Rwanda negotiates modalities for contributing funds to ECCAS
Rwanda is in the process of negotiating with Economic Community of Central African States (ECCAS) an agreeable mode of contribution of membership funds to meet cost of operations and establishment of the body’s free trade area.
During a meeting of the Ministers for Trade and Finance affairs in Kinshasa, DR Congo, in May, a special tariff was established to be imposed on imports by member states for products originating outside the region.
The levy’s proceeds are earmarked as contributions to meet the body’s operating costs as well as compensate potential revenue loss resulting from the liberalisation of tariffs within the ECCAS’s free trade area.
The body fixed a 0.4 cent levy on all imports from outside the region.
The Minister for Trade and Industry, Francois Kanimba, said the ECCAS Heads of State had directed that 50 per cent of the proceeds be used for compensation of potential revenue losses resulting from the liberalisation of tariffs within the ECCAS free trade area which will be operationsalised beginning January 2017.
“Some countries get revenue from custom duties from trade with other countries within the bloc, there is a potential revenue loss. The bloc has put in place measures to establish a compensation mechanism to ensure success of the initiative,” he said.
The other 50 per cent is earmarked as countries’ contribution to fund the operating cost of the regional bloc.
However, Rwanda is negotiating to be left out of the import levy model citing other commitments with the import levy model.
According to Kanimba, Rwanda, as part of the East African Community, is subject to a similar import levy arrangement of 1.4 per cent whereby proceeds are earmarked for joint infrastructure projects.
Rwanda also committed to another import levy under the African Union, which was unanimously agreed upon in July.
During the African Union summit in Kigali, a new formula was agreed upon whereby countries’ contributions will be increased through a 0.2 per cent levy on eligible imports through which they expect to raise about $1.2 billion every year.
Beginning next year, the levy will be collected by tax collection authorities of African countries and channelled through central banks of member states.
Kanimba said these import levies being decided by different organs of regional bodies of integration pose a challenge, hence Rwanda’s request to make its contribution using a different model.
Kanimba said the Ministry of Finance and Economic Planning, and that of Trade and Industry had presented Rwanda’s case, proposing that the country makes contributions by budget line whereby funds will be sent from the Treasury.
“We can agree with the body on our contribution which will be by budget line instead of earmarking specialised revenue as it has been decided. That is our position. We will take part in the Council of Ministers in January when we are expected to explain our position to our counterparts to see if there will be a possibility to reformulate the decision,” Kanimba said.
The two ministries are expected to make their case in the next Council of Ministers scheduled for January.
According to officials from ECCAS, the import levy model would raised about $192 million if all countries met their commitments.
Jules Touka, a macro-economist expert of the bloc, said, presently, the import bill for ECCAS member states is estimated at about $50b.
“The base for the collection of the 0.4 levy is $48.5 billion, which brings the proceeds to $192 million,” he said.
Chantal Marie Mfoula, the ECCAS secretary-general, called on member states to present a list of products that they will export to fellow member states on the launch of the free trade area.
Although Rwanda is yet to present its list of products, Kanimba said that previous trade missions have shown that there is a potential market for agricultural products in most Central African countries considering that at the moment most of them import from countries outside the bloc, including Europe.
He said they were also going to carry out public awareness campaigns among members of the private sector to ensure more of them take advantage of the opportunity.
Rwanda was readmitted to the 11-member state bloc last year with the government saying that it would enable the country to access duty-free access to new markets, especially among central African countries.
Rwanda was one of the founding members of the bloc that now brings together Angola, Burundi, Cameroon, Central African Republic, Congo, DR Congo, Gabon, Equatorial Guinea, Chad, and Sao Tome & Principe, in 1983.
Other than ECCAS, Rwanda is a member of the East African Community, the Common Market for Eastern and Southern Africa, and the Economic Community of the Great Lakes Countries.