Mkapa, Kagame want Africa to change mindset on financing development

06Aug 2018
Francis Kajubi
The Guardian
Mkapa, Kagame want Africa to change mindset on financing development

As illicit financial flows from Africa currently exceed overseas development assistance, a leadership forum has urged the continent to rethink its finance models towards its development.

Former President, Benjamin Mkapa at the Uongozi Institute Forum last week. File photo.

In a statement, former African leaders suggested on reorganisation of economies, strengthening of countries governance through supporting local enterprises and capacity of revenue institutions and regulations to curb illicit financial flows.

Speaking at the fifth African Leadership Forum (ALF) last Friday, organised by former Tanzanian President, Benjamin Mkapa and coordinated by UONGOZI Institute being held in Kigali, Rwanda, Mkapa warned that no country should continue with the illusion that someone would come from outside the continent to help and transform them.

“This idea does not preclude working with the rest of the world, it means that we first stand strong and anyone can make partnerships with us while we are already moving on,” said Mkapa.

He added that in order to confront the problem of illicit financial flows, it was important to turn around complicity of financial institutions, customs systems, tax authorities and laxity of other state organs.

Mkapa noted that governments should encourage innovation and private initiatives and not be an obstacle to enterprises.

In his keynote address, Rwanda’s President Paul Kagame said Africa can finance its own development through rethinking how regional integration can grow local economies as governments become enablers of local businesses as opposed to being obstacles.

“Africa can finance its own development. At least a big part, no doubt. We know it because Africa finances other peoples’ development. The value of evaded taxes, commodity extractions and illicit financial outflows outnumbers the overseas aid,” Kagame argued.

“We need to mobilise the right mindsets rather than funding because whatever we are lacking, we have means to acquire and yet we remain with the mind-set that nothing can happen without external finance, that’s a failure of the mind-set," argued President Kagame while proposing that Africa should reach a turning point through accountability.

“For example, on domestic finance, we have to build trust that public funds will be spent on the rightly, this is the foundation of good policies. Secondly, through regional integration, the continent has the will and ability to fund common priorities, so we should build on this,” he said noted as he suggested that investment in critical fields such as renewable energy, the private sector need multi country markets to make projects viable.

President Kagame noted that while railways and roads are important, there were situations when what stops trade is not the lack of infrastructure but bad politics that make toxic decisions that are obstacles to small businesses selling legitimately across borders.

“We have to make it easier for African businesses to grow and create jobs, building deeper capital markets and lowering high costs of making remittances," he affirmed.

He concluded that when ordinary people use informal routes to do informal trade, governments have to ask themselves what they are doing wrongly and rectify it.

On his part, United Nations Conference on Trade and Development Secretary General, Dr Mukhisa Kituyi said global dynamics are such that each region will have to look inside itself to transform.

Dr Kitui noted that recent reports show that illicit financial outflows from Africa were more than the overseas development assistance and foreign capital that comes into the continent. He thus suggested that for the kind of development needed to take place, it was important to relook at the current traditional models of financing.

“We have to develop financial institutions, domestic resource mobilisation is a core area, and so taxation should be focussed on through strengthening revenue authorities and strengthening regimes of trade facilitation through soft infrastructure like automated systems of customs goods management,” added the UNCTAD chief.

Dr Kituyi said there is poor capacity of revenue authorities and challenges of transfer pricing saying there is need to urgently understand the problem in order to confront it.

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