Sadc seeks alternative funding to take full charge of regional development agenda

Kizito Sikuka
Sadc has made significant progress in developing alternative financing modalities to support self-sufficiency and financial independence. One of the major decisions to come out of the 35th Sadc Summit held in Botswana in 2015 was the need for southern Africa to take full charge of its regional development agenda by embracing new and innovative financing mechanisms.

This was in realisation of the fact that the current situation – where most of activities, programmes and projects of the Southern African Development Community (Sadc) are supported by development partners – is not ideal and sustainable.

It is estimated that only 9.2 percent of regional projects are funded by Sadc member states while the balance of 90.8 percent comes from international cooperating partners (ICPs), according to the Sadc Secretariat. This situation has compromised the ownership and sustainability of regional programmes.

To this end, the 35th Sadc Summit held in Gaborone, Botswana in August 2015 “directed Council to finalise ongoing work on alternative sources of funding and report to the next Ordinary Summit” scheduled for August in Swaziland.

The Sadc Secretariat is in the process of engaging consultants to develop a Sadc Resource Mobilisation Framework (Alternative Sources of Funding Sadc Regional Programmes).

In coming up with the framework, a number of consultants will be engaged for seven different but related assignments to determine how fiscal space could be created to enable Sadc member states to finance regional activities, programmes and projects.

The assignments will focus on various issues, including how to curb illicit financial flows (IFFs); the creation of a regional lottery system; harnessing the resources from a proposed philanthropy network and database of private sector companies; development of a sharing formula for import and export levies; introduction of regional transport and tourism levies.

For example, consultancy on curbing IFFs and creation of fiscal space to enable Sadc finance its regional programmes will analyse illicit cross-border financial flows as a measure to boost resource mobilisation in the region.

It is estimated that Africa lost more than $1.8 trillion to IFFs between 1970 and 2008 alone, and continues to lose resources valued at up to $150 billion annually through IFFs or “illicit capital flight”, mainly through tax evasion, mispricing of goods and services by multinational companies, according to a recent study commissioned by the African Union.

This, therefore, means that resources that are intended to develop Africa are being used elsewhere to improve the economies of other countries in Europe, Asia and the United States.

The consultants will assess how much of the income currently being lost to IFFs “will be curbed from this option and how much of the resources can be mobilised using innovative financial instruments.”

The region is also considering the possibility of creating a regional lottery system, whose proceeds will go towards financing regional programmes and projects. Among other things, the consultants will determine the indicative levels of income that member states can generate from this option, as well as the financial burden of the regional lottery option on the lottery industry at the national level.

However, for Sadc to develop a regional lottery, member states will be expected to first establish a coordinating mechanism and agree on a regional regulatory framework.

The lottery system is one of the innovative financing mechanisms that have been successfully used to fund regional programmes in South East Asia, where pooled revenues are distributed equally to different countries.

A separate consultancy on the visibility of using a tourism levy to finance regional programme is expected to explore how the tourism sector could be an alternative measure to help the region finance its programmes.

The levy is expected to be applied on tourism-related activities, including hotel accommodation and other charges.

A similar initiative by the African Union (AU) will see levy taxes on plane tickets, hotels and text messages as alternative sources of financing for the AU. It is hoped that these measures will raise about $600 million a year, and over five years, it is expected that the AU will be able to pay the bulk percent of its costs using its own funds.

According to the Sadc Secretariat, consultancy for the development of the Sadc Resource Mobilisation Framework (Alternative Sources of Funding Sadc Regional Programmes) is expected to be undertaken over two months.

Regional efforts to explore sustainable alternative sources for Sadc have been on-going for a long time.

For example, a concept note on alternative sources of income was developed with the assistance of Southern African Trust and presented to the Sadc Committee of Ministers of Finance and Investment at their meeting in August 2015 in Bulawayo, Zimbabwe.

The Sadc Council of Ministers endorsed the recommendations made by the Committee of Ministers of Finance and Investment.

It was recommended, among other things, that the Sadc Secretariat should constitute a working group comprising experts from member states to coordinate work on the development of the regional resource mobilisation framework.

The development of the framework is expected to allow southern Africa to fully take charge of the regional development agenda by exploiting its vast natural resources, which range from minerals to wildlife and watercourses to fund its own agenda.

Sadc Secretariat estimates that southern Africa will require approximately $260 million to fund its regional projects, including coordination of activities, studies, capacity building initiatives as well as consensus meetings.

An additional $64 billion is needed to support regional infrastructure projects in various sectors such as energy, transport, water and tourism. –

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