Tax reform, digitisation key to financing development
This year’s Economic Report on Africa, a flagship publication of the United Nations Economic Commission for Africa (ECA) focuses on fiscal policy
African countries continue to search for policy mixes to help accelerate the achievement of the SDGs
Africa must digitise its economies, broaden its tax base, prevent further deterioration of fiscal and debt positions, and aim for double-digit growth to achieve the UN 2030 global goals (SDGs), and the AU Agenda 2063 according to the 2019 Economic Report on Africa released today at the Conference of Ministers.
This year’s Economic Report on Africa, a flagship publication of the United Nations Economic Commission for Africa (ECA) (www.UNECA.org) focuses on fiscal policy. Government revenues account for 21.4%, insufficient to meet countries’ development financing needs.
“The Report identifies several quick wins in Africa’s pursuit of additional fiscal space to finance its accelerated development,” Vera Songwe, the ECA’s Executive Secretary stated at the launch. “[It also] focuses on the instrumental role of fiscal policy in crowding-in investment and creating adequate fiscal space for social policy, including supporting women and youth-led small and medium enterprises.”
But, a decade away from the SDG, she added that “African countries continue to search for policy mixes to help accelerate the achievement of the SDGs. However, for many countries, financing remains the biggest bottleneck with implementing capacity a close second.”
While analysing and highlighting both challenges and opportunities, the Report also recommends comprehensive macroeconomic reforms aimed at building financial resilience, placing emphasis on the need for Africa to accelerate growth to double digits by 2030 and to boost investment from its current 25 per cent of GDP.
While economic growth in Africa remained moderate at 3.2 per cent in 2018 – due to “solid global growth, a moderate increase in commodity prices and favourable domestic conditions”, the Report emphasises that Africa needs to to do more, and work towards achieving a fine balance between raising revenue and incentivizing investments, in order to boost growth.
In some of Africa’s largest economies—South Africa, Angola and Nigeria – the Report reveals, growth trended upwards but remains vulnerable to shifts in commodity prices. East Africa remains the fastest growing, at 6.1 per cent in 2017 and 6.2 per cent in 2018, while in West Africa, the economy expanded by 3.2 per cent in 2018, up from 2.4 per cent in 2017. Central, North and Southern Africa’s economies grew at a slower pace in 2018 compared to 2017.
On the issue of Africa’s debt burden, the Report reveals that debt levels remained high as African countries increased their borrowing, to ease fiscal pressures most of which have been precipitated by the narrowing of revenue streams that has gone on since the commodity price shocks of 2014.
It argues that African countries can increase government revenue by 12–20 per cent of GDP by adopting a policy framework that strengthen revenue mobilisation, including through digitalising African economies stating that digitization could enhance revenue mobilization by up to 6 per cent.
“Digital identification can broaden the tax base by making it easier to identify and track taxpayers and helping taxpayers meet their tax obligations. By improving tax assessments and administration, it enhances the government’s capacity to mobilize additional resources. Digital ID systems yield gains in efficiency and convenience that could result in savings to taxpayers and government of up to $50 billion a year by 2020.”
Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).
About Economic Commission for Africa (ECA):
Established by the Economic and Social Council (ECOSOC) of the United Nations (UN) in 1958 as one of the UN’s five regional commissions, ECA’s (www.UNECA.org) mandate is to promote the economic and social development of its member States, foster intraregional integration, and promote international cooperation for Africa’s development. ECA also provides technical advisory services to African governments, intergovernmental organizations and institutions. In addition, it formulates and promotes development assistance programs and acts as the executing agency for relevant operational projects. Made up of 54 member States, and playing a dual role as a regional arm of the UN and as a key component of the African institutional landscape, ECA is well positioned to make unique contributions to address the continent’s developmental challenges. The ECA is headquartered in Addis Ababa, Ethiopia with offices in Rabat, Lusaka, Kigali, Niamey, Yaoundé and Dakar.
About the Conference of Ministers:
The 52nd session of the Conference of African Ministers of Finance, Planning and Economic Development (www.UNECA.org/CFM2019) is taking place the Palmeraie Golf Palace in Marrakech, Morocco. The Committee of Experts will commence on Wednesday, 20 March and end on Friday, 22 March 2019. The ministerial segment of the Conference of Ministers will take place on Monday, 25 and Tuesday, 26 March 2019. The twentieth session of the Regional Coordination Mechanism for Africa (RCMAfrica) and side events will take place on Saturday, 23 and Sunday, 24 March 2019 at the same venue.