A new funding model by the African Union (AU) could see South Africa cough out a whooping sum of R2.2 billion to bankroll the cash-strapped body.
SA has been investing Millions towards the upkeep of the Pan-African Parliament that it hosts on behalf of the AU, the country has also forked out more millions of rand for Peace keeping Missions, but with the new funding model, the country will have to pay more.
The funding model,which was welcomed by most members of the Union, will see each member country pay 0.2% of its trade revenue as contribution to the AU.
This was announced at the just-ended summit in Kigali by Rwandan Finance Minister Claver Gatete. Observers said the model was more efficient than the current method, in which most of the funds came from foreign donor countries.
South Africa is known for its countless role in the growth and upkeep of the AU. The country has undertaken in numerous hotspots in the continent, and is a generous donor to its struggling peers.
According to Lionel October, the Department of Trade and Industry director-general, the proposal had been on the table for a while, and the new funding formula was derived from a trade model. “As a percentage of trade, SA imports comprise about 30% of GDP, which is in the region of R1-trillion.
“Some of this trade occurs in the form of financial transactions,” said October.
Giving a further explanation on how the AU revised fund-collection model would work, October said that the funds collected, in the form of import duties and tariffs, would be paid directly to the Reserve Bank, with the South African Revenue Service serving as the collecting agent.
“This is a better formula, because it does not go into the overall tax base, and it is a more efficient system.
“Even SA’s contributions towards other forums, including the Southern African Development Community and the World Trade Organisation, are calculated using GDP.” October said, adding that the model was designed for states that did not have efficient tax systems.
To him also, the new payment formula will take time to come into effect because it has to be ratified by member states. He said there are also lots of logistics that have to be factored before this is realized.
Greater Payment For SA
Meanwhile, the Democratic Alliance (DA) spokesman on international relations Stevens Mokgalapa said although the decision was long overdue, the issue of self-sustainability was a thorny topic among member states.
As things stand, the current formula is unsustainable, in that the biggest states make the lion’s share of subscriptions. But the dilemma for these states is that they are not permitted to second officials to the institution.
“This (secondment) is reserved for the smaller states. Hence SA lobbied hard for Nkosazana Dlamini-Zuma’s candidacy to the AU. The argument was that she would be able to institute reform from within the organisation,” he said.
However, a political analyst Shadrack Gutto pointed out that the AU’s decision was a positive move, which would cushion its precarious finances though the South African nation will pay a greater contribution than before.