SUB-SAHARAN Africa has the lowest savings rate which is continuing on a declining path compared to East Asia, Pacific, Latin America and South Asia, a new report by the African Capacity Building Foundation has shown.
BY VICTORIA MTOMBA
The report, titled Africa Capacity Report (ACR), was simultaneously launched on Monday in Harare, Nairobi and Geneva.
“When compared with other developing regions (such as) East Asia and Pacific, Latin America and the Caribbean and South Asia, Sub Saharan Africa has the lowest savings rate and it has been trending downward. Similar trends can be observed for investment and per capita growth rates, which, to a large extent, explain the persistence of absolute poverty in Sub-Saharan Africa,” the report stated.
The ACR indicates that overall Africa’s savings rate is lower than East Asia, Pacific and South Asia. The report states that when North African countries are included in the mix, only Algeria has a very high savings rate.
The average tax-to-GDP ratio in Africa has crossed 20% of regional gross domestic product (GDP) in recent years, far higher than in South Asia, but still lower than in Latin America and slightly lower than in East Asia. Tax revenues have surged in the last decade, from $123,1 billion in 2002 to $508,3bn in 2013.
“But these numbers may not reflect the situation across the continent since the resource-rich countries skew the regional average and most African countries have tax-to-GDP ratios below the regional average. The increase in tax revenues has been driven by resource rents and by direct and indirect taxes; in countries such as Chad, Equatorial Guinea, and Nigeria, resource rents dominate the tax mix,” the report said.
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It said the increase in resource rents had caused a split between countries mobilising high tax revenues thanks to natural resources and others making efforts but unable to mobilise revenues because of a shallow tax base.
Results of a computed average tax effort index the ratio of actual tax collection and taxable capacity for 1996 to confirm this: 27 of 47 countries have low tax effort indices, and several of them are resource-rich, it said.
The report said African countries have room for improvement whether in savings and investment rates, tax-to-GDP ratios, the tax mix, tax effort, the disincentive effects of revenue from natural resources, tax performance indicators, or the nature and reach of financial systems.
“Too few countries are paying attention to the expenditure side as to whether taxation is leading to efficient service delivery. A credible fiscal pact between citizens and the State can work only if citizens can see their tax dollars being used effectively,” the report showed.
