“The Accidental Ecowas
& AU Citizen”:
Deconstructing ECOWAS’s war chest of $US252million, or a Brief
Tale on Financing African Integration (2)
By E.K.Bensah Jr
January is always a great month
to review and refresh everything – including money. It is no surprise,
therefore, I have chosen to focus on an aspect of resource-mobilization in
fulfillment of the African Integration narrative which ought to see continental
union—as per the Abuja Treaty of 1991—by 2034. True, it seems quite a long way
away, but whoever thought the Millennium Development Goals (as prescribed in
2000) would now only be two years away? There’s no gainsaying that the road to
economic emancipation for Africa is very long and hard, so it remains paramount
to get more serious now, more than ever, on management of finances of the eight
regional economic communities populating the African integration landscape.
Last week, I touched on innovative
financing and offered an insight into how it is an old battle that needs a
little warming up by both African integration watchers and the African populace
alike. It needs must go beyond being a discussion rendered to abstraction by
cognoscenti of African policy-makers to a place where media across the
continent can begin to discuss and engage. Never mind that the idea of
financing African integration seems to be a preserve of “specialists”, it needs
moving to a place where all can freely discuss and debate it.
Proposals for innovative financing paths
The original study by the
Commission of the African Union proposed no less than eight scenarios of
innovative financing sources. These sources are to be structured around: (a)
tax on imports; (b)tax on revenue from hydrocarbon exports; (c)tax on insurance
premiums; (d)levy on airline tickets; (e) involvement of the private sector
through sponsorship and other forms of support; (f) the sale of items and other
products carrying the African Union symbol. However, as a consequence of a
series of expert meetings and ministerial conferences, the Commission’s choice
was limited to the following main components or instruments: (i) levy on
imports from the rest of the world; (ii)levy on airline tickets; and (iii)levy
on insurance policies.
In order to obtain a greater
insight into how these three instruments are used in levying taxes for some of
the AU’s regional economic communities, we shall look at the cases of the
Economic Community of Central African States(ECCAS); UEMOA/CEMAC; and ECOWAS.
Truth be told, ECOWAS, UEMOA,
ECCAS and CEMAC are the only RECs that have been implementing the levy on
imports from non-member countries with some degree of success
The case of ECCAS and its Levy on Imports
For an organisation that barely
makes the news in this part of the world [for example, they just concluded the
15th session of their summit on Monday, which major outcome was to
call for the application of the convention on free movement of good and people,
including the fixing of the date of 1 July, 2012 for the launching of an
free-trade area to be fully realized by 2014], one might find it hard to
believe that it has a fully-functioning financing mechanism.
In ECCAS, the levy is called the
*community
contribution for integration (CCI)*. Consumer goods, originating from
third countries, imported by member states are subject to the CCI. Products
that are excluded from the field of taxation are products originating from the
Community and imported goods under “suspensive customs regimes”.
In this grouping, the taxable
value is the customs value of goods. In other words, the CIF(cost insurance
freight) or the transaction value. The rate of the CCI is calculated as 0.4%.
In other words, if the customs value is 2,000,000CFA, the CCI is 2,000,000 X
0.4% = 8000CFA. This is collected by national authorities – or customs or the
Treasury.
These amounts collected under the
CCI are deposited into an account opened on behalf of ECCAS at the Central Bank
of each of the 15 member countries of ECCAS. In addition, a central account for
ECCAS is also opened at the Central Bank of the country, which hosts the
headquarters – as in the case of the cash account in Libreville, Gabon.
On the plus side, if the CCI is
well-implemented and all countries have a surplus in t he ECCAS account opened
in their central bank, it is the entire region that is strengthened.
The case of UEMOA/CEMAC
According to the AU’s “Bulletin
on Fridays”, these two organizations implement fully the Community levy system.
One of the major reasons for this is because they are both customs unions,
which facilitates the implementation of this measure.
The levy rate in UEMOA is 1%. As
a consequence, the levy rate in the member countries of UEMOA is 1.5%, broken
down as follows: (i)1% for UEMOA; (ii)0.5% for ECOWAS countries.
The case of ECOWAS
In ECOWAS, as in ECCAS, the
community levy is placed on taxable value of goods imported into the Community
from third countries and marketed for consumption. The following are exempt
from the community levy: (i)aid, grants and non-repayable subsidies for a
state, public corporations and state-approved charities; (ii)goods imported
from third countries through financing provided by foreign partners, subject to
a provision exempting such products from all tax levies; (iii) good imported by
firms under the existing tax system at the date of entry into force of this
Protocol; (iv) the goods having been charged the community levy under any
previous tax regime.
ECOWAS Community levies are
predicated on: (i) CIF (cost insurance freight) value at the port of landing
for imports by sea; (ii) the CIF value of imports by land at the point of entry
into the customs territory of the
Community; (iii)the customs value at the port of landing (APOD) for imports by
air; (iv)the market price list of the respective goods.
The actual rate, as in the case
of ECCAS being at 0.4%, is set at 0.5% of the value of goods imported from
third countries. This rate, however, can, if necessary, be changed every three
years by the Authority of Heads of State and Government on the recommendation
of the Council and the collection is done by heads of competent customs
offices. To this end, an additional line is opened in their accounting books in
which daily collections of the Community levy are recorded. In turn, the Commission of ECOWAS, on its own
behalf, opens an account in the books of the Central Bank of each member state
(for countries having their own Central Bank) and with a branch of the
UEMOA-based BCEAO.
Based on the import value of
imported goods, the customs requires the importer (who is also from the private
sector) to issue two cheques: one in favour of UEMOA(1%) and the second in
favour of ECOWAS(0.5%). The Customs Services in turn deposit the cheques
received from importers to the accounts of UEMOA and ECOWAS, which have been
opened at the Central Bank of each state.
Finally, in ECOWAS, what will be
most useful to the reader is how these funds are used. First, the funds go to
the regular budget of the Community and its institutions’, such as the West
African Monetary Institute (located around the Tetteh-Quarshie interchange) and
the Spintex Road-based ECOWAS Regulatory Electricity Authority (ERERA). The
funds exclude the budget of the Cooperation, Compensation and Development Fund;
(ii)the budget to compensate revenue losses suffered due to trade
liberalization; (iii) the financing of development activities; and (iv)any
other allocation decided by the Authority or the Council including the capital
increase of the ECOWAS Fund.
In the interests of space, I will
conclude next week’s third part by providing greater insight into that
so-called “war chest” I have alluded to in the two parts. It goes without
saying that without an explanation of how ECOWAS innovatively-finances its
funds for regional integration, it would be veritrably difficult understanding
how one arrived with a “war chest” of that considerable sum!
In
2009, in his capacity as a “Do More Talk Less Ambassador” of the 42nd
Generation—an NGO that promotes and discusses Pan-Africanism--Emmanuel gave a series of lectures on the
role of ECOWAS and the AU in facilitating a Pan-African identity. Emmanuel
owns "Critiquing Regionalism" (http://regionswatch.blogspot.com ). Established in 2004
as an initiative to respond to the dearth of knowledge on global regional
integration initiatives worldwide, this non-profit blog features regional
integration initiatives on MERCOSUR/EU/Africa/Asia and many others. You can
reach him on ekbensah@ekbensah.net / Mobile: +233-268.687.653.
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