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AU’s troubled path to self-sustaining funding

The slowdown of members’ financial support could impede the implementation of critical programmes, particularly the African Continental Free Trade Area
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The 2024 draft budget of the African Union, with grossly inadequate funding from member states, has again reinforced unspoken fear that the widening gap between performances and expectations that trailed the first decade of Agenda 2063 implementation could continue well into the critical phases of the project and rob the continent of the ambitious self-sufficiency promised by the plan.

African leaders talk with high shoulders about Agenda 2063, a framework that highlights the path to a self-sufficient and globally competitive Africa, the people also listen with mixed feelings of renewed hope and cautious optimism.

It will take work (or wait) of four decades to see the continent truly transform into ‘the Africa We Want’. But the real distance between now and the goal is in articulating a sustainable funding template, steering the ideological cause of the agenda and integrating both.

Perhaps, how these twin-important elements of the programme align could determine the extent of departure from historical regrets: regrets over promises of the past, and the overall success rating of Agenda 2063, which seeks to address poverty unemployment, artificial barriers, illiteracy, insecurity and several other pain points of Africans.

The chief promoter of the project – the African Union (AU) – has stayed the course of selling the plan and aligning thoughts. But financing the AU itself is in the heart of the pan-African agenda, which is driven by decolonization and regional development aspirations.

The union also seems to be caught in the claws of a lion and the jaws of a shark, when it comes to financing the ambitious programme contained in Agenda 2063. Since it does not have an independent source of funding, it either affronts its members for their poor payments or remains dependent on external partners, which, in a way, touches the deep-seated pains the agenda aspires to address.

The budget of AU, which oversees the last layer of the tripartite implementation, is a critical lens for assessing the milestone performance. Sadly, the 2024 budget, a transitional budget, being the beginning of the second decade of implementation, falls short of the critical thresholds highlighted in the financial concept notes.

Johannesburg resolution and dithering compliance           

The fight to achieve financial autonomy for AU predates the organisation, and in fact, was part of the endemic challenges of its legacy organisation, the Organisation of African Unity (OAU). At different summits and meetings, new initiatives were created to achieve a funding model that aligns with the ideological foundation of the organisation.

One of the most prominent efforts was the June 2015 summit in Johannesburg, where the Assembly decided that members work towards achieving the following financing goals: 100 per cent of the operational budget, 75 per cent of the programme budget and 25 per cent of the peace operation support budget.

The targets, which came into effect in January 2016, were thoroughly debated, based on the belief that the development of the continent is primarily and necessarily driven by its resources and the need for AU to champion sustainable strategies to mobilize resources without losing focus on political anchor of the aspiration – self-reliance.

In commitment to the self-reliance philosophy, the 2024 Budget Framework Paper, as prepared by the AU Commission, adopts “progress towards self-financing” as one of the six appropriation principles.

Of course, radical progress could be a mirage, considering the macroeconomic challenges many African economies currently face. For instance, Nigeria, the biggest regional economy, was forced to call off its decades-old fuel subsidy programme by the new administration, owing to the country’s dire fiscal conditions, including shrinking revenues and mounting debt. Ghana, another West African country, is currently grappling with a debt crisis, with the International Monetary Fund (IMF) granting it a debt restructuring bailout of $3 billion in May.

The conditions are not remarkably different in East Africa, where Kenya, the regional economic leader, is battling with a high debt service to revenue ratio and a possibility of default as close as next year. The north and central African regions are also not immune to the global economic turmoil that has only been turbocharged by a tight debt market.

So, it is understandable if all that could happen to the self-funding agenda of the Africa project is a modest increase in the progress made so far. Interestingly, the AU Commission draft increased the member states’ assessment by 12.3 per cent year-on-year (Y/Y) to $230.3 million (excluding members’ voluntary contributions amounting to $635,000), bringing the total funding by members to approximately $231 million. If endorsed, that would have translated to about one-quarter (34.3 per cent) of the total funding needed.

According to the budget document obtained, the 2024 budget had a rigorous review process that included engagement with international partners and a review of the recent budget performance of the Union before the final figures were considered for adoption for the next stage, as per the AU Financial Rule 15.

First, the Commission’s proposals were an outcome of a pre-budget session held at the African Union Headquarters in Addis Ababa from 26th April to 5th May 2023 and after engagement with international partners to identify and fine-tune areas of support while aligning thoughts. After the process, the original estimated $687.6 million appropriation arrived on two-pegged considerations – a five per cent mark up on this year’s budget and contemplation of the average performance of the last three-year budget cycle.

But a joint sitting of the Sub-Committee and the Committee of Fifteen Ministers of Finance Experts (F15 Experts) was concluded on May 31, 2023, where it was a ceiling of $200 million “budget cap (including the Transitional Plan impact for 2024) as comprised of the member states contributions” among others. With the rationale for the joint committee’s decision being scanty, the weight of the decisions means the major international funding mechanism that should be growing came off the Commission’s recommendation by 13.4 per cent, and 2023 appropriation by 2.4 per cent.

But the message is much more symbolic. That recommended figure is only $15 million above the estimated operating expenses, which the Johannesburg decision said should be 100 per cent funded by members’ contributions, and that amount can only fulfill five per cent of their supposed obligation to programme and peace operation funding, where $301.8 million and $185.03 million are earmarked respectively. The $200 million cap would need to be raised by an additional 129 per cent or $258 million to reach the self-imposed targets at in South Africa eight years ago.

History of failed commitment to Johannesburg pledge 

But the wide gap between the 2024 reality and the target is a telling reflection of the faltering commitment to the AU financial autonomy roadmap that kicked off eight years. A report issued ahead of the Permanent Representatives Committee (PRC) retreat which was took place last month in Kigali, Rwanda, provides a sketch of the achievement made so far in terms of self-funding.

In 2020, the report said, the Union had introduced “a contribution capping at $250 million on member states assessed contributions”, which it blamed for the slow attainment of the Johannesburg targets.

“Member states assessed contribution has been lowered over the last three years (around $205 million and proposed $200 million for 2024). Assembly has extended the deadline for attaining the Johannesburg decision to 2025. Rationalization on financing conflicts with increased approval of new structures over rationalization of staff cost will not enable us to implement appropriate structures to their full capacity,” it added.

In the baseline year (2015) to the Johannesburg ambitious target, member states assessed contributed covered 80 per cent of operating expenditure (OPEX) and only 5.3 per cent of the programme cost. Rising from the resolution, 100 per cent of OPEX has been taken care of by the contributions in the past eight years, according to the performance report.

That sounds like good news. But the downside is that the funding could only pick 25 per cent of the cost of programmes, which are critical to the attainment of Agenda 2063. Against the 75 per cent cut-off mark for programme cost financing, members kicked off slowly from a baseline of 5.3 per cent in 2015 to six per cent the subsequent and shot up to 16 per cent in 2017 even though the performance was still a far cry from the threshold.

The proportion of programme implementation funded from member assessment saw an aggressive growth but peaked in 2019 when it reached 45 per cent or 60 per cent of the set goal. With the kneecapping impacts of COVID-19 on African economies and the resultant re-capping of the members’ contribution at $250 million, the growth has been on a downward slope. This year, it is 17 per cent. If the current cap holds at $200 million, the paltry left after funding the estimated OPEX will be 4.97 per cent of the programme cost and channeled accordingly, it will be the smallest percentage of funding in about a decade.

With an average funding contribution of two per cent or 92 per cent behind the pass mark, members’ attention to peace operation support is worse than programme. Despite the escalating security tension, AU members’ funding of peacekeeping missions and de-escalation activities campaigns, leaves the burden for national governments and, in some cases, external forces whose real motives are often questioned.

Poor funding commitment and uninspiring journey to 2063 

The compliance goalpost of Agenda 2063 has been shifted to 2025, which creates another challenge of attaining the ideas of Johannesburg Decision. A continuous shift of critical milestones, of course, could also raise the odds against the overall mandate. Indeed, in real material terms, the new cap has more damning consequences for the continent’s yearning for self-determination. Now, the Union may be forced to scale back or eliminate certain programmes and initiatives, which could hurt the achievement of Agenda 2063 aspirations.

With the $ 200 million cap, the contribution of the international partners to the Union’s regular programme budget will increase from 76.9 per cent in 2023 to 86.5 per cent, according to relevant data. The Union’s external partnership linkages include Africa–League of Arab States (LAS), African Union (AU) – European Union (EU) Partnership, Africa–South America Cooperation Forum (ASACOF) and the Union Commission–United States of America High-Level Dialogue. Others are China–Africa Cooperation Forum (FOCAC), Tokyo International Conference on African Development (TICAD), Africa–India Partnership, Africa – Turkey Partnership and Africa-Korea. Some pan-African schools of thought hold a strong view that the partnerships provide a breeding ground for the growth of neocolonialism, which Agenda 2063 seeks to break.

This has huge consequences for the ability of the Union to chart an African independent and untainted path to its future – a challenge that shaped the elaborate deliberation that led to the birth of self-funding aspiration.

According to informed argument, the slowdown of members’ financial support could also force the Union into staff rationalisation, which could impede the implementation of critical programmes, particularly the African Continental Free Trade Area (AfCFTA) – a trade pact that is expected to substantially increase intra-African trade volume. Scaling back on budgetary provision could also imply non-operationalisation of new offices, dearth of resources for maintenance of existing structures, limited growth initiatives and inability to leverage critical international collaborations.

Africa has come a long way in its journey of self-fulfillment and a stronger global influence. But these cannot happen in the absence of a, guaranteed, sufficient, reliable and ‘free’ financial lifeline.

 

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