Introduction
The African Union (AU) is a regional organisation established in 1963 to promote the political and economic integration of the African continent. Since its establishment, the AU has been developing various strategies to help the continent achieve its development goals and become stronger in the global economy. An important component of these strategies is the efforts to achieve financial sovereignty. Financial sovereignty refers to the capacity of a country or region to manage its economic policies and financial systems independently of external interference.
In line with its goal of achieving financial sovereignty, the African Union has focused on projects such as the establishment of the African Central Bank, the creation of the African Currency and the promotion of intra-continental trade. In addition, the fairer and more sustainable management of foreign investment and the strengthening of financial infrastructure in Africa are also important components of these efforts. These initiatives of the AU are aimed not only at enhancing economic independence, but also at the long-term development and prosperity of the continent and the institutionalised financial sovereignty and stability of the African Union.
It aims to comprehensively analyse the history, current status and potential future implications of the African Union's efforts to achieve financial sovereignty. In this context, the impact of the policies and practices developed by the AU on the economic independence of the African continent will be analysed in detail.
Reforms on Budget and Financial Stability
In 2016, African leaders recognised the urgency of a comprehensive reform of the African Union (AU). Rwandan President Paul Kagame's initiative aimed at realigning the AU's institutions in order to improve service delivery, increase operational efficiency, ensure sustainable financing and strengthen the organisation's connectivity with African citizens.
Since its implementation in 2018, some important steps have been taken. A new management team was created, new directors were appointed, the number of departments of the AU Commission was reduced, gender and regional representation at management level was strengthened, a merit-based recruitment system was introduced, and all departments underwent an audit and competency assessment.
Significant progress was made in establishing the AU Peace Fund, the main financing instrument for peace and security activities, launched in November 2018. Management structures are largely functional, but the independent evaluation group expected to be established this year has not yet been set up.
Supervision and competence assessment have not been sufficient to improve recruitment, diversity and representation of all Member States within the AU Commission. The moratorium on recruitment in 2018 led to an over-reliance on temporary employees and consultants, resulting in high staff turnover and performance problems. While most Commission staff passed the competence assessment, some countries raised concerns that the results were manipulated to ensure the exclusion of their nationals.
These suspicions complicated the working relations between the Commission and the Committee of Permanent Representatives responsible for day-to-day affairs on behalf of the AU Assembly and the Executive Council. The Commission has been accused of corruption and making illegal appointments to high-level posts at the expense of highly competent persons.
The adoption of the Commission's new structure in 2020 was challenging. In particular, the reduction in the number of departments from eight to six led to conflicts over the division of tasks.
While the merger of the two departments into the Political Affairs, Peace and Security department allowed for strengthening synergies, the lack of coordination, especially in the supervision of elections, and rivalry between the directors created problems. Furthermore, the placement of the AU's continent-wide early warning system in the "conflict management" category has hampered its ability to anticipate and prevent conflicts.
The Kagame-Faki Reforms: Key to the African Union's Political and Financial Sovereignty
In 2016, African leaders decided to undertake fundamental reforms, recognising that the African Union was struggling to realise its main objectives and in particular to implement Agenda 2063, the 50-year vision for Africa. African leaders appointed Rwandan President Paul Kagame to lead this process. Kagame established a Pan-African advisory team of 9 members to assist him in this process (Dougueli, 2021). It is no coincidence that Kagame was elected as the rotational chair of the African Union in January 2018.
This development points to the idea that the continental organisation is open to change. Kagame's economic, social and political development of his country in recent years is on the agenda of the whole continent. As a matter of fact, everyone expected such a leader to lead the Union. Kagame, who is known as a "reformer", had a great deal of freedom in fulfilling his duty due to the trust he had built up in the eyes of Africans. In addition, Kagame's tenure coincided with that of the President of the AU Commission, Moussa Faki, another key figure in the African Union and a co-architect of the ACSTA. These two figures led the continental organisation to its most important milestone since its transformation in 2002 (from OAU to AU).
In addition to the traditional annual conference of heads of state and government, the Kagame-Faki duo has introduced a second conference. This second conference will be closed within four walls and will take decisions on the fly. This would eliminate the time previously spent consulting the presidencies’ delegations. Most heads of state objected on the grounds that this was contrary to the African Union's Constitutive Constitution and that ministers and ambassadors should be consulted before taking important decisions. To make this new practice effective, Kagame amended the articles delaying decision-making in 2018. This method, which accelerates the decision-making process of the organisation, is among the best legacies left to the AU by Kagame.
One of Kagame's priorities was to ensure the financial independence of the union. Until 2017, 54% of the AU's annual budget of 596 million Euros was collected from external partners (Jeune Afrique, 2018). To address this, the Kagame-Faki duo proposed a 0.2% tax on total imports from the organisation's member states (Le Monde, 2018). In an interview in January 2021, Moussa Faki said that the 0.2% tax had already been adopted by half of the member states of the union and that more countries were expected to join by the end of the year.
Institutional reforms also center on two other important points: reducing the number of commissioners and allowing the AU Commission Chairperson to directly appoint commission members. In the first implementation, Kagame managed to reduce the number of commissioners from 8 to 6. This change was intended to speed up the commission's work and rationalise decisions. However, the second practice was not implemented at the expected level due to the reaction of member states who wanted to preserve their privileges. Accordingly, it is stated that "the Chairperson of the Commission shall not appoint Commissioners but shall distribute the role of the appointed Commissioners". These two practices will start with the new commission office to be established in 2021.
Williams Ruto:
Possible New Financial Champion of the African Union
Financing remains another major obstacle for the African Union (AU). Five years after the start of the process, the AU still faces chronic pre-reform budgetary problems, in particular low budget execution and unapproved expenditures. With more than 85 per cent of the AU's budget coming from external partners such as the European Union, over-reliance on external financing is a serious concern.
On the other hand, the contributions and disbursements of the Peace Fund remain insufficient despite the growing security challenges in parts of Africa. Moreover, many Member States are hesitant to honour their commitments. As of 31 October 2023, only 31 out of 55 Member States had paid 100% of their annual contributions, creating a deficit of $56.3 million. This reduces the ownership and financial autonomy of the AfB programmes.
At the AU summit in February, Kagame expressed frustration at the slow pace of reforms and criticised member states' resistance to real transformation. Handing over responsibility for the reforms he has championed from the outset to President William Ruto of Kenya offers Ruto the opportunity to consolidate existing gains and revitalise the reform process.
Ruto emphasised that the AU needed a real reform in order to achieve its priorities and that this reform would strengthen the organisation and provide financial autonomy. He also made it clear that the AU needed to be "repaired", stating that member states should partially relinquish their sovereignty in order to strengthen the AU Commission. Ruto can now act to bring about the change he advocates.
Kenya is well placed for this role: It is one of the six main contributors to the AU's regular budget, contributing about $7.2 million annually. In geopolitical terms, Ruto is recognised as a leading African voice on the global climate agenda and the reform of multilateral financial and political institutions. The new leader must put pressure on states resisting change and encourage them to honour their commitments, while at the same time addressing sensitive issues such as increasing the powers of the AU Commission.
The effectiveness of the AU will depend on a strong and adequately capacitated Commission and consistent implementation of decisions. Ruto should consult with Member States, the Commission and the AU's partners and strengthen relations between the Committee of Permanent Representatives and the Commission.
Achieving fiscal autonomy is vital. The involvement of African private sector leaders can revitalise the AU and ensure the successful roll-out of priority reforms.
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