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Development financing: Africa’s Achilles heel to achieving the SGDs by 2030
Development financing: Africa’s Achilles heel to achieving the SGDs by 2030. © DR
Since the historic adoption of the Sustainable Development Goals (SGDs) in 2015 and in spite of the wide buy-in by governments worldwide, achieving the SDGs by 2030 continue to present serious challenges for Africa. According to a report by the Sustainable Development Goals Centre for Africa (SDG/A), after nearly a decade of implementation, the continent has made minimal progress in most of the 17 goals, if any at all. The only notable signs of progress were on SGD 5, 13 and 15 which deal with gender issues and climate change and whose assessment focuses more on the adoption of key policies and not so much on empirical results. The main culprit for this state of affairs is the insufficiency of funds to finance the implementation of the goals.
Indeed, the 2019 Financing for sustainable development report warns that “mobilizing sufficient financing remains a major challenge in implementing the 2030 Agenda for Sustainable Development”. According to the report, existing multilateral funding mechanisms are under huge strain, which leaves much of the goals underfunded with a growing risk of not being achieved by 2030.
The developing world, and Sub-Saharan Africa in particular, where most countries’ tax to GDP ratios falls below the 15% minimum required to be able to fund basic public services, are amongst the most exposed economies. In clearer terms, it is estimated that Africa needs an additional $500 billion to $1.2 trillion annual financing to meet its SDG targets. With the declining official development assistance (ODA) and other decreasing external sources of funding, experts agree that these amounts must be generated internally. The question is how?
The African Tax Administration Forum (ATAF), the continent’s main tax body, seems to be getting the formula right. Driven by the belief that strengthening tax systems in Africa could help generate the much needed revenues and put the continent back on track to achieving the SDGs by 2030, ATAF has developed a multi-dimensional approach to boosting tax revenues in Africa including tailored technical assistance programmes, training and capacity building workshops, knowledge generation and dissemination and multilateral diplomacy.
“We are 11 and a half years away from the SDGs deadline. Sadly, a good number of African countries still do not raise sufficient revenues to meet basic state functions. But this is not a death sentence. Large amounts of revenues can be unlocked by capacitating our tax administrations with the right skills, knowledge and expertise, and our Ministries of finance with the necessary data, sound policies and adequate regulatory and legislative frameworks”, says Logan Wort, the Executive Secretary of ATAF, speaking at the World Bank Group’s General Meetings last week. ATAF signed a Memorandum of Understanding with the World Bank on the side line of the Meetings precisely in order to strengthen the two organisations cooperation in building strong revenue administrations in Africa.
In its 10 years of existence, the organisation has been the continent’s champion on tax matters. To date, it has 20 on-going country programmes focusing on cross-border taxation, exchange of information, transfer pricing and VAT, amongst others. Such programmes have proven instrumental in generating over $300 million in additional tax revenues for ATAF members. New transfer pricing rules have been introduced in 12 countries, allowing them to increase their revenues from large taxpayers.
In addition to providing technical assistance, ATAF believes that building the necessary skills and capacity within tax administrations will have a more sustainable impact over a longer term. The organisation has therefore trained more over 15,422 tax officials and policymakers on tax audit, tax treaties analysis, compliance risk management and fraud detection, transfer pricing, revenue forecasting and analysis and many others.
As a home-grown initiative, ATAF presents the characteristics of a winning formula for overcoming the development financing challenges currently faced by the continent. If Africa is indeed to mobilise sufficient revenues to meet the SDGs by 2030, improving its tax systems represents one of the key areas to focus on. Having an already established body such as ATAF to provide the expertise required for this, is a definite plus.
Indeed, the 2019 Financing for sustainable development report warns that “mobilizing sufficient financing remains a major challenge in implementing the 2030 Agenda for Sustainable Development”. According to the report, existing multilateral funding mechanisms are under huge strain, which leaves much of the goals underfunded with a growing risk of not being achieved by 2030.
The developing world, and Sub-Saharan Africa in particular, where most countries’ tax to GDP ratios falls below the 15% minimum required to be able to fund basic public services, are amongst the most exposed economies. In clearer terms, it is estimated that Africa needs an additional $500 billion to $1.2 trillion annual financing to meet its SDG targets. With the declining official development assistance (ODA) and other decreasing external sources of funding, experts agree that these amounts must be generated internally. The question is how?
The African Tax Administration Forum (ATAF), the continent’s main tax body, seems to be getting the formula right. Driven by the belief that strengthening tax systems in Africa could help generate the much needed revenues and put the continent back on track to achieving the SDGs by 2030, ATAF has developed a multi-dimensional approach to boosting tax revenues in Africa including tailored technical assistance programmes, training and capacity building workshops, knowledge generation and dissemination and multilateral diplomacy.
“We are 11 and a half years away from the SDGs deadline. Sadly, a good number of African countries still do not raise sufficient revenues to meet basic state functions. But this is not a death sentence. Large amounts of revenues can be unlocked by capacitating our tax administrations with the right skills, knowledge and expertise, and our Ministries of finance with the necessary data, sound policies and adequate regulatory and legislative frameworks”, says Logan Wort, the Executive Secretary of ATAF, speaking at the World Bank Group’s General Meetings last week. ATAF signed a Memorandum of Understanding with the World Bank on the side line of the Meetings precisely in order to strengthen the two organisations cooperation in building strong revenue administrations in Africa.
In its 10 years of existence, the organisation has been the continent’s champion on tax matters. To date, it has 20 on-going country programmes focusing on cross-border taxation, exchange of information, transfer pricing and VAT, amongst others. Such programmes have proven instrumental in generating over $300 million in additional tax revenues for ATAF members. New transfer pricing rules have been introduced in 12 countries, allowing them to increase their revenues from large taxpayers.
In addition to providing technical assistance, ATAF believes that building the necessary skills and capacity within tax administrations will have a more sustainable impact over a longer term. The organisation has therefore trained more over 15,422 tax officials and policymakers on tax audit, tax treaties analysis, compliance risk management and fraud detection, transfer pricing, revenue forecasting and analysis and many others.
As a home-grown initiative, ATAF presents the characteristics of a winning formula for overcoming the development financing challenges currently faced by the continent. If Africa is indeed to mobilise sufficient revenues to meet the SDGs by 2030, improving its tax systems represents one of the key areas to focus on. Having an already established body such as ATAF to provide the expertise required for this, is a definite plus.
