Collaborations on Tax and the Financial Sector Within the Continent

The African Union Commission (AUC) and the African Tax Administration Forum (ATAF) have extended their cooperation by officially signing a MoU, which is aimed at amplifying the continent’s voice on global tax engagements. The signing of the MoU marks a significant step in strengthening the cooperation on tax policy and improving tax administration – all aimed at mobilising domestic resources in Africa and achieving Agenda 2063. In addition, the 2 organisations will also work on rolling out the work plans of strategies to combat illicit financial flows (IFFs) and bringing the African voice on tax matters to global discussions.

The UN Economic Commission for Africa (ECA) last year created the Africa High-level Working Group on Global Financial Architecture as a forum to develop reform proposals for the global financial architecture as well as to unify the African voice on the global stage. The background to that was that since 2020, Africa has been hit by a series of shocks that has stalled progress on the Sustainable Development Goals (SDGs), threatening to lead to a lost decade for the continent, rather than one of action. 62m Africans were pushed into poverty in just one year due to COVID, with an additional 18m estimated to have fallen into poverty by the end of 2022. Economies have been hit hard and many African countries are burdened with elevated levels of debt and insufficient fiscal space to make essential investments in critical infrastructure projects, education, and healthcare. Africa needs an extra $1.6tn by 2030 (or $194bn annually) to achieve its Sustainable Development Goals (SDGs).

To attract more and better investment and fill that gap, African governments and their partners must improve information to investors, increase the capacity of African development finance institutions, and boost regional projects, according to the 2023 edition of Africa’s Development Dynamics. Africa’s real GDP growth is expected to reach 3.7% in 2023, a return to pre-COVID levels. Despite that potential, global crises have been affecting investment in Africa more negatively than in the rest of the world. For instance, Africa’s share of global greenfield foreign direct investment dropped to 6% in 2020-21 (the lowest share in 17 years), while high-income countries elsewhere have recorded their highest share ever (61%), compared to 17% for developing Asia and 10% for Latin America and the Caribbean. According to the most recent edition of the annual African Tech Startups Funding Report released by Disrupt Africa, African tech startups raised US$1.19bn in the first half of 2023, down by more than half on the total from the corresponding period in 2022.

The good news is that African countries have realised additional revenues totalling €1.69bn owing to voluntary disclosures, the implementation of information exchange mechanisms, and rigorous offshore investigations, according to the ‘2023 Tax Transparency in Africa‘ progress report, published by the Africa Initiative. The release of the report comes as African governments continue to step up efforts to bolster domestic resource mobilisation in the face of economic headwinds that include global inflation and mounting debt levels. But the Organisation for Economic Cooperation and Development (OECD) estimates that Africa loses as much as $60bn each year in illicit financial flows.