The money to finance Africa’s development is there

In recent years, I have read many sobering reports on the state of Africa’s development and specific vulnerability to climate change. But these increasingly stark warnings do not seem to be heeded.

For instance, only three weeks ago the World Bank’s latest Global Economic Prospects report found that global economic growth will stabilise in 2024 for the first time in three years, but at a pace insufficient for progress on development goals. In 2024, one in four developing economies is expected to remain poorer than it was on the eve of the pandemic in 2019. This is a recipe for more instability and increased conflict. The current state of play cannot continue – something has to give.

This is not, however, a plea for more money: quite the opposite. Based on MIF’s latest report, 2024 Ibrahim Forum report - Financing Africa: where is the money? the money to finance Africa’s development is already there, But more often than not, it is misused, inefficient or inaccessible; what’s needed is a complete shift in the financing paradigm.

We got to this conclusion via three core assessments of financing in Africa: the finance needed; external resources; and domestic resources.

So, first, what’s needed?

Both the UN’s 2030 Sustainable Development Goals and the African Union’s Agenda 2063 are far from being met, with key gaps evident in health, food security, economic transformation and strong institutions. Assessing the financial needs to achieve the goals in due time reveals a complex picture marked by staggering numbers ranging from $900 billion to $1.3 trillion a year or higher.

Climate change exacerbates these challenges, with the continent facing an estimated annual GDP loss of up to $50 billion. Furthermore, mainly led by already developed countries, whose citizens all have had access to energy for a long time, the current global conversation on climate prioritises mitigation. This means that the needs for adaptation, Africa’s priority, remain underestimated and the needs for immediate access to energy for all are mostly overlooked.

In short, Africa’s financing needs are vast. This leads us to the next question: where is the money to address these daunting challenges?

Let’s start with external resources.

 Official Development Assistance (ODA) constitutes nearly 10% of the continent’s financial resources, but conditionalities and the focus of traditional donors often limit its impact. Debt has become an impossible option, as Africa’s external debt has already tripled since 2009, and is compounded by a complex structure that renders traditional relief mechanisms obsolete. Foreign Direct Investment (FDI) and participation in global financial markets remain disproportionately low.

To move forward, I am convinced of our need for a radical reboot of the current multilateral financial system. In practice, this means increasing concessionality, enhancing Africa’s representation at decision-making level, boosting the agility, flexibility and innovation of lending institutions, updating approaches to risk assessment and mitigation, and effectively implementing the ever-piling up global commitments.

But we cannot simply point the finger at the international community. We must also assess Africa’s domestic resources, which, to be frank, is what concerns me most.

To be blunt, we are squandering our own resources. While substantial, Africa’s resources are currently left dormant and too often misused.  According to the African Union, the mobilisation of the continent’s domestic resources is expected to cover up to 90% of the financing required for Agenda 2063. This means drying up illicit financial flows, strengthening tax systems (we cannot afford tax holidays for foreign companies), leveraging remittances, sovereign funds, pension funds, and monetising Africa’s green assets, including biodiversity, critical minerals and carbon-sinking potential.

The many streams of finance available on the external and domestic front drive home our central conclusion: the money is there.

What is needed is not further, seldom implemented pledges or more money, but smarter money. What is needed is a complete financing paradigm shift. A shift that avoids any trade-off between climate and development. A shift that moves beyond the aid and charity model to a cooperative, deal-making one, trading resources with expertise and information. And vitally, a shift that puts the responsibility and ownership, rather than the blame, on Africa.

Download report here

Read Mo's Foreword

Read the press release