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4. Sources of financing


Livestock-related revenue
Livestock services revenue (LSR)

Sources of financing here mainly relate to domestic sources, although external funding including grants, loans and technical assistance, does play an important source of financing for many of the countries considered (see Anteneh, 1983 and 1985). Domestic sources further relate to fiscal instruments used by governments to raise general revenue from the livestock sector irrespective of whether such revenue is wholly available to the financing of the sector. Indirect taxes on external and internal trade in livestock and livestock products are normally treated as part of the central government revenue. Even where user-specific charges are imposed and collected, there is no assurance that these get to be directly allocated to the funding of livestock services. There is also no way of determining what proportion of the amounts collected are recycled. At this stage, a brief presentation of the available information on sources of finance will help in appreciating the absolute level of funds raised from the livestock sector as well as the relative (potential) contribution of livestock-related revenue to meeting the financing requirements of the services.

Livestock-related revenue

As noted elsewhere (Anteneh, 1983 and 1985), we use the term "livestock-related revenue" to denote all government revenue raised from taxes (other than income or profit taxes from livestock production activities) and other charges. There is a marked difference between West and Central (WCA) on the one hand, and East and Southern African (ESA) countries on the other, as to the way these revenues are treated. Most WCA countries, prior to the drought in the 1970s, raised revenue from the livestock sector through both direct and indirect taxation. Direct taxes in the form of livestock head taxes have either been suspended or discontinued since the drought and most of those countries considered here seem to have shifted to sources based on indirect taxes and charges.

The type of taxes and charges applicable to livestock in the 13 WCA countries has been reported in Anteneh (1983, Annex Table E). French-speaking countries in West and Central Africa have basically similar instruments through which they raise livestock related revenue. These include external and internal trade taxes, licensing fees and user charges. There is a multiplicity of taxation instruments employed and a wide diversity of conditions under which these are applied (e.g. concessions to different reciprocal groupings such as CEAO, EEC-associated countries, etc.). Beyond that the lack of data on the volume and value of trade and on the number of producers or animals affected under the different categories make it difficult to provide the total amounts of taxes and charges raised in most of these countries. In general, however, substantial amounts seem to have been raised from indirect taxation sources, even after allowing for uncontrolled trade in animals or evasions by livestock traders. Just to give some order of magnitude, the information provided for the 3 countries in Table 11 shows that taxes on live animal exports alone constituted an important proportion of the livestock budget in the early 1970s. Mali, Mauritania and Niger are important livestock exporting countries. Although no data are available to determine the contribution of total livestock-related revenue to agricultural revenue, particularly that not generated from income or profit taxes, there is no doubt that, as a whole, taxes, fees and other charges on livestock in combination form an important source of tax revenue.

In all three countries, livestock export taxes declined substantially after 1971/72. Supplies of live animals did certainly decline as a result of the drought in the early 1970s and this was probably a major cause for the decrease in export tax revenue. The three Sahelian countries are major suppliers to the meat importing countries of the coastal states of West Africa. The latter have shifted to non-Sahelian and non-African sources of supply as a consequence of the drought-induced shortages and the instability of Sahelian supplies. Additionally, competition from non-Sahelian sources (including EEC subsidized beef supplies) could have exerted a downward pressure on export prices on which ad valorem taxes are based.

Table 11. Revenue from duties on live animal exports a

Country

1970

1971

1972

1973

1974

in millions current CFA and percent

Mali


Revenue

170

182

150

115

93


Livestock budget

137

154

148

142

174


Revenue/budget (%)

124

118

101

81

53

Mauritania


Revenue

18

10

21

26

22


Livestock budget

140

163

174

157

135


Revenue/budget (%)

14

6

12

16

16

Niger


Revenue b

127

178

223

213

165


Livestock budget

262

270

281

302

328


Revenue/budget (%)

48

66

79

70

50

a Based on export duty rates per head of livestock (cattle and sheep/goats only) and on the total number of officially recorded exports

b Includes a small proportion (< 7%) of taxes on meat exports

Sources: Revenue calculations based on export figures and duty rates reported in GTZ/SEDES (1976); Anteneh (1983) for livestock budget data.

Data on the amount of livestock-related government revenue for East and Southern African countries are again scant. During the 1970s livestock head taxes were not used to raise revenue in any of the reviewed countries in the region. For other revenue types, only data for Botswana, Ethiopia, Lesotho, Swaziland and Tanzania-are available from official publications. The revenues are raised from livestock-based external and internal trade taxes, fees and other charges. Table 12 below presents data on such government revenue for selected years and compares the respective livestock budgets to the livestock-related revenues raised.

Tables 11 and 12 show that in many of the important livestock countries livestock-related revenue contributed the equivalent of no less than one-third of the recurrent livestock budget. The case of Ethiopia makes it quite evident that livestock services which seem to be underfunded and understaffed could benefit from a larger allocation from these sources. It is not of course realistic to talk about allocating all livestock-related revenue to livestock services but it may be so in regard to user fees directly related to the provision of services. We now turn to considering this aspect.

Table 12. Livestock-related revenue and government recurrent livestock budgets in some East and Southern African countries (national currencies in current prices)

Country

1970/71

1972/73

1974/75

1976/77

1978/79

1980/81

Botswana (000 Pula)


Revenue

315

358

622

1056

1226

1357


Livestock budget

1155

1277

2567

2623

3794

8499


Revenue/budget (%)

27

28

24

40

32

16

Ethiopia (000 Birr)


Revenue

4205

5976

4092

4474

5929

6592


Livestock budget

1982

2768

3142

3376

3570

1160


Revenue/budget (%)

212

216

130

132

166

568

Lesotho (000 Maloti)


Revenue

233 a

256

208

332

386

352


Livestock budget

278 a

280

346

827

1546

2293


Revenue/budget (%)

84

91

60

40

25

15

Swaziland (000 Emalangeni)


Revenue

118 a

100

90

105

107

73


Livestock budget

654 b

648

831

1175

2486

2980


Revenue/budget (%)

18

15

11

9

4

2

Tanzania (000 Tsh) b


Revenue

5190

..

4398

6110

15989

33161 c


Livestock budget

29169

..

23686

25262

90234

96142 c


Revenue/budget (%)

18


19

24

18

34

a 1971/72

b Data up to and including 1976/77 are only for central government while figures for 1978/79 and 1980/81 include regional budgets and revenues

c 1981/82

".." = Data not available

Sources: Anteneh (1985; and unpublished data for Ethiopia, Lesotho and Swaziland).

Livestock services revenue (LSR)

The term livestock services revenue (LSR) is used to denote government revenue mainly from user fees and charges (including sale of inputs such as drugs, vaccines, etc.) as well as, in some cases, revenue generated from the sale of produce from service-related activities such as livestock research stations. They exclude livestock head taxes, trade taxes etc. imposed by governments. Much of the quantitative data in this regard are presently available only for the East and Southern African (ESA) countries and have been reported in Anteneh (1985) for six countries.

Funds raised by this means, particularly from user fees and charges, are a source of finance to which managers of livestock services can lay a legitimate claim. Such a claim can be envisaged in one of two ways. When the livestock service departments themselves can collect and utilize such funds to defray their operating costs in whole or in part, the claim is direct and unequivocal - - the authority and responsibility for the expenditure rests with the departments. Where funds so raised and collected by the departments have by law to revert to the central treasury, the authority to allocate the funds to the services rests with central government. The claims in the latter case are indirect but still legitimate, because funds are made up of user-specific revenues raised in the exclusive domain of services offered by the departments which, however, do not have the authority to allocate or spend them.

It would thus seem reasonable to compare the performance of different countries in this respect not only to see the extent to which such revenues contribute to expenditure but also as a reflection of government policy on cost recovery. Table 13 presents information on the proportion of livestock recurrent expenditure covered by livestock services revenue over a period of years.

Table 13. Livestock services revenue (LSR) as a proportion of LRE and NSE in some East and Southern African countries.

Country

1970/71

1972/73

1974/75

1976/77

1978/79

Percent share in

LRE

NSE

LRE

NSE

LRE

NSE

LRE

NSE

LRE

NSE

Botswana

2

3

4

8

6

10

18

28

19

28

Ethiopia

18

118

8

55

7

41

13

70

10

45

Kenya

..

..

..

..

26

42

39

74

14

24

Lesotho a

15

39

23

56

16

38

20

45

13

40

Malawi

34

69

32

59

45

82

34

49

24

44

Swaziland a

14

29

11

25

7

17

7

20

4

10

Tanzania b

10

20

..

..

7

12

23

41

18

26

Zambia

1

1

..

..

1

1

2

2

2

2

LSR = Revenue from veterinary service fees, sale of drugs, etc. plus sale of produce
LRE = Recurrent expenditure on livestock services or livestock recurrent expenditure
NSE = Non-staff expenditure
".." = Data not available

a Data for 1970/71 are from 1971/72

b Percent shares calculated exclude revenue collected (LSR) and expenditures made by regional administrations.

Source: Anteneh (1985, and unpublished data for Ethiopia, Lesotho and Swaziland).

Except for Botswana where the proportion of livestock services revenue in both LRE and NSE has steadily increased, all other countries' percentage figures show generally (and in cases like Ethiopia, sharply) declining trends. Despite this, the figures for most countries (excluding Tanzania whose data tend to be particularly unreliable) show that livestock services revenues represent an important proportion of the non-staff expenditures in particular.

Changes over time in the proportion of expenditure generated from livestock services revenue (LSR) could have occurred as a result of the fluctuations in the absolute level of total recurrent and non-staff expenditure on livestock services and in revenue amounts. A comparison of the real growth rates of the three values (i.e. LSR, LRE and NSE) should partially explain the extent to which the different countries have made an effort (both in terms of policy making and implementation) to recover costs in the face of increasing real costs of government services. In Table 14 below these comparisons are made on a per TLU basis to further capture the effect of changes in the livestock population over time.

Table 14. Annual growth rates of LSR, NSE and LRE per TLU (1975 constant prices)

Country

Annual growth rates (%): 1970/71 - 1978/79

LSR

NSE

LRE

Botswana

23.8

- 4.0

- 6.6

Ethiopia

- 2.2

10.9

5.2

Kenya a

- 14.3

- 0.8

0.0

Lesotho b

13.6

12.3

15.9

Malawi

- 0.4

5.5

4.0

Swaziland b

- 2.5

11.4

16.6

Zambia

6.6

- 6.8

- 2.3

LSR = Revenue from veterinary service fees, sale of drugs, etc. plus sale of produce
LRE = Recurrent expenditure on livestock services or livestock recurrent expenditure
NSE = Non-staff expenditure
a 1974/75 - 1978/79
b 1971/72 - 1978/79

Source: Anteneh (1985) and Annex Tables A 3, A 4, and A 10.

It is known that AI and dipping services in Kenya have been heavily subsidized (see FAO 1981; CTA, 1985). In Swaziland, dipping chemicals have been provided free to producers during the 1970s (CTA, 1985). On the other hand, most of the veterinary requisites for treatment are directly or indirectly paid for by users in Botswana (e.g. through the livestock advisory centres). In Lesotho, an established revolving fund caters to livestock producers who require animal health and husbandry inputs. It is clear from Tables 13 and 14 how these differing policies have affected the pattern of growth in LSR and the proportion of total livestock recurrent expenditure and its non-staff category which it has been possible to recover by charging for certain services. Other things being equal, where the real cost of services is increasing, there is very little economic or financial justification for increasing the level of subsidy to the services. This is particularly true for those livestock services from which benefits exclusively accrue to the producers.

There is, however, one qualification we need to make considering the practical realities of policy-making in most of Africa. In earlier discussions, we have dealt with the structure of expenditure in terms of the proportion taken up by the staff and non-staff categories. Probably one of the important reasons why staff expenditures could not be adjusted downwards in the face of absolutely necessary budget cuts is that most governments have been unable or unwilling to make a corresponding adjustment in the level of staffing. As a consequence, budget cuts have instead inevitably resulted in severe reductions in the non-staff categories of expenditure. In view of this, it could be argued that cost recovery policy should aim to charge users only for that part of expenditure on which governments themselves are willing or able to exercise control in the first instance. In such cases staff costs which producers have no power to influence would have to be borne by the treasury regardless of whether the service provided is user-specific and benefits producers individually.


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