The 2nd African Union Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration will be held at the African Union Commission (AUC) Headquarters in Addis Ababa, Ethiopia, from 12-17 April 2018, with the Ministerial component taking place from 15-17 April 2018.

In recognition of the negative impact of corruption and Illicit Financial Flows on the development of African countries, the African Union has dedicated the year 2018 to the fight against corruption. Under the theme, “Winning the Fight against Corruption: A sustainable path for Africa’s Transformation”, AU Heads of State and Government are resolute in their willingness to fight corruption on the continent.

In the same spirit, this year’s STC will discuss the theme “Mobilisation of domestic resources: fighting against corruption and Illicit Financial Flows”. The meeting will be divided into three sections: (1) Independent Experts’ Meeting; (2) Meeting of Experts from the Ministries of Finance, Economic Planning and Integration; and (3) Ministerial and Central Bank Governors Meeting.

The Independent Experts’ Meeting (9-10 April) will provide a forum for independent experts from Africa and beyond to articulate challenges and propose solutions concerning three thematic areas: domestic resource mobilization, the fight against corruption and the fight against illicit financial flows (IFFs).

Theme and sub-themes

Since the transformation of the Organisation of African Unity (OAU) to the African Union (AU) in 2002, African leaders have emphasized the importance of mobilising domestic savings for financing the development of the continent. In recognition of the massive resources that would be required to fund the new agenda of the AU aimed at dealing with the socio-economic and political challenges facing the continent, the Heads of State and Government of the OAU, at their Summit in Lusaka, Zambia, in 2001, requested the Secretariat to undertake studies on Alternative Sources of Financing the AU.

Several proposals were made on options to finance the Union, including a 0.2 percent levy on imports originating from outside the continent, which was adopted by Heads of State and Government in 2015. The levy is expected to collect substantial resources for the African Union, with the aim that the AU Member States will gradually cover 100 percent of the operational budget, 75 percent of the programme budget, and 25 percent of the peace and security operations by the year 2020.

The need for domestic resources mobilisation has become even more critical due to the increasing developmental requirements of the continent, including Agenda 2063 and the United Nations Sustainable Development Goals. In 2015, the African Union Assembly of Heads of State and Government adopted Agenda 2063, which outlined the continent’s aims for its socio-economic transformation over the succeeding 50 years. This document expresses many of the same aims as the SDGs, to which African countries also agreed in 2015.

As outlined in these two frameworks, one of the main methods that Africa has decided to use to finance its development is through increased mobilization and use of domestic resources. It is widely accepted that the realisation of the goals spelt out in the two development Agendas, will depend on the ability of the continent to mobilise the substantial financial resources required for their implementation.

Over the past two decades, African countries have experienced positive growth rates due to improved macroeconomic fundamentals and increased resilience to external shocks. The growth was driven by sound macroeconomic policy and improved public resource management overall. Corruption is threatening to erode the gains made in Africa over the years. In addition to the negative effects corruption has on African economies, it undermines good governance, distorts public policy and erodes development and economic growth.

Illicit financial flows, on the other hand, continuously drain the resources that are required for Africa’s development. It is estimated that Africa loses up to US$50 billion annually through illicit financial flows mainly through tax evasion, mispricing of trade of goods and services by multi-national companies. It is important for African countries to continue fighting against illicit financial flows through strengthening legal and regulatory regimes, fighting corruption, building capacity for contract negotiation, tax administration and identifying and returning the resources lost through illicit financial flows. In this regard, the recommendations of the High Level Panel on Illicit Financial Flows should be implemented.

The STC will discuss the theme under the following sub-themes:

1. Illicit financial flows, a hamper to the effectiveness of the AfCFTA;

2. Corruption and illicit financial flows accentuating inequality and poverty;

3. Mobilization of domestic resources in order to meet the needs of development and ensure the independence of the Continent; and

4. Fight against money laundering, tax evasion, corruption and repatriation of stolen and illegally acquired assets.

This will be the 2nd STC on Finance and Monetary Affairs, Economic Planning and Integration solely organized by the African Union with the full support of its Member States. It will provide an opportunity to deliberate on items on the agenda and propose recommendations for approval by the African Union Summit in June/July 2018. The independent experts’ meeting will make proposals for consideration and deliberation by the Senior Officials’ meeting.

Background

The First STC was held in October 2017 in Addis Ababa, Ethiopia, under the theme “Growth, employment and inequality”. The STC highlighted corruption as one of the setbacks to sustainable inclusive economic growth. The meeting noted that corruption discourages investors and increases inequalities. In this regard, efforts have to be directed toward considering the correct mix of policies, auditing national laws and enacting laws in line with the changing global context.

In addition, the meeting underscored the need to address Illicit Financial Flows (IFFs). To achieve this, it was noted that there was need for improved governance and accountability for reducing the financial haemorrhage of illicit financial flows through the fight against corruption. Overall, the meeting concluded that financing Africa’s development requires a comprehensive approach that harnesses the potential of domestic resources mobilization.