SOUTH AFRICA: UN says Africa must rely on self-funding

Africa will only be able to determine its development priorities if it uses its own finances to fund them, according to the United nations Conference on Trade and Development ( UNCTAD) report. Better use of local savings and more productive investments, along with better governance, would provide African leaders with the financial independence needed to drive their countries genuine priorities, rather than pay lip-service to economic principles, said Sam Gayi, the top official at the UN's Trade and Development body, UNCTAD. "For developmental states to be succesful we have identified a variety of issues, the prime of which, the most urgent one being being reducing depency on external funding and off course having the policies base for countries to be able to craft their development policies to reflect their genuine priorities." The UN identified better domestic tax collection as crucial to attempts to improve financing. High costs linked to collecting taxes in rural areas and Africa's huge informal economy make tax collection on the continent particularly difficult. Corruption makes things worse. "Taxable capacity in Africa tends to be highly concentrated in a small number of people and firms that can often evade taxes by using their power and influence," the report said. Tax collection rates are generally higher in North Africa than in the sub-Saharan region. Gayi, however sounded an optimistic note on major steps towards better run economies, by several African countries. "Most countries, in fact apart from two or three contries, most countries, now have very low inflation rates around 10% or below, and physical defecits are also very very low, and in terms of trade openness, African economies are some of the most open in the world. So we don't think that, you know, macro-economic stability and trade openness appear as binding constraints on Africas growth at the moment." added Dr Sam Gayi. The report said African countries stood to benefit hugely from from their diaspora communities, noting successful efforts by Ethiopia, Rwanda and Ghana to attract funds from abroad into investment projects. Africans from the diaspora remit 14 to 17 billion US dollars a year and emittances from Africans working abroad are the main source of foreign currency in many African countries, where they surpass development aid flows and foreign direct investment. The potential for growth in emittances, however, is restricted on the continent by high transfer fees. It is essential, according to Gayi, that African countries harness this wasted potential, because as he explained "he who pays the piper controls the tune."

ITN Source | September 27, 2007

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