East Africa: Govts seek funding solutions to sustain donor-funded projects

East African governments have resolved to consider alternative ways of financing key donor-funded projects to ensure their sustainability after the British government suspended funding for the regional electronic cargo tracking system (RECTS) last year.

The EastAfrican has learnt that EA member states in collaboration with the EAC Secretariat have developed an alternative funding plan, which they consider as “sustainable” for all donor-funded projects starting with the Electronic Cargo Tracking System. The $4.5 million project was being funded by the UK’s Department for International Development (DFID) through Trademark East Africa from 2014 until June 30, 2020 when additional spending on the project was halted.

Details on EA’s alternative funding plan, which was adopted by the sectoral council of the ministers of Trade, Industry, Finance and Investments (SCTIFI) in September last year, still remain under wraps.

The region has relied heavily on donor funding to implement several key infrastructure projects in the transport (rail, roads, and aviation), energy and water sectors amid persistent budget deficits, declining revenue collections and ballooning debt levels. However, with a reduction in donor funding, countries need to rethink their financing options or else suffer setbacks due to stalled projects.

Exemption

During the SCTIFI meeting held on December 2, last year the ministers instructed the Sectoral Council on Legal and Judicial Affairs to review Regulation 9 of the EAC Customs Management Regulations 2010, to exempt the Transit Goods License (TGL) funds from Customs Revenue.

The amendment of this regulation is meant to remove TGL as Customs Revenue, and make it an appropriation in aid, with a view of allowing partner states to use it to finance their part of RECTS operations. The TGL is a license issued for a vehicle/vessel carrying transit goods.

Uganda, Kenya, Rwanda and Burundi have agreed to use the funds generated from the issuance of TGL to sustain the operations of the project where the whole amount of TGL fee or an agreed percentage will be allocated to the escrow account to finance RECTS operations.

However, Tanzania which runs its own electronic cargo tracking system (Tancis), a multi-vendor platform owned by private companies, argues it would be difficult for them to implement recommendations for use of TGL funds since the fund is used for the payment of other costs associated with management of customs-controlled goods. Tanzania therefore recommended that operation funds for RECTS be raised by charging for the use of electronic seals per trip at the rate of $30 for cross border trips and $15 for the national trip.

In Kenya, these charges are estimated at $45.87 and $137.61 for dry cargo and wet cargo respectively while in Uganda it is estimated at $200 and $400 for trucks and trailers respectively.

A report by the United Nations Department of Economic and Social Affairs shows that Official Development Assistance to Less Developed Countries are largely in the form of grants.