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(26/05/10) African Economic Outlook
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© EC Stefano Manservisi, Director General of DG Development, the European Commission |
The 2010 edition of the African Economic Outlook was launched on the 24/05/2010 in Abidjan, at the Annual Meeting of the Boards of Governors of the African Development Bank Group. The special focus this year is on "Domestic resource mobilization, fiscal governance and aid in Africa".
The African Economic Outlook is the only report on Africa produced by African institutions, in partnership with international organizations (OECD, AfDB, UNECA, financed partially by the EU – 1/3 of the financial contributions).
The report analyses the current socio-economic performance of African economies per countries on their short to medium term perspectives. This edition increased the country coverage to 50 African states, accounting for more than 99% of the continent's economic output and 97% of African population.
The report broadens the knowledge base on African economies and supports policymaking,, investment decisions and donors' interventions. A special focus is chosen each year with relevance to African development: water (2006), transport and sanitation (2007), technical and vocational skills (2008), ICT (2009), domestic resource mobilization and fiscal governance (2010).
| "Tax systems are not only crucial to generate revenues: a broad and fair tax system also contributes to improved accountability of the government to its citizens". Stefano Manservisi, Director General of DG Development, the European Commission |
Africa proved to be more resilient to the global crisis than some observers had feared thanks to prudent macro policies prior to the downturn that resulted in improved economic fundamentals in many African countries. The AEO finds that the global crisis brought a period of relatively high economic growth in Africa to a sudden end: Africa’s GDP growth was slashed from an average of about 6% in 2006-2008 to 2.5% in 2009. Given the pace of population growth this means that growth of per capita GDP came to a near standstill. Average growth is expected to rebound to 4.5% in 2010 and 5.2% in 2011, although the recession will leave its mark.
The theme of this year AEO is related to the Communication on "Tax and development – cooperating with developing countries on promoting good governance in tax matters", adopted by the European Commission in April 2010. In its cooperation with developing countries, European Commission will take into account the central role taxes can have on several central issues such as good governance, redistribution of wealth and economic growth.
Taxation and development
The 2010 AEO includes a special study on Public Resource Mobilisation—or taxation— one means for African governments to become less dependent on aid in the long run, to the benefit of recipients and donors. There are very large differences in the tax raising performance of individual countries.
Annual taxes per capita ranged in 2008 from between USD 20 to 40 in Burundi, Guinea-Bissau, Congo Dem. Rep., Sierra Leone and Ethiopia, to USD 4 866 in Equatorial Guinea, and USD 11 725 in Libya. In fact, tax effort estimates confirm that some countries collect as little as half of what would be expected, given their living standards and economic structures, while others collect two to three times what is expected. In particular, resource-rich countries have made little effort to broaden their tax base. By contrast Kenya, Morocco, Ghana and Cape Verde have shown that it is possible to collect taxes effectively from diversified sources.
Strategies towards more effective, efficient, and fair taxation in Africa typically lie with broadening the existing tax base. Policy options include cracking down on fraud and evasion, removing tax preferences, particularly for large corporations and traders, dealing with abuses of transfer pricing techniques by multinationals and taxing extractive industries more fairly and more transparently.
