The African Union has been facing challenges of how to continue to finance its annual programmes because of financial shortfalls, despite the growing contributions of member states to the organisation.
A political advisor to the AU, Solomon Ayele Dersso, said financing had been characterized by unpredictability, leading to risks of defaulting on financial obligations.
In 2016, heads of state and governments of the continent passed a decision that all African Union member states were to implement a 0.2% levy on eligible imports to finance the Union.
The purpose of the decision was to provide reliable and predictable funding for continental peace and security though the peace fund: to provide an equitable and predictable source of financing for the Union: reduce dependency on partner funds for implementation of continental development and integration programmes: and relieve the pressure on national treasuries with respect to meeting national obligations for payment of assessed contributions of the Union.
Apart from financial help from the European Union and United Nations, the continental body was dependent on financial support from its top five contributing member states, namely Libya, Nigeria, South Africa, Egypt and Algeria.
“Failure or delay in contributions by at least one of the five member states caused major financial crisis as it was witnessed in 2011/12 during the Libyan crises” Solomon said, stressing that the crisis could be even worse when all the five states were late with their contributions.
According to the advisor, the AU has been facing financing challenges also due to lack of planning, and the system of financial management which he said has to do with the administration of the Union.
Ineffectiveness on the offer side and lack of an accountability mechanism have negatively affected AU’s financing, and followed implementation of the sanction of regimes which he said proved to be effective and absolute.
In 2013, former Nigerian President, Olusegun Obasanjo, had proposed an alternative source of funding the AU, which required member states to levy $10 tax on air transport, and $2 on hotel accommodation. The proposal, however, did not work for unspecified reasons.
The 0.2% levy on eligible imports to finance the Union was referred to as the most promising one in setting up the best alternative sources of funding to the Union, even though it had not hit the ground yet.
Out of the $400 million peace fund which was supposed to be collected from member states, $89 million was secured from 49 member states by the end of last month.
The AU peace fund finances the AU’s peace and security operations and according to the advisor, the contributions for the peace fund ranges from $350 thousand to $35 million.
The advisor said the AU will introduce what is a new scale of assessment from 2020-2022, during which all member states will begin to contribute not less than their capacity to pay.