Building a new social contract between governments and its citizens
How can the post-2015 development finance agenda deliver for citizens in developing countries? ACORD's Tom Fry and Salome Zuriel write about Domestic Resource Mobilisation in Africa, looking at how it is becoming a priority for African governments and the ways in which it can make a strong contribution to meeting the needs and matching the priorities of African citizens.
Why domestic resource mobilization should be prominent in Africa's development financing post 2015
Within the myriad debates taking
place on the post-2015 development agenda, perhaps the most important is the ever-tricky subject of
financing. The sheer scale of resources needed to implement the agenda means
that financing decisions are crucial, especially for Africa, a continent seen
as dependent on external resources. African governments themselves have made
financing one of the six pillars of the Common African Position (CAP) on post-2015. In current drafts of the CAP, the first form
of financing mentioned (and above external assistance) is domestic resource
mobilisation (DRM) - a sign, perhaps, of the growing prominence of this issue
among African governments.
DRM is becoming a priority for African governments, both domestically and in intergovernmental processes, bolstered by a growing evidence-base that proves its significance as a potential resource for development. Its suitability is not just a question of volume, but of how appropriate it is in responding to the continent's developmental needs. ACORD has just completed a series of 45 Citizen-Driven Workshops in 13 different countries across Africa. The idea was to harness the power of the African citizen - to privilege their position as agents in their own development. The workshops triggered debate and discussion in some of the most remote and marginalised communities in Africa today, with citizens reflecting on the challenges they faced, and their ideas on how they want to see change take place.
Strong conclusions from the African citizen workshops across 13 countries
Two strong conclusions emerged from these workshops that underline why DRM should be top of the menu in the post-2015 framework for African governments. First, citizens asked consistently for governments to invest and increase access to basic services such as health and education, and to invest in the small-scale food production sector through the public provision of services, skills, and productive resources. These are areas where private capital is often unwilling to invest, and where aid flows will not be large enough to fill the gap. But even more importantly, African citizens also repeatedly and emphatically diagnosed the lack of accountability, governance and participation as the key impediments to change in their communities. Across the workshops, participants spoke of what it means to be an African citizen, the challenges in making their voice heard and ensuring that governments respond to their needs. The overbearing image was of a fractured relationship between states and citizens, in which people felt disempowered and unable to see how their interests were being represented, if at all.
Can domestic resource mobilization repair fractured relationship between African states and citizens?
It is the power of DRM to contribute
to building a new social contract between African states and their citizens
that reinforces its importance to sustainable development on the continent. Historical evidence elsewhere in the world points
to the emergence of effective tax systems as pivotal in incentivising
governments to support broad-based prosperity and improved public services in
Northern and Asian countries. How a government raises money matters in
determining how government institutions behave in relation to the well-being of
Traditionally, however, African economies have relied on aid and foreign earnings from resource exploitation. This has had significant and negative impacts on the direction of public expenditure, country ownership of the national development process, and on the power of the continent's voice in the global political arena. Africa's dependence on aid and the sale of its natural resources has distorted accountability over public expenditure, with states incentivised to meet the needs of extractive and commodity sectors and the priorities of donors.
Increased domestic resource mobilisation could correct this imbalance, building states that have the resources to finance services and investments that meet the needs of most of their citizens and building prosperity and inclusive economic growth, with the fiscal accountability to ensure this takes place. However, this will require a more conscious and explicit linking of the DRM and accountability agendas in the discourse over development finance, by policy-makers, researchers and civil society.
Challenges to overcome for broadening African countries tax-bases and build tax system built on fairness and equality
Of course, most African countries
face serious impediments in broadening their tax bases. These include economies
that are agrarian and dominated by the informal sector, small potential tax
bases, significant mistrust of tax administration authorities, systems that
allow tax evasion by elites and rent-seeking by tax administrators. But we know
now that there are significant revenue gaps in most African
countries, especially as a result of unjustified tax incentives to the private
sector; tax evasion through transfer mispricing; and the under-taxation of
natural resource extraction, land, property and the wealth of the very rich.
Closing these gaps would allow governments to link DRM directly with governance
and citizenship by demonstrating a commitment to tax systems based on fairness
and equality. This link should be both rhetorical, arguing that increasing tax
in these areas signifies political commitment to broad-based development, and
through expenditure, with the resulting revenue spent on the services and other
investments that citizens require.
An explicit linking of DRM and accountability and citizenship in discourse and policy around development finance could also increase pressure and expectations for the post-2015 agenda to include a global tax-reform process. Donors who bang the drum relentlessly on governance issues must be forced to demonstrate their own commitment to building accountability and citizenship by addressing donor-country tax havens and secrecy jurisdictions, as well as tax treaties with developing countries.
Domestic resources and better governance
Connecting DRM and governance would
also allow conversations over development finance to focus not only on the
mechanisms to collect revenue, but also to the policies and institutions
required to ensure that resources are spent on genuine broad-based development.
Tax administration and collection-capacity building are obviously required, but
the need to have accountability, transparency and participation as a starting
point has yet to gain wide acknowledgement. There is also significant potential
to address the role of aid in increasing DRM, which is still very low, through technical
assistance and other measures. Expanding the discourse on development finance,
an area that remains a little esoteric for wider civil society organisations
(CSOs), to include governance issues may be an opportunity to mobilise both
more CSO actors and the general public to take action on this issue.
African citizens in ACORD's workshops said that accountability, participation and political rights should be at the heart of the post-2015 framework. For us, this calls for a move away from numerical targets around the mobilisation of finance, and instead a direct linking - in terms of discourse, research and policy - of DRM to the idea of building a social contract between governments and citizens.
|This article was written by Tom Fry, ACORD's Policy and Advocacy Advisor and Salome Zuriel, Conflict Thematic Manager at ACORD.
It was published on the Development Progress blog of the ODI in their financing progress series in June 2014.