Business a.m.
The Mo Ibrahim Foundation has released a new report that details the widening gap in financing for Africa’s development and climate goals, highlighting the urgent need for a change in approach to financing if progress is to be accelerated.
The report, titled “Financing Africa: Where is the Money?”, outlines the financial requirements for Africa to reach its developmental and environmental targets and assesses the current resources available to address these needs. It also highlights the existence of resources to finance Africa’s development and climate goals, but underscores the ineffectiveness of the allocation process and the dormant or misused nature of domestic resources.
Amidst the conflicting financial data on Africa’s development and climate goals, the report reveals the magnitude of the required funds, emphasising the criticality of balancing climate finance and development finance. The report also underscores the risk of African nations being forced to choose between improving the welfare of their citizens and ensuring environmental sustainability if these two areas of finance are not prioritised and managed effectively.
The report explores the role of debt in Africa’s financial landscape, underscoring its growing complexity, surging costs, and the need for a more effective approach to debt relief. Furthermore, the report highlights inadequate African risk assessment and mitigation, specific surcharges imposed by the IMF, and dormant Official Development Assistance (ODA) funds as key areas of concern.
If tapped, Africa’s domestic resources, currently dormant or misused, could boost annual funding by $100 billion, overcoming the $81 billion ODA and $97 Billion remittances, says the report.
The Mo Ibrahim Foundation report further reveals that Africa’s domestic resources, which should cover 75-90 percent of the continent’s Agenda 2063 funding needs, are largely potential or dormant, and often misused. It addedReigniting Africa’s Tax Systems Could Unlock $46 Billion in Corporate Tax Revenue, More than Half of ODA Received, and Close the Gap Between Africa’s 15.6% Tax-to-GDP Ratio and the OECD Average, States Mo Ibrahim Report.
According to the report, even as OECD nations collect twice the tax revenue as Africa, Africa’s 15.6 percent tax-to-GDP ratio Squanders $46 billion in corporate tax revenue each year due to tax incentives, outstripping ODA.
The report suggests that tapping into remittances, sovereign wealth funds, pension funds, and private wealth, as well as monetising Africa’s natural assets like biodiversity, critical minerals, and carbon-sinking potential could generate significant financial resources, provided that good governance and allocation of resources to people’s development is prioritised.
According to the Mo Ibrahim Foundation report, Africa’s green assets, including its biodiversity, critical minerals, and carbon-sinking potential, if monetised, could provide much-needed financial resources for development.
Despite the cancellation of the Ibrahim Governance Weekend, which was to be held in Nigeria, the input from the expected speakers and panellists proved invaluable in finalising the Mo Ibrahim Foundation’s report on African financing.
Commenting on the release of the report, Mo Ibrahim, founder and chair of the Mo Ibrahim Foundation, said:
“We need a complete change of paradigm. This is not about Africa coming to the developed world with a begging bowl and developed countries considering how much more they can pledge. This is about smarter money, not just more money. As this report outlines, the money is already there. But current processes prevent resources from being used to properly address the challenges.
“Steps must be taken to reform the international financing system and update African debt structuring, risk assessment and mitigation and aid conditionalities. Even more, our continent must stop squandering its own assets and take proper ownership and responsibility. In short, we must apply good governance to ensure these assets are adequately leveraged for the best interests of our people.”
