Despite fiscal reforms that raised revenue to GDP ratios averaging above 15% per cent between 2000 and 2017, there remains a significant financing gap to bridge, if Africa is to realise its Agenda 2063 ideals, or to meet the deadline for the 2030 Agenda for Global Goals. Digilitalising African economies will be key. From Marrakech, reGina Jane Jere reports.
The 2019 Conference of Ministers (COM2019) met in Marrakech 20 -26 March, and examined solutions focusing on the theme “Fiscal policy, trade and the private sector in the digital era: A strategy for Africa”.
For the Executive Secretary of the ECA Vera Songwe the urgency, “to put the right fiscal policies in place, cannot be overstated”, and digitalisation of African economies, to finance and bridge the development finance deficit holds the key.
Africa can improve revenue collection, from 11 to 20% of GDP, just by better fiscal policies, better tax collection, stopping illicit financial flows
“One of the big conversations that we have on the continent is the need for [budget] financing. And the question is why Africa always needs to, and goes outside to raise this money. This week, as part of our focus, we will be looking at how countries that have had good policies, good governance and good public administration, have actually raised revenues – and even without necessarily taxing particularly the less well off.,” she told us in interview just before the official start of the conference, that brought together at least 38 African Finance Ministers or their representatives.
She says: “One of those countries for example is here in Morocco were the tax ratio to GDP is already at 25% . We also have countries like Rwanda that have used better digitalisation to improve revenues by 6%, and South Africa, which has used digital technology to improve collections by 22%.”
“The big message we are sending out is that Africa can improve revenue collection, from 11 to 20% of GDP, just by better fiscal policies, better tax collection, stopping illicit financial flows and by using digital technology to enhance revenue collection. And we know how to do that. We also know that the problem of how we raise, and where we get the financing, lies with us. Our leadership can make the decision to actually address a substantial part of the problem,” she added:
Songwe also believes that the youth and women are a key demographic in maximising the potential of digital technology for better economic performance:
“We know that Africa is a hub of innovation, a hub of excitement, a hub of activity. There are youths that are developing Apps that are being put to use both in the private and public sectors… At this conference we will be asking and discussing how we can harmonise these platforms, so that if a youth in Tunisia or Zimbabwe has a good idea, we should ensure it be replicated or be used across the continent. For example we have Mpesa in Kenya, why is it not being used across the continent? I believe that the conversation around the Continental Free Trade Area should allow for these kinds of innovations to penetrate like wild fire across the continent.”
She also commended the COM2019 host country, Morocco on how it is “getting a few things right” and could set examples for other countries including in the use of digital technology, more so how it has used it to advance its its agricultural sector.
“Morocco is getting a few things right. Like many African countries, Morocco still depends a lot on its agricultural sector for growth. But what Morocco has succeeded in doing is mechanise the agricultural sector, by using more innovation, improving agricultural technology… Of course Morocco is the largest producer fertilizer in Africa, so they may have a natural advantage, but it is one thing to have an advantage, but another thing to use it well. What Morocco has succeeded in doing is creating sophisticated fertiliser, which is attuned to different weather and crop patterns.”
We do things quickly because we are behind. We are late. We are growing at 3%, we should be growing at 10%.
The other thing Morocco has done well, she continued, is building a skills sector. It changed its education system to develop skills that are more attuned to the digital age.
“But Morocco has also succeeded in creating a good business environment. When you have a good business environment, investments come, and therefore they are able to attract the Volkswagens of the world and other big enterprises, and that also creates jobs, which allow for technology transfer. And the private sector itself allows you to innovate and create hubs and clusters around it. That is what we should be doing across Africa in the digital era.”
Placing more emphasis on the importance of the COM2019 she contends: The beauty with digital is that you can leapfrog and do so quickly. Africa can do so even faster. Therefore, what is exciting and important about our conversations this weekend is how we can, and should we do things quickly because we are behind. We are late. We are growing at 3%, we should be growing at 10%.”