FINANCING OF THE UNION

WHY INTRODUCE A LEVY ?

The continued and successful implementation of the Union’s programmes require adequate and predictable, sustainable funding. However under existing arrangements, the Union’s budget continues to be underfunded by both the Member States and Development Partners. 

On average, 67 percent of assessed contribution is collected annually from Member States. About 30 Member States default either partially or completely on average, annually. This creates a significant funding Gap between planned budget and actual funding, which hinders effective delivery of the African Union’s agenda.

HOW WAS THE 0.2% ON IMPORTS ARRIVED AT?

In the search for a viable, equitable, sustainable and predictable source of financing the union, the AUC working in close collaboration with the UNECA undertook several simulations with different sources of funding in line with the original proposal from President Obasanjo. Several options were considered. These include surcharge on SMS, hospitality levy for hotels stays, levy on all air tickets to and from Africa and a basket of others including the levy on imports. 

After a careful evaluation of the potential of all the options, the 0.2% came out as the most viable in the sense that it was doable, equitable in the sense that the rate was the same across all the countries, sustainable in the sense that it would be available over the short medium to long term, predictable in the sense that one could assess the expected inflows from existing national data and also the AU could expect to receive funding on time once the scheme sets in.