Africa’s rapid growth and urbanization will require stable local governments to deliver goods and services to billions of people, and the continent can look to an underutilized source of revenue, the property tax, write the authors of a book published by the Lincoln Institute of Land Policy.
In Property Tax in Africa: Status, Challenges, and Prospects (Paperback $40.00, 625 pages: ISBN: 978-1-55844-363-1), Riël Franzsen and William McCluskey of the African Tax Institute at the University of Pretoria provide the first comprehensive study of the property tax in Africa, laying out challenges, opportunities, and pathways to improvement. They analyze property tax systems in 29 countries and offer four regional overviews, highlighting the key political, administrative, and technical issues that affect how these systems function.
The book comes at a critical time for Africa. The world’s fastest growing continent, Africa has added more than 500 million people since 1990, and by 2050 it will hold a quarter of the world’s population. The continent is rapidly urbanizing, and together with Asia will absorb most of the world’s urban growth in the coming decades.
“Nowhere are the fiscal challenges of urbanization more pronounced than in Africa,” Lincoln Institute President and CEO George W. “Mac” McCarthy writes in the book’s forward. “Establishing high-functioning systems capable of delivering reliable annual revenue flows to help cities make ends meet will require a lot of work. But there is plenty of room for optimism.”
The property tax contributes relatively little revenue in most African countries, representing only 0.38 percent of gross domestic product, on average, compared to more than 2 percent the mostly developed countries that make up the Organisation for Economic Co-operation and Development (OECD). Property Tax in Africa identifies many common challenges, including poor tax collection and enforcement, weak administration, and inadequate systems for assessing property values.
Despite the relatively low utilization of the property tax in most African countries, some cities generate significant revenues from the tax. The property tax represents 42 percent of all locally generated revenue in Freetown, Sierra Leone, 23 percent in Nairobi, Kenya, and 21 percent in Accra, Ghana, for example.
The book also highlights some successes in cities that have been able to bolster their property tax systems. The city of Kitwe, Zambia undertakes supplementary valuations, which have increased the number of properties on the tax rolls and increased assessed values, leading to greater revenue. In Kampala, Uganda, officials from the national Uganda Revenue Authority and the Ministry of Finance collaborated with the local government to set up a new office for revenue collection, which more than doubled the collection of property tax in four years.
A resource for property tax scholars as well as public officials and practitioners on the ground, the book makes recommendations for improving the performance of the property tax in Africa, including the following: Thoroughly analyze the property tax system and decide how it relates to national economic development goals; Audit the legal underpinnings of the property tax and redraft laws, as needed, to lay the groundwork for more effective systems; In most countries, concentrate reform in the largest cities; Focus on collection and enforcement systems first; and Plan gradual transitions that allows the tax administration to catch up and taxpayers to get used to the new system.
In addition to continent-wide and regional overviews, the book includes detailed analyses of the 29 countries: Benin, Botswana, Cabo Verde, Cameroon, Central African Republic, Cote d’Ivoire, Democratic Republic of the Congo, Egypt, Equatorial Guinea, Gabon, The Gambia, Ghana, Kenya, Liberia, Madagascar, Mauritius, Morocco, Mozambique, Namibia, Niger, Rwanda, Senegal, Sierra Leone, South Africa, Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
Praise for Property Tax in Africa
John Norregaard : "This one-of-a-kind study is an indispensable source for academics and policy makers who seek to explore the virtues of the property tax. The relevance of this volume clearly transcends the continent it embraces, and pertains to the large majority of countries at the global level that are now engaged in developing a property tax. This is a very impressive book.” John Norregaard is Tax Policy Consultant and Former Member of IMF Tax Policy Team
Lawrence Walters: “Property Tax in Africa is a remarkable book. Those interested in improving urban services, land administration, and tenure security in Africa will find this book invaluable. There is no comparable resource available in terms of breadth or depth of insights into land taxation, administration, and policy in Africa.” Lawrence Walters is Emeritus Professor of Public Management, Romney Institute, Brigham Young University
Peadar Davis: “Property taxation is high on any list of possible solutions to harness Africa’s wealth for the betterment of its people. The authors greatly add to our understanding of the challenges faced and have created an invaluable resource to guide policy development. This book will rapidly become required reading for all students of the property tax in Africa.” Peadar Davis is Senior Lecturer in Property Appraisal and Management School of the Built Environment, Ulster University
About the Authors
Riël Franzsen occupies the South African Research Chair in Tax Policy and Governance and is also director of the African Tax Institute at the University of Pretoria, South Africa. He has a doctorate in tax law from the University of Stellenbosch (South Africa) and a master’s degree in creative writing from the University of Pretoria. He specializes in land and property taxation and regularly acts as a policy advisor for the International Monetary Fund, United Nations Food and Agriculture Organization and World Bank.
He has worked in this capacity in Africa (Egypt, Kenya, Liberia, Namibia, Rwanda, South Africa, Tanzania and Uganda), Asia (Thailand), the Caribbean (Antigua, Dominica, Grenada, Saint Kitts & Nevis, Saint Lucia and Saint Vincent & the Grenadines) and Europe (Croatia, Georgia, Romania and Serbia). He has acted as an instructor for the IMF (Austria, Singapore and Saint Lucia), Lincoln Institute of Land Policy (China and Slovenia), Network of Associations of Local Authorities of South-East Europe (Macedonia) and The Hague Academy for Local Governance (Lesotho). He is on the Board of Advisors of the International Property Tax Institute, regularly participates in local and international conferences and has authored many journal papers and book chapters on land and property taxation.
Dr. William McCluskey joined the University of Ulster in 1986. He was appointed as Professor of Property Studies at Lincoln University, Christchurch, New Zealand from 2001-2002. He is currently Extraordinary Professor at the African Tax Institute, University of Pretoria, South Africa. His main professional and academic interests are in the fields of real estate valuation, property tax systems, computer assisted mass appraisal modelling and geographic information systems.
He is a technical adviser on property tax issues with the International Monetary Fund, World Bank and United Nations Food and Agriculture Organization and has been involved in a number of missions advising on ad valorem tax issues in countries including Albania, Bermuda, Botswana, China, The Gambia, Georgia, Jamaica, Kazakhstan, Kenya, Kosovo, Lesotho, Northern Ireland, Philippines, Poland, Mauritius, Republic of Ireland, Slovenia, South Africa, Tanzania and Uganda. He is a Fellow of the Royal Institution of Chartered Surveyors.
About the Lincoln Institute
The Lincoln Institute of Land Policy seeks to improve quality of life through the effective use, taxation, and stewardship of land. A nonprofit private operating foundation whose origins date to 1946, the Lincoln Institute researches and recommends creative approaches to land as a solution to economic, social, and environmental challenges. Through education, training, publications, and events, we integrate theory and practice to inform public policy decisions worldwide.
PROTECT YOUR FINANCES THIS HOLIDAY SEASON: A GUIDE TO FRAUD PREVENTION
November marks Fraud Awareness Month across the world and Bank Gaborone has a dedicated mission to inform the public of evolving threats. The holiday season is a time for celebration, togetherness, and giving. However, it’s also a time when the risk of financial fraud increases.
Common Types of Financial Fraud During the Holidays
- Online Shopping Scams: With the rise of online shopping, scammers often create fake e-commerce websites to steal your money and personal information.
- Sim Swap: Fraudsters may try to gain control of your phone number by swapping your SIM card, which can lead to unauthorized access to your accounts.
- Application Fraud: Be cautious when downloading apps, as some may be malicious and designed to steal your data.
- Travel Scams: Planning a holiday trip? Watch out for fake travel deals and websites that can lead to disappointment and financial loss.
- Identity Theft: Protect your personal information, as identity theft can have far-reaching consequences, both financially and emotionally.
- Phishing and Email Scams: Scammers often send deceptive emails and messages, trying to trick you into revealing sensitive information or making payments.
- Mobile Network Fraud: Be cautious about unsolicited calls or messages requesting personal information or payments.
How You Can Identify Potential Fraud
To protect yourself from financial fraud, keep an eye out for the following signs:
- Unexpected Transactions: Check your account statements regularly for any transactions, withdrawals, or purchases that you didn’t initiate.
- Unauthorized Account Activity: Pay attention to notifications of login attempts or changes to your account details that you didn’t initiate.
- Phishing Attempts: Be cautious about emails, calls, or messages requesting sensitive information or payments, especially from unknown or suspicious sources.
At Bank Gaborone, we are committed to ensuring the security of your finances. Our Bank Gaborone 360 initiative encompasses several security features:
- 3D Secure Cards: All our cards are equipped with 3D secure technology, which means that an OTP (One-Time Password) is sent with every purchase for your approval, adding an extra layer of security.
- 24/7 Call Centre: Our round-the-clock customer centre is ready to assist you at any time. If you have questions, concerns, or need assistance related to your account’s security, simply give us a call 3158681 at any hour of the day.
- Secure Online Mobile app: To enhance security and ease of access, you can use your biometric authentication to log in to the app and authenticate transaction. An additional layer of protection is provided through two-factor authentication.
Security tips for customers
- Avoid sharing personal information – the Bank will never ask for login credentials, personal details, card numbers, or OTPs.
- Exercise caution when receiving unexpected links or messages.
- Ensure your device is protected with a screen lock and refrain from storing passwords on the device or in the cloud.
- Promptly report lost or stolen devices to the bank for immediate action.
What to Do If You Fall Victim to Fraud
If you suspect that you have fallen victim to a fraud attempt, it’s essential to act quickly:
- Report the incident to the bank immediately.
- Block your card.
- Contact the customer centre at 3158681 for assistance and guidance.
As you enjoy the holiday season, we urge you to stay vigilant and prioritise the security of your finances. Safeguarding your assets is a shared responsibility, and Bank Gaborone is committed to supporting you in this effort. Remember that you are not alone in this journey. Your bank is here to protect your financial interests and guide you through any challenges you may face. By being proactive and following the tips and security measures outlined in this article, you can ensure that your holidays are joyful, secure, and free from financial fraud.
Challenging times as GROWTH IS EXPECTED TO SLOW DOWN IN 2023
The third quarter of 2023 has been characterised by a worsening of global economic conditions, with global growth forecasts revised downwards by the IMF, rising fuel prices, and the expectation that interest rates will remain “high for longer”. This has impacted on the global diamond market, which has experienced a persistent weakening of demand through the year. Domestically, annual GDP growth has fallen, but remains in line with expectations. Inflation has risen, also as expected, and is likely to rise further in the coming months, driven mainly by global factors.
The IMF released its new World Economic Outlook (WEO) in early October, just after the end of the quarter. The IMF predicts a slowdown in global growth to 3.0% in 2023, down from 3.5% in 2022. Growth is projected to fall slightly further, to 2.9%, in 2024. Current and projected global GDP growth rates remain well below historical averages. The IMF notes that three factors are driving the slowdown in growth.
One is the tailing off of the post-COVID economic recovery, particularly following the very strong 2022 recovery in travel and tourism. The second is the consequence of the tighter monetary policy implemented in most countries to bring inflation down, with tightening of credit conditions impacting on aggregate demand. Third, the impact of the commodity price shock following Russia’s invasion of Ukraine persists, notably through higher energy prices, reducing real incomes in energy importing countries and of consumers generally. To what extent have these factors had an impact on Botswana? Certainly economic growth is tailing off, with annual GDP growth down to 5.0% in Q2 2023, with a projected further decline to 3.8% for the year as a whole.
However, the slowdown appears to be having a greater impact on sectors that have a domestic focus (such as agriculture, food manufacturing, wholesale and retail, and other domestic services). The main outward-facing sector that has experienced a severe slowdown is diamond trading (discussed more below). With regard to monetary policy tightening, Botswana is feeling the impact of global developments, but there has been no real domestic impact given that the Bank of Botswana has hardly tightened monetary policy while many other central banks have raised policy rates significantly. But Botswana has felt the impact of higher energy prices, which remain elevated despite some easing earlier in 2023, and there has been a squeeze on real incomes and living standards as a result.
The major impact of adverse global conditions has been experienced in the diamond market. This has not yet fed through to diamond mining which, perhaps surprisingly, was up 7.1% in the 12 months to June 2023. This may just be “the calm before the storm”, however. Diamond sales through DBGSS are down 31% over the first eight sales cycles of 2023 compared to the same period last year, and Okavango Diamond Company is experiencing similar pressures. It will not be possible to continue expanding mining with sales contracting, as the required stockpiling becomes increasingly expensive. The global diamond market has been buffeted by multiple adverse factors during the year. Restrained consumer demand in the US, notwithstanding some resilience in the US economy, has been one factor, compounded by weak post-COVID recovery in China. Recent demand may have been impacted by a sharp increase in diamond prices in 2022, when demand was strong, but the industry is now paying the price. Synthetic diamonds are taking increasing market share, at much lower prices than natural diamonds. With slowing demand, downstream participants in the diamond value chain (cutters and polishers, traders, jewellery manufacturers and retailers) have all cut back on purchases as their stocks have risen, impacting rough diamond demand. As a result, De Beers have announced that sightholders would be permitted to defer up to 100% of their contracted purchases for the remainder of 2023 while Okavango Diamond Company cancelled its planned November auction.
Inflation and interest rates
After the sharp drop in inflation from its peak of 14.6% in August 2022 to 1.2% a year later, the increase to 3,2% in September was not unexpected. Fuel prices have been the main driver of changes in inflation over the past two years, in part because international oil prices have been so volatile, combined with their very high weight in the Botswana Consumer Price Index (CPI) basket. After the upsurge in oil prices caused by Russia’s invasion of Ukraine, to over US$110 per barrel in June 2022, prices fell to just over $70 a barrel in March this year. The decline enabled pump prices to be reduced, leading to the dramatic fall inflation as the previous year’s increases dropped out of the annual inflation calculation. In recent months, however, the deliberate actions by OPEC+ member states to restrict production and supply have pushed prices back over $90 per barrel, a selfish move seemingly calculated to put further pressure on households across the world who have already been badly impacted by the cost-of living crisis. In Botswana, regulated pump prices – which are determined under a highly politicised adjustment mechanism – have lagged the increase in global prices. For instance, the price increase in late October came about a month after the relevant increases in global prices. Following this increase, we expect inflation to continue to rise through to the end of 2023 and into 2024, when it is likely to temporarily go above the upper end of the BoB’s 3-6% inflation objective range. This means that there is unlikely to be any reduction in the BoB’s monetary policy rate (MoPR) in the near future.
The Ministry of Finance’s draft Budget Strategy Paper (BSP) was released in September, and provided updated information on the outturn of the 2022-23 budget, revisions to the current year (2023-24) budget, and the medium-term fiscal framework out to 2026-27. The fiscal data shows a continuation of recent trends, with an (unplanned) balanced budget for 2022-23; a (planned) deficit budget for 2023-24 and 2024-25, and a (planned) balanced or surplus budget for the outer years of the projections, which would mark the beginning of the NDP 12 period. There is a consistent story in the BSP which relates to the need for fiscal consolidation (discussed further in our special feature). In a parallel with Saint Augustine’s famous prayer (“Lord, make me chaste, but not yet”), fiscal consolidation – in the form of a balanced or surplus budget – is always a year or two away. For instance, the BSP released in September 2022 projected a balanced budget from 2023/24 onwards. However, the September 2023 BSP now indicates a balanced budget two years later, from 2025/26 onwards. This largely reflects the dramatic increase in development spending first proposed in the 2023 Budget for 2023/24 and set to be continued in subsequent years. That relates to planned budgets. Outturns are quite different. In both 2021/22 and 2022/23 large projected deficits did not materialise, and in both years, budgets were broadly balanced, due mainly to significant underspending on the development budget, along with higher-than-expected mineral revenues. Notwithstanding a large (47%) planned increase in development spending in the current fiscal year, it seems quite possible that, as in the last two years, the development budget will be underspent and the budget will end up being broadly balanced – although there may be risks on the revenue side if the diamond market continues to deteriorate. Even though the outcomes are good (balanced budgets), the fact that these are unplanned reflects negatively on the quality of fiscal planning and budgetary control.
The rest of 2023 and early 2024 looks likely to be an uncertain and somewhat challenging time for the economy. The main concern is the depressed state of the global diamond market, and the potential impact on economic growth, exports and government revenues – although it is important to note that no negative impact on these important economic indicators has yet been realised. The likelihood that inflation will rise in the coming months means that domestic interest rates are likely to be maintained – at levels that are low by international standards – for the foreseeable future. Projections of adverse climatic conditions in the coming months – with forecasts of higher temperatures and lower rainfall – are likely to have a negative impact on agriculture, water supplies and tourism, and illustrate the longer-term challenges posed by global climate change. Fortunately, Botswana’s critical financial buffers – in the form of the Government Investment Account at the BoB and the foreign exchange reserves – have been rising, assisting the ability of the economy to withstand possible shocks, at least in the short term.
(Adopted from Econsult Economic Review Q3)
Thamane Launches AADFI Working Group on Climate Change to Support African DFIs
The Association of African Development Finance Institutions (AADFI) has taken a significant step towards addressing the pressing issue of climate change by launching a working group dedicated to this cause. The working group aims to support AADFI member institutions and the wider African DFI community in tackling the challenges posed by climate change.
The launch of the working group occurred on November 9, 2023, immediately following the opening ceremony of the AADFI 2023 Annual General Assembly in Egypt. The theme of the assembly was “The Role of African DFIs in Achieving Just Energy Transition,” highlighting the importance of sustainable energy practices in combating climate change.
Thabo Thamane, Chairman of AADFI and CEO of Citizen Entrepreneurial Development Agency (CEDA), announced the launch of the working group and introduced its members and objectives. The group was approved by the AADFI Board of Directors on August 28, 2023, following a resolution made at the previous annual general assembly.
The working group is chaired by the Development Bank of Southern Africa (DBSA), with Boitumelo Mosako, CEO of DBSA, leading the efforts. Mr. Olymous Manthata, Head of Climate Finance at DBSA, will coordinate the working group’s activities.
Comprised of member institutions dedicated to driving the climate agenda within their organizations and communities, the working group plays a crucial role in supporting AADFI member institutions and the wider African DFI community in addressing climate challenges. It serves as a strategic platform for generating ideas and actions that will enable the association and its members to remain relevant in the climate change agenda.
The working group has several key responsibilities. Firstly, it will support efforts to create a roadmap for African DFIs to accelerate their involvement in addressing climate challenges. This includes leading the effort in attracting technical assistance and support to build the skills and capacity of member DFIs in dealing with climate change.
Additionally, the working group will guide African national DFIs in mobilizing finance and identifying funding opportunities for green projects. It will also play a crucial role in raising green bonds and collaborating with the African Financial Alliance on Climate Change (AFAC) to represent the interests of AADFI members in the alliance. Furthermore, the working group will leverage support from partners such as the African Development Bank (AfDB), the Global Center on Adaptation, and the Green Climate Fund (GCF) to facilitate member DFIs’ actions on climate change.
The working group’s ultimate goal is to drive meaningful change and accelerate Africa’s just energy transition by collaborating with various stakeholders and partners. Thamane urged all member institutions to actively support the working group and participate in its activities. He expressed his gratitude to the DBSA for taking the lead role in the working group and expressed confidence in its ability to deliver on its mandate.
In conclusion, the launch of the AADFI working group on climate change marks a significant step towards addressing the challenges posed by climate change in Africa. By supporting member institutions and the wider African DFI community, the working group aims to drive meaningful change and accelerate Africa’s just energy transition. With the support of various stakeholders and partners, the working group has the potential to make a significant impact in combating climate change and ensuring a sustainable future for Africa.