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Three ways African governments can increase access to schools, health and food for our children.
The African States are parties to several international frameworks that set minimum requirements for public spending in the health, education and agriculture sectors, among others. These sectors impact vulnerable groups, especially children. We conducted a study on ‘‘African States’ commitments on investments in children’’ on Uganda, Tanzania and Zambia. As opposed to what most would think these countries meet minimum budget allocations requirements in health, education and agriculture. However, their spending does not always correspond to the budget allocation neither does it benefit children. Here are three ways our study reveals African governments can increase access to schools, health and food for children.
Meet or exceed the minimum public spending requirements
The countries we studied missed the minimum target set for public expenditure in food, school and health. Indeed, in April 2001 in Abuja, the African Union countries met and pledged to set a target of allocating at least 15% of their national budget to improve their health sector. Through the Incheon declaration “The Education 2030 Framework for Action”, they committed to invest at least 15% of their resources in education, and in Maputo Declaration on Agriculture and Food Security (Assembly/AU/Decl.4- 11 (II), they planned to devote 10% of their public spending to agriculture.
We analyzed budget percentages spent on those sectors based on budget speeches for the last five most recent years. It came out that on average:
- Tanzania has allocated 7.62% of its budget on health, 16.42% on education, 5.05% on agriculture meeting its target on education only.
- Uganda has spent 8.36% of its budget on health, 11.82% on education and 3.44% on agriculture, failing to meet all three social spending targets.
- Zambia has spent 9.24% on health, 18.04% on education and 3.02% on social protection. Zambia missed the education target in the other sectors.
These figures show that meeting the target is not enough. Ensuring quality spending is also important. For instance, while Tanzania focuses on implementing free basic education countrywide, Zambia spends its allocation to education on university infrastructure, which is not a pro-poor objective. While Tanzania devotes the most considerable portion of its health spending on primary health care, Zambia allocates money for drugs, medical supplies, infrastructure and equipment.
Limit the tendency to finance the budgets’ deficit through debt
Governments do not have enough resources to meet their development needs. They have resorted to debt to finance the deficit. The tax to Gross Domestic Product (GDP) ratio in Uganda is 11% below neighbours in the East African Community and the 16% Sub-Saharan average. As a result, governments have resorted to debt to finance the deficit. The country’s stock of public debt has almost tripled in the last ten years, from USD 2.9 billion in 2006 to USD 8.7 billion in 2016. In 2018/19, the budget deficit increased to USD 2.0Bn, which is nearly half of the total tax revenue.
Tanzania raises 2/3 of its budget from domestic revenue. However, its tax to GDP ratio stands at 11.85% below the 13% average for low-income economies (LIEs) evidencing that it is still possible to raise more revenue through taxation. Tax to GDP ratio in Uganda and Tanzania falls below the average for low-income economies. Low tax to GDP ratio often means less domestic revenue available for national expenditures. In Uganda, the increase in budget deficit led to a rise in public debt. At March 2018, it stood at US$ 10.53 billion (equivalent to 38.1% of GDP). In Tanzania, in April 2018, external debt accounted for 71.71% of the country’s total debt.
Indirect taxes tend to be more regressive than direct taxes as they target the value of goods, services and assets, rather than the ability of people to pay. Uganda has a high dependence on these type of taxes (excise duty, VAT, customs) which contribute 2/3 of total tax revenues. In Tanzania and Zambia, indirect and direct taxes contribute almost the same to tax revenues.
Fight harmful tax incentives, key drivers of revenue losses
The debt burden is high economies and indirect taxes represent a significant proportion of tax revenues on the one hand. On the other hand, tax evasion, tax incentives and exemptions, illicit financial flows are the leading causes of revenue lost in Uganda, Tanzania and Zambia. Plugging these loopholes will increase domestic revenue thus resources available for investments in children.
Each country studied has a tax system constrained by weaknesses in the tax administration system, a large informal sector, tax evasion, harmful tax incentives and a narrow tax base. In 2008, Tanzania lost an estimate USD1.23Bn in tax exemptions and incentives, USD 174Mn granted to companies alone in 2008/09- 2009/10. Had Tanzania spent the same amount on education and health, both budgets would respectively witness an increase of more than a 1/5 and 2/5. Illicit financial flows (IFFs) from Zambia between 2008–2012 were equal to 24.1% of its total trade. As shown by a study, high IFFs are often due to high inequality and poverty.
A clear policy on tax incentives and exemptions based on a cost-benefit analysis is a necessity to reduce the amount of money lost. Improved governance and fight against corruption in customs is an additional way government can curb IFFs. They can also address tax evasion by formalizing the informal sector, strengthening the tax administration system, managing and reducing debt levels. Budgets need to reflect policy objectives to resource social services. Budgeting needs to programme-based as opposed to line-item based.