East Africa: EAC Ministers to Fast-Track Alternative Funding Mechanism

12 October 2019

Regional ministers in charge of EAC Affairs on Friday resolved to accelerate a proposal to find an alternative financing mechanism as they discussed ways of pulling the six-member bloc out of its financial hole.

This decision was reached at the end of a week-long 30th Meeting of the Sectoral Council of Ministers responsible for EAC Affairs and Planning (SCMEACP), which ended Saturday at the EAC Headquarters in Arusha, Tanzania.

It comes at a time when, again, the EAC Secretariat and other organs and institutions of the bloc are grappling with financial difficulties, a situation worsened by the fact that some partner states continuously default on the payment of membership contributions.

Last week, the East African Legislative Assembly tasked the Council of Ministers, the central decision-making and governing organ of the EAC, to urgently address the issue of partner states that defaulting on their membership contributions.

Each year, every country is supposed to remit $8.3 million, totaling to $49.8 million.

The money is used to fund activities of key organs and institutions of the bloc, including the Secretariat, EALA, and the East African Court of Justice.

Amb. Olivier Nduhungirehe, Rwanda's Minister of State in charge of the East African Community, who chaired the extraordinary meeting in Arusha, on Saturday told Sunday Times that a report of current contributions for the fiscal year 2019/20 shows that only Uganda, Rwanda, and Tanzania paid some money.

Nduhungirehe said: "For now, Uganda has paid 72 percent of this contribution, which is around $6 million. Rwanda paid 14 percent; $1.2million, and Tanzania paid 13 percent which is $1million. Other partner states, meaning the Republic of Burundi, the Republic of Kenya, the Republic of South Sudan, are yet to pay for this fiscal year."

"But we still have arrears to be paid by the Republic of South Sudan; $19 million from previous fiscal years, the Republic of Burundi has to pay $3.9 million of arrears, and then the Republic of Kenya also has a small amount of arrears of $160,000."

Nduhungirehe said the meeting was informed by the Secretariat that South Sudan "may have paid" $3million of its arrears.

The hope, he said, is that the trend of paying up continues. They set November 15 this year as the deadline for countries to finish paying their remaining arrears.

Unequal economic size

For some years, there has been talk in the EAC corridors that the bloc could follow in the footsteps of the African Union in its quest to find an alternative financing mechanism.

During the 2016 AU Summit in Kigali, African leaders adopted a self-financing mechanism, proposed by former African Development Bank President Donald Kaberuka. The AU model aims to raise $1.2 billion annually to reduce heavy dependence on external partners to finance Africa's development projects.

Nduhungirehe said: "We decided that we should fast-track the process for an alternative funding mechanism because this issue of contributions by partner states will continue if we, as partner states continue to pay the same amounts of contributions yet we don't have the same economic size."

"There is a process now which is with the Ministers of Finance of the EAC to find alternative funding mechanisms. There are several options and proposals including a levy on imports basing on the model of what was done by the African Union."

Nduhungirehe explained that the meeting in Arusha requested that regional ministers in charge of EAC affairs follow up on the matter so that the process is concluded.

"We have also requested the Secretariat to propose a procedure on investigations of breaches on the [EAC] Treaty, and sanctions, because we have sanctions in our treaty but we don't implement the sanctions for several issues including non-payment of contributions," he added.

Institutional review

Among others, the extraordinary meeting also discussed the report of the Ad Hoc EAC Service Commission on the institutional reform [on workload analysis and job evaluation] of organs and institutions of the community.

Nduhungirehe said: "This is a long-overdue report because there is an institutional review for organs and institutions of the EAC and we want the structures of different organs and institutions be rationalized."

Once the Ad Hoc EAC Service Commission's report is adopted, it is expected that, among others, some job positions will be removed.

The landmark work-load analysis and job evaluation exercise conducted by experts from the six countries begun in March 2018.

Its prime aim, among others, is to create a new flexible and decentralized organizational structure for the Community that allows speedy decision-making using fewer resources.

Lack of a rational recruitment policy has often caused turbulence in the past.

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