Tax Platform: Climate Change, COVID 9, Conflict, IFF threaten Africa’s Growth-APNIFFT

Tax Platform: Climate Change, COVID 9, Conflict, IFF threaten Africa’s Growth-APNIFFT

By Jeff Kapembwa

AFRICA must unify in a Pan African manner to overcome the gurgling effects of Climate Change, COVID 19, conflicts amid frightening loses in taxes spurred by Illicit Financial Flows dwarfing the continent’s economic growth, a leading tax think tank has warned.

The threatening shocks buffeting the continent urgently demand quality and determined leadership to respond to shocks across multiple domains through adaptations and built resilience in a concerted manner to alleviate the drivers of such crises to delay their effects on the already fragile and highly indebted economies.

Speaking at a four-day-conference for African Parliamentary Network on Illicit Financial Flows and Taxation (APNIFFT) in Lusaka themed: “Tax Justice Amid Multiple Crises: A legislative Lens”, Titus Gwemede, the Open Society Foundation, Division Director, Opportunity and Equity challenges calls for oneness.

The new order demands policy makers to rethink on policy formulation and devise durable solutions that favorably responds and devise profound ways and strategies to drive the post-pandemic recovery particularly in regions prone to instability, conflict, and the worst effects of climate change.

While national and multilateral policy makers strive to alleviate the drivers of such crises, it is imperative to prepare their countries to adapt and recover from complex shocks, aptly put: ‘they must try to build resilience of African states to allow them to adapt to exogenous shocks.

The pandemic has presented policymakers with daunting, interlinked, and often unprecedented challenges.

From health emergencies that also upend economies to trade disruptions that also pose new multilateral diplomatic dilemmas, the pandemic has generated challenges that seem exceptional in both scale and degree of interconnection.

Gwemede in his presentation to lawmakers drawn from various parts of the continent warned against the effects and expected devastations to be caused by the pandemic, posing a challenge to lawmakers to interlink, and often unprecedented challenges.

“From health emergencies that also upend economies to trade disruptions that also pose new multilateral diplomatic dilemmas, the pandemic has generated challenges that seem exceptional in both scale and degree of interconnection.”

In a study, the COVID 19 pandemic has exposed systemic inequalities in the current social, political and economic systems. African countries are disproportionately bearing the brunt of the impacts of the pandemic in part due to decades of reckless and overeager privatization and austerity measures resulting in under-funding of social sectors.

Beyond the obvious health risks, the Coronavirus (COVID-19) shock to African economies is three-pronged; lower trade and investment from China in the immediate term; a demand slump and a continental supply shock that affected domestic and intra-African trade.

It has shaken commodity-driven growth models that had largely failed to create more and better jobs or improve well-being.

The crisis has further also exacerbated the weak monetary and fiscal systems in recent years, creating a limited fiscal capacity to respond.

African countries experienced reduced tax revenues due to reduced economic activities as a result of the loss of export earnings and commodity price collapses.

Rising interest rates in rich nations are fueling a deep debt crisis, with many countries facing default or crippling repayments. In 2022 the debt servicing for the world’s poorest countries is estimated at $43 billion.

Last year, debt for Africa represented 171 percent of all spending on healthcare, education and social protection combined for low-income countries. Macroeconomic impact: supply and demand shocks have had a strong impact on growth and development.

There are solutions though , despite the multiple challenges. According to Gwemede, redressing the Three Cs demands an opportunity for structural reforms to create a people-centred economic system; it also an opportunity to bolster states’ resilience and capacity for adaptation.

These are key to Africa’s future success in the geopolitical arena. Resilience at the national level can be understood as a country’s capacity to respond to, adapt to, and grow from stresses and shocks.

Resilience focuses on bolstering the overall performance of a system in the face of unpredictable and often interconnected hazards, making it different from risk management, which relates to specific hazards.

A country’s resilience depends on the internal characteristics that allow for states and their institutions to navigate a variety of disruptions.

Legislators require panoramic vision of African structural transformation while honing their skills on global finance.

At the most basic level, states need capacity—an ability to synthesize information, connect observations to government action, and effectively operationalize those actions—in order to successfully respond to shocks.

“Citizens’ reliance on the state often becomes more acute during times of crisis. Accordingly, resilient states are those that are able to not only deliver routine services but also effectively integrate information and adapt service provision to changed circumstances.” he said.

And lawmakers in Zambia have pledged unwavering support towards progressive laws that will protect the country from various vices that stifle growth of the economy threatened by the three Cs while seeking laws that could stifle International Illicit Flows.

Lawmaker, Evans Katotobwe encouraged fellow legislators to be resolute and seek to enact legislature to protect future generations from the vices and the laws embraced must yield benefits to the African continent and uplift the livelihood of our people in Africa.

Mr. Katotobwe regrets Zambia being is one of the victims of the Illicit Financial Flows estimated to be losing a staggering $630M annually by alleged multi-nationals largely from the Mining Sector.

He regrets the multiple incentives, tax breaks extended to multinational companies to create jobs or save jobs, yet the jobs intended to be realised remain dismally low or in some instances of low calibre and not corresponding to the Tax Breaks.

“Many countries in Africa have been too generous – giving Tax Incentives or Tax Breaks to multi-nationals in order to create jobs or save jobs. he says.

“However, the jobs created have been dismal and of low grade, therefore, not corresponding to the Tax Breaks. This means our Tax Incentives are not guided by the Cost Benefit Analysis.”

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