REFLEXIONS SUR L’OPPORTUNITE DE LA CREATION D’UN FONDS DE  CAPITALISATION POUR LE FINANCEMENT DE

REFLEXIONS SUR L’OPPORTUNITE DE LA CREATION D’UN FONDS DE CAPITALISATION POUR LE FINANCEMENT DE

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11 September 2007 THOUGHTS ABOUT THE CREATION OF A TRUST FUND TO FINANCE STATISTICAL TRAINING IN AFRICA Paper drafted by Jean-Louis Bodin and Lamine Diop, consultants, for the meeting of the PARIS21 task team on statistical training in Africa (Yaoundé, Cameroon: 18 and 19 1September 2007) One of the recommendations made by the workshop on statistical training in Africa held in Kampala from 12 to 13 March 2007 is that “an opportunity study on the creation of a trust fund for statistical training ” should be carried out. The purpose of this memorandum is to present the key factors with respect to the operation of a trust fund by drawing on the experience of AFRISTAT, by identifying the conditions to be met to ensure the success of such a financing instrument and by examining the problems to be solved as part of an opportunity study on the creation of such a fund with respect to funding statistical training in Africa. This memorandum, in other words, is not the opportunity study that was recommended at Kampala. Its goal is to launch a debate on this issue. 1. Prerequisites in the operation of a trust fund: the experience of AFRISTAT A trust fund is a mechanism in which medium- or long-term funding of an organisation or specific activities is totally or partly ensured by income from capital subscribed and paid up at the beginning of a given period by the various stakeholders. Management of such a fund is usually entrusted to a ...

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11 September 2007
THOUGHTS ABOUT THE CREATION OF A TRUST FUND TO FINANCE
STATISTICAL TRAINING IN AFRICA
Paper drafted by Jean-Louis Bodin and Lamine Diop, consultants, for the meeting of the
PARIS21 task team on statistical training in Africa (Yaoundé, Cameroon: 18 and 19
September 2007)
1
One of the recommendations made by the workshop on statistical training in Africa held in
Kampala from 12 to 13 March 2007 is that
an opportunity study on the creation of a trust
fund for statistical training
should be carried out
.
The purpose of this memorandum is to present the key factors with respect to the operation
of a trust fund by drawing on the experience of AFRISTAT, by identifying the conditions to be
met to ensure the success of such a financing instrument and by examining the problems to
be solved as part of an opportunity study on the creation of such a fund with respect to
funding statistical training in Africa.
This memorandum, in other words, is not the opportunity study that was recommended at
Kampala. Its goal is to launch a debate on this issue.
1.
Prerequisites in the operation of a trust fund: the experience of AFRISTAT
A trust fund is a mechanism in which medium- or long-term funding of an organisation or
specific activities is totally or partly ensured by income from capital subscribed and paid up
at the beginning of a given period by the various stakeholders. Management of such a fund
is usually entrusted to a mutually agreed upon financial institution.
The idea of setting up a trust fund to finance the activities of an African regional organisation
dedicated to statistics became reality for the first time in 1993, when the Economic and
Statistical Observatory for sub-Saharan Africa, called AFRISTAT, was created. At that point in
time, the goal was to find an original medium-term financing mechanism that pursued two
objectives:
ensure lasting and dependable funding of the current operation (ex projects) of
AFRISTAT, in order to no longer depend on the financing of projects by various
donors to cover current expenditure;
no longer rely solely on annual contributions by Member States. This is because
experience had shown that virtually all African sub-regional or regional organisations,
whose operation was ensured by annual contributions by Member States, ran into
recurring financial problems, due to the delays usually incurred with respect to their
payment or even sometimes non-payment. Such problems prevented them from
implementing their activity programmes with the regularity and visibility that could
have been wished.
1
The ideas expressed in this memorandum are those of the authors only and do not necessarily reflect the views
of anybody else or any institution.
2
In the case of AFRISTAT, it was decided, given the modest resources of the fourteen
founding Member States, to estimate
the fund’s
capital at a level that would enable the
institution to operate steadily over an eight-year period by using every year not only capital
income, but also part of the capital. This estimate had been based on the assumption that
the capital would be depleted at the end of the eight years. For, funding the operation of
AFRISTAT solely with capital income would have required excessively large contributions in
comparison with the budgetary resources that Member States could be reasonably
requested to allocate to this regional organisation.
The capital of the trust fund aimed at funding AFRISTAT during the period ranging from 1
January 1998 to 31 December 2005 was subscribed to, in equal shares, by the fourteen
Member States, while France was the only donor to accept to pay a contribution to the fund.
All in all,
the fund’s
capital totalled around 3.3 billion francs CFA, or about
5 million, with
France paying around 45%
2
. Furthermore, one has to add the contributions of the four other
States that joined AFRISTAT between 1998 and 2002. Management of the AFRISTAT Fund
was entrusted to the French Development Agency (AFD), a French public institution charged
in particular with implementing part of French bilateral aid to African countries via donations
or loans
whether preferential or not.
This initial experience was successful and enabled AFRISTAT to operate without any
problems until 2006. The two objectives set when the Fund was set up have been met
overall. This original initiative inspired the founders of another regional organisation: i.e. the
Organisation for Harmonisation of Business Law in Africa (OHADA). The same idea was used
in 2003 when setting up a second trust fund aimed at funding the activities of AFRISTAT in
the ten-year period ranging from 1 January 2006 to 31 December 2015.
2.
Conditions for the satisfactory operation of a trust fund
To assess the amount of a trust fund, one usually starts off by estimating the expenditure to
be covered, year by year and for the entire period that has been chosen, by taking into
account foreseeable inflation. Assumptions are made about the interest rates at which the
capital can be invested and simulations are subsequently carried out to monitor the
foreseeable changes in the level of capital and generated income. Obviously, in practice and
ceteris paribus
, the rate at which expenditure is covered will depend on moves in inflation
rates and interest rates. The amount of capital income depends, moreover, on the duration
and volume of investments made and therefore on the rapidity at which stakeholders
actually pay up their contributions. Attention must accordingly be paid to ensuring that the
following conditions are met:
- the assessment of expenditure to be covered must be exhaustive;
- the assumptions drawn upon with respect to moves in inflation and interest rates
must be realistic;
- the various stakeholders need to pay up their contribution preferably in one lump
sum and as soon as the call for contributions is made. For any delay in payment or
2
The funding package also included another component, i.e. a subsidy granted by France to finance the start-up
period (1996 and 1997). France and other donors, in particular the European Commission, financed major
projects aimed at developing statistics via AFRISTAT for the benefit of Member States.
3
payment by instalments has negative consequences on the efficiency of the financing
mechanism since capital income is reduced.
In the case of the first AFRISTAT Fund, only half of the Member States and France paid their
contributions before 1 January 1998, the day on which the Fund began to finance activities.
Furthermore, interest rates over the relevant period were far lower than had been projected
in simulations. The foregoing led to a shortfall that was offset to a large extent by statistical
development programmes financed by development partners as well as the revenue derived
by AFRISTAT from its services.
With regard to the setting up of the second AFRISTAT Fund, delays have been significant at
times and some Member States have asked to be allowed to pay by instalments in order to
stagger their payments over several years, a request that runs counter to the very principle
of the Fund. These delays can be explained by the relatively substantial contributions
requested from Member States, namely more than three times larger on average than for
the first Fund, but could be detrimental for the efficiency of the process
3
.
3.
Financing statistical training in Africa by a trust fund.
The Kampala workshop on statistical training in Africa highlighted the funding problems
encountered by all training centres located in Africa. These problems are now dramatic in
the crucial field of scholarships for students who are enrolling in the various initial training
courses of Statistics schools of sub-Saharan African countries. This is because development
partners are increasingly choosing to provide budgetary aid to the detriment of aid for
specific projects. Under these conditions, it is up to the beneficiary countries to define their
priorities with respect to the budgetary aid they receive. As a result, Statistics is competing
with other fields or sectors of activity deemed to be a priority by said countries. Under these
conditions, scholarships allocated to statistical training may well eventually disappear.
Apart from scholarships, the problem of funding statistical training relates to financing
equipment and pedagogical tools, modernising the infrastructure and providing support for
the ongoing training of teachers and for research.
These various needs could be
a priori
financed by a mechanism such as a trust fund in line
with what has been done for AFRISTAT.
The prerequisites to ensure the efficiency of such a Fund were spelled out in point 2 above.
In addition to achieving the prerequisites for the satisfactory operation of a trust fund, the
following problems ought to be studied at the meeting to be held on 18 and 19 September:
a)
Should the creation of a single fund for statistical training be considered or should
there be several funds in view of the fact that the statistical training centres
concerned are located in three groups of countries with respect to their language:
French-speaking, English-speaking and Portuguese-speaking?
3
The AFRISTAT Council of Ministers is continuing to exert pressure on the Member States that have not yet
fully paid up their contribution.
4
Comment:
The advantage of a single fund consists in sharing risks and dealing with
the problem of statistical training in Africa as a whole. A single fund would make a
contribution to the statistical integration of the African continent. On the other hand,
managing a single fund might be difficult because funding needs are closely linked to
the cultural context and academic practices that vary significantly from one linguistic
zone to another. In the worst-case scenario, these differences in the cultural and
academic contexts could give rise to internal conflicts in the management of a single
fund.
b)
What kind of relationship should be possibly established between the fund(s)
mentioned in point a) and the second AFRISTAT Fund that is being set up, if the
fact is taken into account that to date the Member States of this organisation are
mostly French-speaking countries?
Comment:
One might consider a single fund aimed at meeting the financing
requirements of all statistical activities in Africa. The advantage would be that
requests for a contribution to this single fund addressed to States would cover all
requirements and would undoubtedly be dealt with at the highest political level.
However, the large sums to be collected might lead to a serious problem for the
budgets of Member States that might be tempted to an even greater extent to pay
their contribution in instalments.
c)
Must the trust fund(s) to be set up be restricted to funding scholarships for initial
training or also cover the other needs related to initial training and possibly
ongoing vocational training?
Comment:
This question resembles question a. There are pros (e.g. a single request)
and cons (size of sums to be collected) for both options.
d)
What is the likelihood of convincing development partners to make a contribution
to the capital of the fund(s), give the stance most of them have voiced until now?
In other words, they argue that their regulations or procedures do not allow them
to subscribe to the capital of such funds.
e)
What procedure would have to be set up to allocate scholarships given the still
highly unequal breakdown of applicants accepted in statistical training centres,
notably in French-speaking training centres that select their students with
competitive examinations (so-called
concours
)?
f)
Which institution(s) might be entrusted with the management of the capital of
the future trust fund(s)?
Comment:
Ideally, it must be an African financial institution. However, one should
bear in mind the demand for transparent and low-scale management (management
costs need to be kept to a minimum).
g)
Would it be possible, and under which conditions, to get African central banks,
regional and sub-regional development banks and economic integration
organisations to make a contribution?
The answers to be given to these questions will be decisive with regard to the conclusions of
the opportunity study recommended by the Kampala workshop held in March 2007.