WHAT IS FINANCING OF THE UNION

Financing of the Union is a historic decision adopted by Heads of State and Government (HOSG) in a “Retreat on Financing of the Union” during the 27th African Union Summit held in Kigali, Rwanda in July 2016. The Decision directs all African Union Member States to implement a 0.2% levy on eligible imports for to finance the African Union. 

The Retreat was attended by over 30 Heads of State and Government, Ministers of Foreign Affairs, Ministers of Finance and other representatives of Member States, the High Representative on the Peace Fund Dr. Donald Kaberuka presented comprehensive proposals on financing the Union including the Peace Fund. 

The purpose of the decision is:

1. To provide reliable and predictable funding for continental peace and security though the Peace Fund;
2. To provide an equitable and predictable source of financing for the Union;
3. To reduce dependency on partner funds for implementation of continental development and integration programs; and 
4. To relieve the pressure on national treasuries with respect to meeting national obligations for payment of assessed contributions of the Union

The decision will enter into operations for each Member States from January 2017. The above notwithstanding it is important to note that some countries have already initiated action to implement. These include Kenya, Rwanda, Chad and Ethiopia and Republic of Congo.

THE BACKGROUND OF THE DECISION 

Self-reliance was the core of Pan-African values of the Organization of African Unity (OAU). Following the transition to the AU, at the turn of the millennium, several milestones have been achieved towards attaining a reliable effective and predictable financing mechanism for the Union. Over the period, several decisions have been taken by the Assembly leading to the appointment of a High Level Panel on Alternative Sources of Financing headed by former President Obasanjo of Nigeria. The work of this Panel informed the development of concrete recommendations by a working group of the Conference of African Ministers of Economy and Finance (CAMEF) held in Washington in 2014. These recommendations were endorsed in subsequent decisions of the assembly.

In June 2015, the Assembly adopted a decision on Financing of the African Union in Johannesburg, South Africa. Later in September 2015 the Meeting of the Peace and Security Council at the Level of Heads of State and Government requested the Chairperson of the Commission to appoint a High Representative on the Peace Fund. Dr. Donald Kaberuka was appointed a High Representative on the Peace Fund.

In January 2016, the 26th Ordinary Session of the Assembly of Heads of State and Government in Addis Ababa, once again deliberated on the issue of financing, and in its decision on ‘The Scale of Assessment and Implementation of Alternative Sources of Financing the African Union and further requested that:

1. The Executive Council through its Committee on Contributions and Scale of Assessment to continue to develop modalities for the implementation of the Alternative Sources of Financing the African Union and report on progress to the next Ordinary Session of the Assembly in July 2016. 
2. The AU Commission to convene a Retreat of Heads of State and Government, Ministers of Foreign Affairs and Ministers of Finance, to examine the financing of the Union before the July 2016 Summit. 

Finally, in July 2016 the Assembly of Heads of State and Government adopted the Decision directing all African Union Member States to implement a 0.2% levy on eligible imports for to finance the African Union.