lagging behind. Africa should articulate what it wants in 2015 based on its experiences and the level of development arising from MDGs,” said Ameso at the three day strategy meeting, which brought together over 30 African women’s organisations and networks from all five sub regions of the continent.

Through the meeting, the women hoped to influence Africa’s position in shaping the post-MDG agenda.

“We want to build a strong corps of women to lobby governments and also articulate issues of women’s rights, gender equality, sustainable development and sexual and reproductive health in Agenda 2063,” said Femnet Executive Director Dinah Musindarorwezo.

Musindarorwezo said it was time women participated equally in decision-making and more focus put on gender issues to accelerate progress made from MDGs.

“We need to be cognisant that even though we are an emerging power, we are not provided with equal opportunities. We are portrayed as weak, vulnerable yet we have great potential to steer development,” explained Zenebewerke Tadesse from Ethiopia.

During the discussions, MDGs were heavily criticised as being narrow since they reduced broader development concerns to targets.

SOURCE: http://www.standardmedia.co.ke/?articleID=2000097494&story_title=most-african-nations-will-not-achieve-mdgs

IMF welcomes Namibia’s 2014 active tax-reform agenda

10 Nov

Flag-map_of_NamibiaThe International Monetary Fund (IMF) has welcomed Namibia’s fiscal year 2013/14 budget, which lays the groundwork for an active reform agenda in the area of reduced income taxation and improved public financial management and tax administration.

IMF mission chief Lamin Leigh said on the last day of a 15-day IMF mission to the country that the fund welcomed plans by the government to undertake a comprehensive review that aimed to improve the investment climate and the ease of doing business, support small- to medium-sized enterprises and pursue deeper economic integration.

This approach would require increasing the quality of public spending by reforming public financial management, improving the efficiency and effectiveness of the tax system, reducing the cost of doing business and diversifying the economy.

“The authorities’ increasing emphasis on efficiency and innovation-driven growth, underpinned by greater private-sector development to boost economy-wide productivity, is a step in the right direction.

“While the budget is fairly expansionary, total tax revenue collections, to date, have proven resilient and should help consolidate on the large gains made in the fiscal year 2012/13,” he commented.

With an uncertain external environment, the mission urged the Namibian government to begin rebuilding policy buffers, which should be pursued through a “growth-friendly” fiscal consolidation strategy, focusing on reining in current spending, such as current transfers and subsidies to State-owned enterprises (SOE), while preserving growth-promoting capital and infrastructure spending.

The fiscal consolidation process also needed to be balanced with a combination of expenditure-cutting measures and domestic revenue-mobilisation efforts.

“Thus, the mission welcomes the government’s commitment to a simplified income-tax system to achieve higher compliance and lower cost of administration. The mission supports the authorities’ ongoing work on broadening the tax base through rationalisation of existing tax incentives in some sectors,” Leigh commented.

He added that delivering good outcomes from the government’s diversification policies would require supportive measures to liberalise the service sectors, reduce the domestic regulatory burden on firms and address the skills mismatch in the labour market.

Citing further deductions of the IMF mission, Leigh said Namibia’s real gross domestic product had grown by a healthy 5% in 2012, while preliminary data for the first half of 2013 suggested that growth had moderated somewhat.

The slowdown reflected weak global demand for exports, which more than offset the solid growth in the nonmineral sector, most notably in retail trade.

At the end of August, inflation stood at 6%, broadly in line with inflation in South Africa.

“The fiscal outturn in the fiscal year 2012/13 was significantly better than targeted, with the budget almost balanced at the end of the fiscal year. The strong performance reflects both revenue over performance and some under-execution in capital spending,” Leigh held.

Looking ahead, the mission forecast that output growth would further moderate to about 4% in 2013.

Mineral exports would likely remain subdued in the second half of 2013 on account of weak external demand, with growth slowing in Namibia’s major trading-partner economies.

The impact of the drought this year would also likely weaken economic activity.

“These factors would be partly offset by strong domestic-demand growth emanating from the recent income-tax reform, along with the fiscal expansion targeted in the fiscal year 2013/14 budget,” he said.

The nonmineral sector, in particular construction, was also expected to further rebound in the second half of 2013, mainly on account of the development of the Husab uranium mine, in Namibia’s Erongo region, which was expected to become the second-largest uranium mine in the world.

Source: http://www.engineeringnews.co.za/article/imf-welcomes-namibias-2014-active-tax-reform-agenda-2013-11-08

Africa: Investment in Infrastructure Can Boost Trade in Africa, Finance Ministers Assert

6 Nov

Speaking to reporters during the IMF-World Bank Annual meetings in Washington, D.C., African finance ministers stressed that Africa needs to strengthen the implementation of structural reforms in order to maintain the annual average growth of around 5 percent over the past few years and significantly reduce poverty.

Ministers also emphasized that current developments in the world economy affected Africa’s growth. “We are concerned that the increased downside risks to the global economy will impact negatively on Africa’s trade flows and financing opportunities. We are also worried about the uncertainty regarding the unwinding of unconventional monetary policies, and the threat of potentially devastating budgetary challenges in the United States, which, if left unaddressed, could derail the fragile recovery we experienced last year across the world,” said Amara Konneh, Minister of Finance, Liberia.

Looking at the medium-term, ministers also noted the significant efforts African countries have made to improve human capital through education and training with the aim of reducing poverty. However, they also acknowledge much more needed to be done. “We have noted the weaknesses of our education system. Professional education is not up to par. Our education system needs to be reformed in order to meet the requirements of our economy and the requirements and demands of our society”, said Luc Oyoubi, Finance Minister of Gabon

Armando Manuel, Finance Minister of Angola, told reporters that as part of its national development agenda, Angola has implemented a training plan for its civil servants. “There is a new strategy in place because Angola has understood that the wealth of a country cannot only be measured by its natural resources, but also by its human capital. And this is a challenge the country is taking on–to form the skilled workers to achieve the objectives of economic development,” said Manuel.

Luc Oyoubi, Minister of Economy of Gabon and Daniel Kablan Duncan, Prime Minister and Finance Minister of Cote d’Ivoire, also said they intended for their countries to become emerging markets by 2015 and 2020, respectively

Reforming the Infrastructure Deficit

In addition, ministers stressed the importance of addressing Africa’s infrastructure deficit. Konneh said the continent needed aggressive infrastructure projects to unleash its growth potential. “It is worth repeating here that the ability to travel from one side of our country to another side, and from one country to another, is almost a fundamental right; that the ability to travel between countries is necessary for trade, for business, and for sharing of knowledge and innovation,” said Konneh, the Liberian minister.

RETRIEVED: http://allafrica.com/stories/201311050389.html