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Involving African Think Tanks in the African Tax Dialogue, by Chofor Che, 6 December 2016


Africa is still plagued with robust taxation laws as well as state practice on taxation. The constitutions of African countries especially the 1996 Constitution of Cameroon do not create an adequate tax friendly environment that encourages favourable investment opportunities especially for local investors. International investors have to go through vigorous lobbying procedures to benefit from investment opportunities in the country. Trade and taxation bottle necks are a major reason for the country’s poor doing business ranking as evidenced in the World Bank’s Doing Business report of 2016 and other reports like the Fraser Institute’s Economic Freedom of the World : 2016 Annual report.

The Central African Centre for Libertarian Thought and Action (CACLiTA), Cameroon, amongst other African based think tanks, was invited to the International Tax and Investment Center’s (ITIC) 8th Africa Tax Dialogue that took place in Cape Town on the 15th and the 18th of November 2016. The meeting was aimed at bringing together African and international taxation experts, academics, think tank experts as well as industry tax and finance officers to reflect upon salient issues on taxation and investment with Ministry of Finance and Tax Administration officials from across Africa. CACLiTA was represented at this very important meeting by its President Mr. Asanji Burnley Nguh. Other high profile participants included the Commonwealth Association of Tax Administrators. Mukhisa Kituyi, Secretary-General of the United Nations Conference on Trade and Development (UNCTD) delivered the opening speech of the meeting.

The agenda included a mix of Africa-specific taxation challenges, as well as how global tax reform initiatives such as base erosion and profit sharing (BEPS) should be considered in an African context. Discussions also centered on Africa’s Regional Economic Outlook. Concerning Africa’s Regional Economic Outlook, the continent’s medium-term prospects for economic growth remains favourable but the sharp decline in commodity prices, tighter financing conditions, conflict in the Central African Republic, terrorist attacks by the Boko Haram in North Cameroon and a severe drought in Southern and Eastern Africa imply that many countries need to reset their policies. There was therefore need to engage in discussions on the adjustments in fiscal and monetary policies that are needed and the contours of economic diversification that should be pursued. Other sessions included discussions on retirement savings, taxation of mining, oil and gas, as well as discussions on tax consumption. A special workshop was also held on ‘Combatting the illicit Trade of Excisable Products’.

In addition to attending the African Tax Dialogue, the ITIC also invited six African based think tanks present to attend the launch of a new initiative-the Africa Tax and Investment Network. This initiative includes the Cameroon based CACLiTA, the Namibian based Chevauchee, the Tanzanian based Uhuru Initiative for Policy and Education (UIPE), the Kenyan based East African Policy Centre (EAPC), the Malawian based Center for Free Market Enterprise (CFME) and the Mozambican based Center for Mozambican and International Studies. The aim of this initiative was to engage the invited think tanks to investigate on the tax and investment climate in Africa, as well as reflect and propose solutions to the ongoing challenges. It was also an opportunity to involve the concerned African think tanks in monthly and bi-monthly conference calls, information sharing sessions, ITIC Africa programs as well as the upcoming Spring 2017 International Monetary Fund (IMF) and World Bank meetings.

It is believed that it is important to have pro-growth, taxpayer organizations like CACLiTA participate in such encounters, not only to share own country experiences, but to equally propose solutions to the robust tax atmosphere witnessed in countries in the Central African region especially Cameroon. It is hoped that participating in such meetings will advance CACLiTA’s pro-growth reform agendas in Cameroon and in the Central African region.

Chofor Che is contributor to Africanliberty.org and co-founder and Chair at the Central African Centre for Libertarian Thought and Action, (CACLiTA), Cameroon. He is also contributor and consultant with other initiatives like the Moroccan based LibreAfrique.org and the South African based, In On Africa. He has over 10 years of working experience with the government of Cameroon.

 
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Posted by on December 6, 2016 in Uncategorized

 

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The Grand Inga Dam Scheme: Dreams and Nightmares for the local communities in the Democratic Republic of Congo and Africa as a whole, 14 September 2016, by Augustin Nguh


Background
The Grand Inga is the world’s largest hydropower scheme and it is proposed on the Congo River in the Democratic Republic of Congo (DRC). It is a part of a greater vision by the international economic community to develop a power grid across Africa that will spur the continents industrial growth. It is a priority project for a number of African development organizations, including the New Partnership for Africa’s Development (NEPAD), the South African Development Community (SADC), East African Power Pool (EAPP), Africa’s largest power utility- ESKOM, among others. The Grand Inga could generate up to 40000 MW of electricity, over twice the power generation of the Three Gorges Dam in China, and more than a third of the total electricity that is being currently produced in Africa.

 
In design, the Grand Inga is very complex and consists of eleven dams and seven hydropower generation stations, of which the Inga 3 Basse Chute (Low Head), with a designed capacity of 4800 MW is the first phase. The sum of US$ 14 billion is held to be the estimated cost of constructing Inga 3. Of this sum, the World Bank approved a grant of US$ 73.1 million. This grant will finance the technical studies and legal work to prepare for the construction of the dam, which was expected to start in 2016 and take seven years http://www.worldbank.org/en/news/press-release/2014/03/20/world-bank-group-supports-drc-with-technical-assistance-for-preparation-of-inga-3-bc-hydropower-development . With the Grand Inga project supported by the international economic community and the government of the DRC, the following questions begs answers:: Why was the Grand Inga dam proposed? Will it be of any benefit to the local communities in the DRC? This article attempts to advance the reason for the project and provide a glimpse of the socio-economic situation of the DRC and issues the Grand Inga scheme will not address in the hope of providing some answers to the questions.


Why was the Project proposed?

With a price tag of over $80 billion, the Grand Inga dam was proposed to narrow the energy gap in Africa. It is common knowledge that Africa faces a huge infrastructure and energy gap which has contributed to the continent’s slow economic development and poverty http://www.barcelonagse.eu/tmp/pdf/ITFD10Africa.pdf . According to the World Bank’s claim, Africa’s infrastructure funding gap is $ 93 billion per year until 2020, and 40% of this is for power needs. A World Bank’s study, (“Infrastructure: A Time for Transformation”) conducted in 24 countries, estimates that the poor state of infrastructure in Sub-Saharan Africa cuts national economic growth by 2 percentage point every year and reduces business productivity by as much as 40 percent.http://www.infrastructureafrica.org/system/files/Africa%27s%20Infrastructure%20A%20Time%20for%20Transformation%20CHAPTER%201%20SPENDING%20NEEDS.pdf.

Surprisingly, Africa has a huge potential for all forms of energy. The DRC in particular, is endowed with immense natural resources, whose development has failed to lift the majority of its citizens out of abject poverty. Proponents of the Grand Inga project (mainly African governments and development organizations) argue that the Grand Inga scheme will provide cheaper and readily available energy and allow Africa’s industrial and manufacturing industry to take off. The World Bank, one of the funders of mega-dams around the world, argues that a new generation of mega-dams, such as the Grand Inga, could ‘catalyze very large benefits to improve access to infrastructure services’ in Africa. This view has been shared and promoted by Eskom ( the South African electricity provider) and NEPAD. In the words of a former top executive of Eskom, “Africa urgently needs energy to lift its people out of poverty and deliver sustainable development. The Congo River offers enormous possibilities for doing this.” While implying that the project will have a trickle-down effect to benefit the poor, he added that “ Hydroelectricity from the Congo could generate more than 40,000 MW enough to power Africa’s industrialization with the possibility of selling the surplus to southern Europe.” Theoretically, this may be true. In practice, however, account must be taken of the myriad of risks. These include technical challenges such as poor maintenance, metering and high transmission and distribution losses, as well as non-technical risks, including theft and corruption at all levels, associated with a project of this magnitude, and the unstable political situation of the country. All these challenges are evident in the Inga I and II dams.

In the years following independence, under the Mobutu regime, the Inga I (351 MW) (1972) and Inga II dam (1424 MW) (1982) were built, even though feasibility studies had found both projects uneconomical and in excess of the country’s electricity needs at that time. Neglect, financial mismanagement, years of war and siltation caused the Inga dam’s turbines and associated electrical infrastructure to deteriorate long before their expected lifespan. By 2002, the dams were producing only 40 % of their capacity. Within 10 years, poor maintenance, theft and the ravages of the tropical climate caused the transmission lines to deliver less than half the electricity it was designed to carry. http://www.internationalrivers.org/resources/congo%E2%80%99s-energy-divide-factsheet-3413

 

The Grand Inga Project vs. Local Communities.

According to a study conducted by Seraphine Wakana and Ernest Bamou of the African Development Bank and UNDP respectively, the DRC, in 2013, witnessed an economic growth with gross domestic product (GDP) of 8.1% (against 7.2% in 2012). This growth was driven by investments in the mining sector, improved agricultural productivity and infrastructure reconstruction. A rationalized macroeconomic policy and stable commodity prices has helped to contain inflation which in 2012, stood at 2.7%. The exchange rate has depreciated slightly (0.3%). Foreign exchange reserves at the Central bank has been increased thanks to proper co-ordination of monetary and fiscal policies and export earnings http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2014/PDF/CN_Long_EN/CongoRD_EN.pdf

Despite the recorded economic growth, the DRC still remains one of the poorest nations in Africa and the world, and ironically, one of the richest in terms of natural resources. These natural resources, if properly exploited, would uplift the country from poverty. Very little has been done to develop these resources for the benefit of the people and so extreme poverty still persists throughout the country despite ongoing macroeconomic growth. Most people who now generate income rely on informal trading. The country heavily relies on the outside world for technical capacity to develop its natural resources.

According to recent findings by the World Bank on the socio-economic situation in the DRC, poverty rates remains very high (despite witnessing a fall from 71% in 2005 to 63% in 2012) http://www.worldbank.org/en/country/drc/overview . On the 2014 Human Development Index, the DRC ranks the second lowest (186 out of 187 countries), and approximately 87.7 per cent of Congolese live on less than $1.25 a day http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/COD.pdf.

The labor market remains very small and real wages are not increasing. There is rampant malnutrition, leading to high infant mortality rates. Very little has been done to improve the quality of education in the country and many children remain far outside the education system. The government of the DRC with the financial support of multilateral development financiers embarking on a project as ambitious and grandiose, the impression one gets (given the current socio-economic situation of the country) is that local communities were not consulted and did not participate in the formulation of the project and therefore their needs and aspirations has been side-lined or disregarded. The feasibility study for Inga 3 was supposed to be published and presented to the public in Kinshasa in June 2012 but was only presented in September and to date, the full document remains confidential. This is in violation of the right for people to be consulted and to participate in development projects that directly or indirectly impact their lives and their right to decide their own development priorities, as recognized by international and regional human rights instruments, notably the African Charter which in its Article 22 states:
‘All peoples shall have the right to their economic, social and cultural development with due regard to their freedom and identity and in the equal enjoyment of the common heritage of mankind.’

 
Proponents of mega dam projects argue that such projects are a catalyst for development. Between 1998 and 2000, an unprecedented global process to review large dams and their development effectiveness took place. In its final report, the World Commission on Dams (WCD) acknowledged that “dams have made important contribution to human development, and benefits derived from them have been considerable…” However, they pointed out that “in too many cases an unacceptable and often unnecessary price has been paid to secure those benefits, especially in social and environmental terms, by people displaced, by communities downstream, by tax payers and by the natural environment”, when such projects are embarked upon.

The Grand Inga project has been heralded as the Holy Grail for electricity one which will light up Africa, spur the continent’s development and lift it out of poverty. On the contrary, this will not be the case. Close to 600 million people http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/COD.pdf in Sub-Saharan Africa live in a state of permanent power outage. This confirms the fact that Africa urgently needs energy to lift its people out of poverty and deliver sustainable development. However, embarking on a mega dam project (the Grand Inga) is not the best solution to Africa’s energy crisis. According to Rudo Sanyanga of International Rivers, an International NGO working against destructive riverside projects, the Grand Inga project will not benefit the poor or close the energy divide in the DRC and Africa as a whole. Of DR Congo’s 70 million people, only 9% have access to electricity- about 30% in urban areas and an alarming 1% in rural areas. In Kinshasa, the capital city, “there are over 10 million people and less than 30% have access to electricity in a country with so much potential to generate electricity. Connections are intermittent and less than 10% have electricity for 24 hours a day.” http://www.internationalrivers.org/blogs/266/will-congo%E2%80%99s-poor-benefit-from-world%E2%80%99s-largest-dam-project

According to a “Cooperation treaty” signed between the governments of South Africa and the DRC, South Africa is the principal purchaser of power that will be generated at Inga 3 power plant, the first phase of the Grand Inga http://www.southafrica.info/africa/grandinga-200513.htm . The country will purchase 2500 MW of the total 4800 MW from the proposed dam (Inga 3). The remainder will be sold to mining companies in Katanga, southeastern DRC and households in Kinshasa and surrounding regions. The 40000 MW that will be generated by the Grand Inga is meant for transportation through transmission lines to southern Europe and South Africa. This means a substantial portion of the tropical rainforest will have to be cleared, destroying rich biodiversity to make way for transmission lines. In addition, most of the transmission lines will pass over villages without electrifying them, therefore living villagers in darkness. In the words of a researcher with the Institute of Democracy, “Local power grids are not included in the budget. African communities living in darkness are not the intended beneficiaries of the Grand Inga and the 500 million people who have been promised electricity will remain in the dark. “

Besides living local communities in darkness, the Grand Inga dam scheme, it is held, will have severe environmental and social impact. Current designs of Inga 3 and subsequent Grand Inga will result in the diversion of the mighty Congo River. According to some environmental activities, this would create a reservoir that would flood the Bundi Valley (home to 30,000 villagers) displacing its inhabitants, affecting local agricultural lands and natural environment and may cause huge emissions of greenhouse gases that would contribute to global warming.

 
The assertion that the Grand Inga project will have a trickle-down benefit has also been held to be lacking in substance. According to Dr. Sanyanga, “the assumption being promoted is that by developing Grand Inga and exporting or supplying the mines, it will then create new jobs in the mining industry and it will trickle down to the community—but it has never worked.” When the Inga I and Inga II dams were built, the villagers on whose lands the dams were built were promised jobs, electricity and water. This never happened. Six communities were forcibly displaced without compensation and have never received any payment till date. This goes to confirm a 2004 report co-produced by International Rivers and the World Energy Council in which it is stated that:
“Investments in centralized, capital-intensive conventional energy enterprises such as (…) large dams largely benefit high and middle-income urban communities, commercial establishments and industries through electricity distributed through power grids. Poor, dispersed rural communities that are far from the grid rarely benefit from such investments.” Therefore, the Grand Inga project will have no trickle-down benefits to help local communities in the DRC and Africa in general fight against poverty. This in contravention of the peoples’ right to benefit sharing, arising from activities taking place on their land, especially in relation to natural resource exploitation.

Conclusion and recommendations

Since the turn of the century, new and traditional financiers have increased their funding for infrastructure projects especially in Africa, with China being the biggest provider of non-traditional finance for infrastructure on the basis of ‘resource for infrastructure’ or R4I http://www.barcelonagse.eu/tmp/pdf/ITFD10Africa.pdf. A report by International Rivers titled “Infrastructure for whom?” http://www.internationalrivers.org/files/attached-files/infrastructure_for_whom_report.pdf notes that Infrastructure has become a buzz word in current development debates. In November 2011, the Group of 20 (G-20), the World Bank and other multilateral development banks prepared new strategies for infrastructure development, with more emphasis on strategic regional infrastructure projects such as large dams and transport corridors. They proposed to make such projects attractive for private investment through public guarantees and other incentives. Centralized infrastructure projects with private participation (it is argued) improves the delivery of services and lowers the costs of services such as electricity http://www.ppiaf.org/sites/ppiaf.org/files/publication/Attracting_Investors_to_African_PPP.pdf. The Grand Inga dam scheme has been held to be illustrative of this approach. However, as seen from the preceding paragraphs, this ambitious project is a nightmare for local communities and environmental and human rights activities, given that is is plagued with environmental and social flaws that needs to be addressed, requiring extensive consultation and participation of the Congolese people. The negative impacts of mega dam projects has been well researched and document. However, the funders of this project seem not to have learned any lessons from the bad experiences of such projects. The following recommendations, if taken into consideration would be instrumental in closing the energy gap and advancing the country’s development:

Investing in decentralized power supply projects
There is not prosperity without infrastructure. However, infrastructure does not necessarily benefit the poor. Centralized projects have often had massive social impacts on local communities, but their benefits have largely bypassed the rural people, as will be the case with the Grand Inga. The Grand Inga is not a solution to uplift the DR Congo from its current socio-economic predicament. If the World Bank, African Development Bank and the government of the DR Congo truly wants to close its energy gap and spur the country’s development, then the US$80 billion and rising cost for the Grand Inga should be invested in decentralized power supply project. This includes small and medium scale hydro across the country as well as alternative energy sources such as solar energy. Peter Bosshard, Policy Director of International Rivers, holds that “Solar, wind and micro-hydropower are more effective in reducing energy poverty in Africa and do not suffer from cost and time overruns that are typical of large dams.” The DR Congo has a large potential for small and medium-sized hydropower projects, which are more effective at providing energy to the poor, have modest social and environmental footprint and can be built quickly. Small hydropower projects are already generating power in Eastern Congo. Very little has been done to develop other energy alternatives (Solar, wind, geothermal and biogas) in the country. In terms of solar energy potential, the DR Congo is in a very high level sun belt where values are between 3240 and 6000 watts-peak/m2/s. This makes installation of photovoltaic systems viable in most parts of the country (http://www.helio-international.org/VARRDC.En.pdf ).

Curbing corruption

The DRC has to thus revisit its anti corruption strategy especially with respect to hydroelectric projects such as the Grand Inga Dam hydroelectric project. Government officials commissioned to undergo compensations need to be well trained. There is equally a need for mixed commissions which include anti corruption experts, members of the companies carrying of the projects, representatives of the populations like Mayors and Parliamentarians and Senators. Such measures may go a long way to curb corruption.

Create an Enabling Environment for Private Sector Participation
Recently the energy sector of the DRC has witnessed the advent of new actors with the goal of providing cheap off-grid electricity to the people. Several companies have began redistributing solar products. However, the market for them is typically expensive. These companies usually supply sell their products in the cities whereas the real clients are in the rural areas. To address this situation, several companies have created non-governmental organisations (NGOS) to promote solar products in rural markets in order to avoid fiscal measures. It should be stated that the private sector is evolving in a difficult environment due to socio-political crisis that the DRC has been facing for the last 30 years, a situation which discourages private investors and public assistance in development. Registered companies that offer energy solutions to the population have not been able to develop adequately. The government should encourage and motivate the private sector to expand its activities , given that the investment required to promote off-grid lighting technologies in the informal sector is presently unavailable.

Successful Rehabilitation first

Rehabilitating Inga I and II as well as its transmission lines has been argued by some to be a good option for the government of the DRC to embark in order to close the energy gap and spur the country’s development. However, attempt at this option has not been successful. In 2003, the World Bank calculated that the DRC power grid including the dams and transmission lines could be rehabilitated for less than US$200 million and be completed by 2007. However, the Bank overlooked the extent of degradation of the dams, transmission line and other critical infrastructure in their assessment. Consequently, in 2007 the Bank approved a $297 million project to fully rehabilitate the dams. By 2011, very little has been done and additional cost overruns identified totaling to over US$ 1. 2 billion over the past ten years and the project is not close to being finished. http://www.internationalrivers.org/resources/congo%E2%80%99s-energy-divide-factsheet-3413 .
If the government of the DRC and the World Bank are so keen to developing Inga III and Grand Inga, a moratorium on promoting these dam developments should be adopted until there is evidence of development gains from current rehabilitation. This moratorium should be upheld until post-rehabilitation operation of the power grid has been evaluated and considered successful.

Further Reading
Augustin Nguh Corruption and Infrastructure mega projects in the DR Congo: A recipe for failure? International Rivers, 2013, available at http://www.internationalrivers.org/resources/corruption-and-infrastructure-megaprojects-in-the-dr-congo-8192

Chofor Che, The claws of corruption tear into Cameroon’s Memve’ele hydroelectric project, available at https://choforche.wordpress.com/2016/06/30/the-claws-of-corruption-tear-into-cameroons-memveele-hydroelectric-project-by-chofor-che-30-june-2016/

Foster, Vivien and Briceno-Garmendia, C Africa Infrastructure: A Time for Transformation Washington D.C: World Bank, 2010.

Nathaniet Green, Benjamin K. Sovacool and Kathleen Hancock (2015). Grand Designs: Assessing the African Energy Security Implications of the Grand Inga Dam. African Studies Review, 58, pp 133-158 doi:10.1017/asr.2015.7.

Rudo Sanyanga Will Congo’s Poor Benefit from World’s Largest Dam Project? Available on http://www.internationalrivers.org/blogs/266/will-congo%E2%80%99s-poor-benefit-from-world%E2%80%99s-largest-dam-project .
Terri Hathaway Grand Inga, Grand Illusions? World Rivers Review V20 N2 p. 6-7.

 
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Posted by on September 14, 2016 in Uncategorized

 

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Harnessing the remittance market for development in the Central African sub-region by Asanji Burnley Nguh, 19 June 2015


Remittances have been identified as the third pillar of development as their volume is second to Foreign Direct Investment and three times higher than Overseas Development Assistance and are steadier than both private debt and portfolio equity flows. Analytical studies have shown that remittances contribute to poverty reduction in home countries. Remittances are an essential source of external funds for developing countries.

Since 2001, the transfer of funds by Cameroonians abroad to their home country has considerably increased, as testified by the multiplicity of financial companies specialised in the transfer of funds in Cameroon. The multitude of these canals renders impossible the evaluation of the exact amount of these transfers. All the same, going by the 2009 World Bank report, we note an increase of the approximate amount transferred from abroad each year by Cameroonians for the period 2001 – 2008. These amounts, are estimated at US $ 11 million in 2000, to US $ 103 million in 2004 and US $ 167 million in 2008, representing 0,8% of the GDP in 2008.

According to a 2010 World Bank report, in the eight countries belonging to the Central African sub region, remittances do not exceed Official Development Aid (ODA) and are low compared to the other African sub regions. This is partly due to a lack of data reported for half of the countries the sub region. Out of the recorded remittances going to the remaining four countries (125.3 million Euros), Cameroun receives by far the biggest share (86%).

Recognising that remittances are, above all, private funds, but which also offer development possibilities for entire communities and countries, how then, do remittances impact development in Sub Saharan Africa especially in the Central African Sub region and how can remittance flow be enhanced?  This write-up also outlines barriers to remittance markets in the Central African sub-region as well as possible recommendations.

According to the World Bank 2011 Remittance Markets for Africa report, remittances can affect economic growth in a positive manner by raising consumption and investment expenditures. Remittances also increase expenditures on health, education, and nutrition that contribute to long-term productivity; and by improving the stability of consumption and output at both the household and macroeconomic level. These benefits in turn increase the supply of investment from both domestic and foreign sources by increasing financial intermediation, which can ultimately contribute to higher growth.

The 2011 report also brings out the fact that economies in which the financial system is underdeveloped such as those of the Central African Sub-region, remittances may alleviate liquidity and credit constraints and help finance small-business investments, thereby effectively acting as a substitute for financial development.

Consequently, remittances are also of great importance to countries for maintaining external-sector balance and macroeconomic stability. These are some of the reasons why remittances have been receiving increasingly the attention of politicians and analysts.

It is worth noting that despite the development implications, remittance markets in the Central African sub region remain plagued with many challenges.

The remittance market in the Central African sub region is plagued by regulatory bottle necks. Existing policies in a number of countries in the sub region create barriers for deployment of these flows for national gain. Regulations that restrict, limit or authorize institutions to carry out foreign currency transfers include those regulating foreign currency management and authorizing institutions to perform foreign currency transactions.

The decision to allow a particular institution to perform international money transfers is instrumental to expanding financial access for remittance senders and recipients. Countries with more restrictions on outbound payments often belong to monetary unions, such as the Central African Monetary Union (UMAC) or have legislation dating from
before 1998.

Whereof, these policies are there to increase remittances flows in the sub region they rather hamper its development and thus needs to be improved upon for better results, they are either not being implemented or improved upon due to some factors such as;

  • The non-implementation of a regulatory framework to reduce transfer cost in the different corridors;
  • Lack of inclusive finance;
  • Lack of support to investment motivations of the Diaspora amongst others.

The Central African sub region remittance market exhibits a low level of competition and has limited payout presence in rural areas. Going by an IFAD report (Sending money Home to Africa, 2009), 50 per cent of the banks in the Central African Sub-region countries pay remittances, but the percentage jumps to 100 per cent in countries like Angola where only banks are allowed to pay. This situation strongly discourages other actors from entering the remittance market.

Exclusivity arrangements severely limit competition and create barriers to entry. Most regulations in the Central African Sub-region permit only banks to pay remittances. In half of the countries of the Sub-region, they constitute over 50 percent of the businesses paying money transfers. About 41 percent of payments and 65 percent of all payout locations are serviced by banks in partnerships with Western Union and Money Gram.

More than 20 percent of the people within the reach of Microfinance Institutions (MFIs) receive remittances. Yet MFIs currently represent less than 3 per cent of remittance payers. In countries where MFIs do pay remittances they often operate as subagents of banks. This can be seen in the Central Africa Republic where they have an impregnation rate of about 20 percent.

High remittance costs represent an unnecessary burden on Central African migrants. In a 2011 World Bank report based on IMF survey, almost 70 percent of central banks in the Central African Sub-region cited high costs as the most important factor inhibiting the use of formal remittance channels.

According to data from the recently released World Bank Migration and Development Brief 23 Report of 2015, the cost of remitting to the Central African Sub-region remains above global levels (11.3 percent of sending the equivalent of US $200, versus the global average of 7.9 percent).

The lack of readily available data on the remittances markets in the Central African sub-region is another major difficulty. Most  states do not report data on remittance outflows or inflows to the IMF Balance of Payments Statistics, which is the main source for the internationally comparable dataset of the Migration and Remittances Factbook produced by the World Bank.

Also, most of the money sent home by migrants is unrecorded, and therefore does not enter many countries’ national statistics. Development planners increasingly stress the importance of tracking this money. That will help governments try to increase remittances as a source of development finance and better channel them into productive sectors. This makes it difficult to compute the impact of remittances on the development of the sub region.

In the light of these obstacles, the following can be advanced as possible recommendations that can enhance financial access in the Central African Sub-region.

Firstly, regulatory reform is central to leveraging the impact of remittances. There are a range of businesses that have the operational and financial capacity to conduct transfers, but that are not permitted to do so. When banks can perform transfers and MFIs can only act as sub-agents, both institutions suffer as they encounter barriers or lack incentives to enter the market.

Allowing more actors to perform money transfers will expand the reach beyond banks and foreign exchange bureaus, allowing greater competition among Remittances Service Providers (RSPs).

While there are eight banks on average in each Central African Sub-region country, the MFIs impregnation in these countries is about 6.5%, half of which are regulated, and at least three or four of which could compete as payers.

The Central African Sub-region countries have a very low number of payout locations less than 34%. Bringing MFIs and post offices into the market would double the number of payout locations.

According to the IFAD 2009 report cited above, 4 (Cameroon, Congo, Gabon, and Equatorial Guinea) out of the 8 countries of the Central African Sub-region do make use of the Post offices for Remittances payment. Gabon has a Post Office impregnation rate of 50 percent, while Congo has 28 percent.

It is also important that governments provide to MFIs equal market access. This may be done by ensuring basic benchmarks regarding their capacity to comply with the standard regulations on financial crime prevention, cash flow and liquidity to cover payments, technological innovation, trained staff, market presence and financial service cross-sale.

Policies should be designed to increase financial sector development. This may be done by encouraging greater competition among banks and by promoting alternative providers such as microfinance institutions, credit cooperatives, and postal savings. In this way banks are likely to have a beneficial impact on the market for remittances.

Improving competition is germane. In order to improve on limited competition, there is need to phase-out exclusivity agreements and contracts that prevent agents from forming partnerships with other providers or that block competitors from entering the market.

Governments in the sub region should encourage competition through foreign currency market promotion. Competition is enhanced through the dissemination of information and networking tools.

Increasing the role of post offices in remittances can be facilitated by several policy measures. Post offices can partner with destination-country post offices, banks, and money-transfer companies to extend existing domestic money-order facilities to international remittances. Better coordination among the various regulating entities should be promoted to ensure better consumer protection.

High remittance costs represent an unnecessary burden on the Central African migrants. Reducing remittance costs can lead to increases in the remittances sent by migrants, in turn increasing the resources available to recipient households.

The extended geographical coverage of domestic mobile money services and the growing number of customers with access to mobile money accounts may be encouraged in the Central African region. This may entail the need to extend money access points to include ATMs and mobile wallets as well as agents in many countries. The adoption of these innovative technologies is still nascent and will vastly improve access to both remittances and broader financial services, including low-cost savings and credit products, for the Central African migrants and remittance recipients.

Measures that would encourage the expansion of mobile phones to cross-border remittances include (a) harmonizing banking and telecommunications regulations to enable mainstream banks to participate in mobile money transfers and for telecommunications firms to offer micro deposit and savings accounts; (b) ensuring that mobile distribution networks are open to multiple international RSPs instead of becoming exclusive partnerships between an international money transfer operator (MTO) and country-based mobile money services.

Furthermore, Technological development will benefit financial access, including the adoption of new hardware, the development of software platforms, and the adaptation and integration of existing technologies. In the case of remittances, the key to technological development lies in strengthening payment networks.

Finally, as yet, relatively little is known about remittances to Central African Sub-region. The key to both informed policy decisions and private-sector interest is the availability of timely, accurate information.

As more information becomes available on a regular basis, governments, the private sector and the donor community are each better able to play their roles in maximizing the impact of remittances.

Conclusively, good governance and sound economic policy initiatives are also essential if the potential of remittances are to be enhanced in the Central African sub region.

Asanji Burnley is a diplomat by training from the International Relations Institute of Cameroon (IRIC). He is President and co-founder of the Cameroon based Central African Centre for Libertarian Thought and Action (CACLiTA).

 
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Posted by on June 19, 2015 in Uncategorized

 

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The African Union’s illusory quest for financial independence by Asanji Burnley and Chofor Che, published at Africanliberty.org , 15 February 2015


In an op-ed by Gulfnews.com dated the 1 of February 2015, African leaders teamed up in Addis Ababa the capital of Ethiopia in a bid to seek for solutions for an independent African Union (AU). After a two-day summit which took place at the AU’s headquarters ironically built by the Chinese, African leaders proposed new taxes on hotel stays and airline tickets in a bid to finance the AU. Analysts estimate that this move would raise about $730 million dollars a year. AU officials are also optimistic that an additional half-a-cent tax on SMS exchanges would bring in $1.6 billion. They are hoping to see the AU finance its projects and operations to the tune of 65 per cent by 2016. The AU has for long now depended on financial assistance from the West to accomplish missions on the continent, reason why this international body has been faced with a lot of criticisms. Though it is imperative for the AU to be financially independent, one begins to wonder if the right move to financial independence is by imposing heavy taxes on improvised African citizens.

Gulfnews.com opines that the AU was once seriously financed by assassinated Libyan leader Muammar Gaddafi, who was bent in making this institution an opponent to Western dominance. Presently, the AU which is made up of 54 member states gets only 28 per cent of its half-billion dollar operational budget from these members. 72 per cent of the AU’s operational budget is obtained from international donors especially from the European Union (EU), the World Bank, China, Turkey and the United States of America (USA).

Zimbabwean President, Robert Mugabe, notorious for his ‘tug of war’ with the West, and who is currently the AU’s chair observed that “Over 70 per cent of our budget is foreign funded. This is not sustainable,” This position was corroborated by Kenyan President Uhuru Kenyatta, who has also been involved in a brawl with the West after being charged by the International Criminal Court (ICC) for crimes against humanity. President Uhuru Kenyatta added that dependence on foreign financing was a “profound handicap and an impediment to the continent’s momentum”. According to Kenyan President, it is time for Africa to affirm “its independence and sovereignty more robustly”.

AU analysts argue that a financially viable AU would make this institution administratively and financially dependent. Major donors like Egypt and Libya would not have to chip in huge amounts of money for the running of AU projects and operations. Pan-African Youth Union (PYU) leader adds that the AU would thus be in a better position to make strategic and speedy decisions. He adds that “In case of emergencies like Ebola, we need to have the means to intervene quickly and without having to wait for foreign money. Money from donors always comes with strings attached.”

It is thus a laudable idea for African leaders to make the AU financially independent, but the truth is that such a plan remains an illusion for several reasons. Although African leaders have agreed to this ambitious plan, deducting these taxes is not a matter of right but voluntary. What most member states would do is to impose heavy taxes on visitors and citizens. Besides this worry not all member states will adhere to this new measure. For several years now several African states have not been able to furnish financial nor material support to the running and functioning of the AU reason why this institution has shamefully depended on foreign assistance.
Member states must seek for a holistic approach to making the AU financially viable. Charity begins at home so African states must speed up their industrialization process and infrastructure development to attract more businesses and thus more money. The private sector needs to be revamped in all African states which may would also reduce unemployment and boost African economies speedily. African states cannot continue to neglect the agricultural sector and focus more on the mineral sectors.

African governments have to also stop illicit financial flows which is really crippling African economies, despite the much talked about African renaissance. The money the continent loses can indeed make the AU financially independent rather than relying on foreign assistance and taxes.

Asanji Burnley is a Cameroonian diplomat by training and Masters Graduate from the International Relations Institute of Cameroon (IRIC). He is also co-founder of the Cameroon based Central African Centre for Libertarian Thought and Action (CACLiTA). In 2015 he was unanimously voted as President of this newly created think tank which advocates for limited government and free markets particularly in the central African region.

 
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Posted by on February 17, 2015 in Africa Development, African Union

 

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The African Union’s role in enhancing constitutionalism and the rule of law in Africa – by Chofor Che, published at Africanliberty.org, 28 Nov 2013


I was invited to a High Level Consultation, convened at the King Fahd Palace Hotel in Dakar from the 25 to the 27 of November 2013 by the Department of Political Affairs of the African Union (AU) in collaboration with the host country, Senegal, the United Nations Development Programme (UNDP), the World Bank and the African Governance Institute (AGI). Before this High Level Consultation holding in Senegal for the second time, the Youth Programme of the African Union had also organized at the same venue, a High Level Dialogue on Governance and Democracy on Africa. These Consultations coincided with the 50th Anniversary of the then Organization of African Unity (OAU) now the African Union (AU) and offered a unique opportunity to review the progress made in the area of Constitutionalism and the Rule of Law among Member States during this period. There was equally a need to reflect upon emerging challenges and prospects. It was hoped that the Consultations would also provide the AU and its strategic partners the opportunity to consider ways in which the AU could enhance Constitutionalism and the Rule of Law thereby improving its role on governance and democracy on the continent.

Constitutionalism is considered as the respect for the fundamental law empowering and limiting government. It is premised on well-defined concepts such as the need for an independent judiciary, the need for human rights, as well as the need for separation of powers between the executive, the judiciary and the legislative branches of government. On the other hand, the rule of law focuses on the need of the legal system to function effectively and efficiently, thus ensuring equality of all persons before the law.

Participants taking part in these consultations were expected to examine the socio political dynamics of constitution making and reforms processes in Africa, to share comparable experiences on reinforcing constitutional order and safeguarding the rule of law among African Member States. They were also expected to address the emerging phenomenon of popular uprisings and protests and their political and legal consequences on the principles of constitutionalism and rule of law in Africa. They were equally expected to assess the emerging trends, challenges and opportunities to strengthen constitutional order and rule of law in Africa and develop an agenda for promoting constitutionalism and the rule of law in Africa.

Two breakout sessions took place on the 26 of November 2013 during the African Union’s High Consultation on enhancing constitutionalism and the rule of law in Africa. The first breakout session focused on how African member states would accept and come to terms with the African Charter on Democracy, Elections and Governance. The second breakout session was on furnishing a roadmap for an African 2063 agenda in the area of strengthening constitutional order and rule of law as a key ingredient of continental integration and development. After these breakout sessions, I realized that in as much as the African Union had good intentions on enhancing constitutionalism and the rule in Africa, there was actually no concrete modus operandi on how this regional institution was going to achieve these dreams. I also realized that there was actually little harmony with the African Union’s agenda and the agenda of member states when it comes to enhancing constitutionalism and the rule of law in Africa.

Member states especially in the Central African region remain the most corrupt and undemocratic states in the World, despite the AU’s efforts in enhancing constitutionalism and the rule of law on the continent. States like the Central African Republic and part of the Democratic Republic of Congo (DRC) are still plagued by armed conflict. During the Dakar encounter several participants purported that most of the public and economic policy of Francophone Africa is still decided by France, reason why there has been no integration between these states, let alone Africa’s integration.

It is obvious that the AU has not adequately enhanced constitutionalism and the rule of law on the continent. How can the AU try to set an agenda for 2063 when immediate concerns like conflict in Central African Republic and the DRC have not been adequately addressed? How can the AU be trying to set an agenda for 2063 when member states especially in the Central African region have not domesticated the African Charter on Democracy, Elections and Governance?

In as much as the AU has been considered weak in enhancing constitutionalism and the rule of law in Africa, it will be suicidal if we only criticize this institution without suggesting ways by which we can all improve constitutionalism and the rule of law on the continent. In this regard, it is thus germane for African youth both at home and in the diaspora, women, university professors, research institutions, think tanks, religious and civil society organisations to all play a role in enhancing constitutionalism and the rule of law on the continent. It is also important for central governments on the continent to consider the regional and local tiers of government as important actors in enhancing constitutionalism and the rule of law on the continent for better service delivery. Of course central governments must welcome these actors as equal partners in the quest for meaningful constitutionalism and the rule of law in Africa.

 
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Posted by on December 3, 2013 in Africa Development

 

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Embracing territorial coaching for effective decentralisation and local economic development in Africa, by Chofor Che, 1 November 2013


Decentralisation has progressively gained importance in Africa since the 1990s. Whether by own choice or as a result of external pressures especially from the World Bank and the International Monetary Fund (IMF), a great majority of third world countries including the Republic of Cameroon are currently involved in some form of decentralisation, with varying degrees of commitment and success. Despite the commitment by states to the decentralisation process, several states have not yet embraced territorial coaching as part of the decentralisation drive. The much talked about principle of subsidiarity which warrants that a lower tier of government is allowed to carry out services at the grassroots autonomously, still remains an illusion in several African states. With a multitude of actors working to hasten the decentralisation process and improve local economic development like the World Bank, the African Development Bank, the African Union, United Cities and Local Governments of Africa (UCLG Africa), the All Ministerial Conference on Decentralisation and Local Development, the decentralisation process remains slow in Africa. Central governments and international actors seem to be focusing more on signing conventions and creating institutions rather than ensuring that the decentralisation process attains effective realisation. All the same, some African states especially states like Morocco are now ensuring that rural and/or urban actors work together to improve the living conditions of populations and provide solutions through development projects supported by the central government, associations, cooperatives, municipalities, agencies and non governmental organisations (NGOs).

Ownership and empowerment of regional and local government actors in the realisation of development projects has an impact on the development and performance of any territory. To meet this challenge, an innovative approach to intervention at regional and local government is essential through a process called territorial coaching. Apart from countries like Morocco and South Africa that have embraced the territorial coaching approach to local economic development, there is still a concern if other states in Africa are ready for territorial coaching.

Territorial coaching is an intervention process for the identification, support and enhancement of human potential of local actors by giving them ownership of local economic projects and empowering them so that they play an important role in local economic development. UCLG Africa initiated a program of coaching and support to the local authorities and their associations in the implementation of the decentralisation process in Morocco. This initiative has created collaborative ties among local authorities, representatives of the central government, civil society organisations, and private sector actors. The regional and local government areas in Morocco involved in this initiative are the city of Salé, the Commune of Beni Meskine (Settat), the Municipality of Wazzan, the Region of Meknes -Tafilalet Oasis and the South East (Bouanane). The Ministry of Interior of Morocco works with UCLG and some local associations by giving assistance and support to these communities via training, capacity building, skills development and the promotion of networking.

Judging from other country experiences in Africa, territorial coaching has not yet gained grounds. The decentralisation process in states like Cameroon, Congo, Central African Republic and Chad is still very top down driven. Central government actors still impose decisions on regional and local government actors rather than embracing the territorial coaching approach. Local and regional government actors in these states are not sufficiently empowered and they do not have true ownership of their projects.

It is thus vital for the UCLG in partnership with other regional organisations like the World Bank and the African Union to ensure that territorial coaching is embraced by more states in Africa. Although much still has to be done, the experience in Morocco is producing some good local economic development results. Other African states need to emulate the example of Morocco by ensuring that they embrace territorial coaching as an option in accelerating the decentralisation process in Africa. Local and regional actors need to be empowered so that they have true ownership of their development priorities. It is thus suggested that territorial coaching should be incorporated in management modules in training institutions which focus on training both elected and appointed municipal staff. It is also important that regions create a pool of territorial coaches which should include experts in public and local governance. These experts should be able to reach out and train municipal staff in time of need. These territorial coaches as well as elected and appointed staff of municipalities should equally be trained especially by centres of excellence like the envisaged African Academy for Local Authorities in Rabat Morocco which should begin operating in 2014. Empowerment also means ensuring that municipalities and regions have adequate finances to carry out their development projects. In ensuring that the decentralisation process in Africa is hastened, bringing out the best managerial potentials in local actors via territorial coaching, is germane, than signing declarations and agreements.

 
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Posted by on November 1, 2013 in Africa Development

 

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Africa: The poor showing on the World Economic Freedom ranking – by Chofor Che, Published at Africanliberty.org, 2 October 2013


Chofor CheThe World Economic Freedom report was released on Wednesday, the 18 of September 2013. According to Mark Allix in a publication in BusinessDay Live, the report collects data from the World Bank, International Monetary Fund (IMF) and the World Economic Forum (WEF), among other institutions, to come out with country rankings. The WEF report measured variables across five areas: the legal structure and security of property rights in the state; the freedom to trade globally, the size of a nation’s government; the regulation of credit, labour and business and the states access to “sound” money.

According to a report by the South African based, Free Market Foundation, South Africa is ranked 88th out of 152 nations and territories in the latest WEF report. Hong Kong again topped the rankings of 151 countries and territories, followed by Singapore, New Zealand, and Switzerland in the Fraser Institute’s annual Economic Freedom of the World report. The United States, once regarded as a bastion of economic freedom, now ranks 17th in the world. Zambia, Rwanda, Botswana, Kenya, Tunisia and Uganda are ranked above South Africa, while not one of the other BRICs (Brazil, Russia, India and China) states was ranked in the top 100 states with a good economic freedom record in the world.

South Africa, which had not long ago been praised for its stock exchange regulation and auditing and reporting standards, performed poorly with respect to the top quartile of economic freedom indicators in all five categories. The weakest category was connected to the size of South Africa’s government, especially the sub-categories of state consumption and state enterprises and investment.

This means that the South African government consumed a higher proportion of national economic output than the world standard, and had “relatively heavy involvement” in the production of, and investment in, some of that output. Most disturbingly, the report adds that South Africa has been deteriorating according to these ratings since 2000, as government “drains” resources from the more productive private sector.

Mark Allix of BusinessDay Live opines that it is a pity that South Africa was found to be below the global average score. The WEF in collaboration with other organisations had earlier on warned South Africa of its education and labour market inefficiencies. WEF had therefore predicted the country’s poor ranking. According to WEF, coupled with the state’s remaining capital controls, centralised collective bargaining and business regulation, South Africa is plagued by the threat of fixed pricing, the compounded effects of infrastructure deficits and poor policy implementation.

According to Azar Jammine a South African Chief economist and Director of Econometrix (Pty) Ltd, is of the view that the South African economy had long suffered from apartheid. There were some hopes after the apartheid era, but now these hopes seem to be dashing away, especially with the crisis that recently hit the mining sector.

Despite the doubts portrayed by many pessimists about the methods utilised by the WEF in coming up with such rankings, there remain some truism in reports like the WEF report. Most African states, including South Africa have not given the private sector the chance to excel in economic freedom. A critical analysis of the economic atmosphere of most African states show that the legal structure and security of property rights in the states remains poorly developed. There is equally a porous promotion of the freedom to global trade. Most of the sizes of the central governments in Africa are humongous necessitating the use of a great chunk of tax payer’s money to cover unwarranted expenses. The gross regulation of credit, labour and business also adds to Africa’s poor economic ranking in the WEF report.

It is obvious that people living in states with high levels of economic freedom have greater prosperity, more political and civil liberties, better health and longer lifespans. This is based on personal choice, voluntary exchange, freedom to compete, and the security of private property. If African states want to turn things around, then it is imperative that they rethink various policy strategies with respect to economic freedom and liberty.

 
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Posted by on October 4, 2013 in Africa Development

 

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