African leaders have agreed in principle to impose a raft of taxes on flight tickets, hotel stays and text messages in a bid to regain control over the African Union’s finance, with the aim of reducing the dependence of its pan-African diplomatic agenda on foreign monetary aid.
The AU was once heavily bankrolled by Libya’s Muammar Gaddafi, who championed the institution as a means to challenge Western hegemony, but now 72% of the operational budget comes from international donors led by the US and European Union.
“Over 70% of our budget is foreign funded. This is not sustainable,” said Zimbabwean President Robert Mugabe, now AU chairman after the most recent summit in Addis Ababa.
Kenyan President Uhuru Kenyatta, concurred that dependence on foreign financing was a “profound handicap and an impediment to the continent’s momentum,” and called for Africa to assert “its independence and sovereignty more robustly.”
The bloc is now proposing a $10 tax on flight tickets to and from African destinations, plus a $2 tax on each night spent in a hotel — levies that it estimates will pull in $730m a year.
An additional $0.5 tax on SMS exchanges would bring in a further $1.6bn, according to AU officials, who are hoping to see the bloc able to fund 65% of its own operations by 2016.
At present, the 54-member bloc sources only 28% of its half-billion dollar operational budget from its own members. In addition it has to source an additional $750m for peacekeeping operations — a funding gap filled by the European Union, US, World Bank, China and Turkey.
“We should be able to take our decisions freely,” said Francine Muyumba, head of the Pan-African Youth Union (PYU). “We need to have the means to intervene quickly without having to wait for foreign money. Money from donors always comes with strings attached.”
With regard to aviation, Ethiopian Airlines CEO Tewolde Gebremariam has been vocal in his opposition to the already high levels of taxation and uncompetitive stance of many African governments towards their own airlines, in contrast to the aggressively stance of the Gulf.
Drawn up by former Nigerian President Olusegun Obasanjo in May 2013, the proposals have also been criticised by many member states as punishing their tourism sectors and unduly sparing of the oil and mineral sectors.
However, while Africa’s leaders agreed in principle to the proposals, the application of the taxes will be initially on a voluntary basis — leaving each member state with the choice of slapping the new taxes on their citizens and visitors.
Whether or not the plan takes off, moving forward AU members will also be expected to respect a new, higher threshold of contributions calculated on the basis of their GDPs.