Africa needs tapping domestic resources to raise $1.2trn annual funding for SDGs, says ECA

Mobilising domestic resources, from both the public and private sectors, is central to Africa’s collective success in achieving the 2030 sustainable development goals (SDGs) and the continent’s 50-year development plan, Agenda 2063, says Adam Elhiraika, director of the macroeconomic policy division at the Economic Commission for Africa (ECA).

Speaking at the beginning of a three-day high-level policy dialogue on development planning in Africa that is being held in Cairo, Egypt, Elhiraika said the 2030 Agenda and the Addis Ababa Action Agenda on financing for development both underscore that countries need to mobilise greater financial resources if they are to achieve the SDGs.

“African countries will need to tap into diverse funding sources for their development programmes, from tax and non-tax public revenues, to public borrowing, to private investments, to innovative sources of finance,” he said, adding estimates of additional financing needs for Africa to achieve the SDGs range from $600 billion to over $1.2 trillion annually.

“It is also clear that we will need more effective use of the available resources. In particular, public financial management must be improved, including through good budgeting and effective resource allocation towards priority areas,” he told senior government officials from member States, including Finance and Planning Ministers.

These challenges, he said, necessitate a financing framework that can manage the finance mobilised from various different sources.

“It also needs to make sure that the allocation of finance to particular areas of spending is done efficiently so that each type of finance is directed towards funding the programmes to which it is best suited,” the Director said.

Tax revenues, said Elhiraika, are a key part of domestic resources. In 2016, Africa’s tax revenues totalled $500 billion, which is around 3 times the level of ODA, FDI and remittances combined. Yet tax to GDP ratios on the continent are around 18 per cent, which is low compared to other regions.

Boosting tax collection could significantly increase available finance for development, he said.

“There are a number of ways in which tax revenues can be increased, for example by formalising or otherwise taxing the informal sector, which is estimated to account for 50 to 80 per cent of GDP in some African countries and remains largely untaxed,” said Elhiraika.

He said tackling illicit financial flows, particularly abusive tax practices of multinational corporations, could mobilise substantial additional revenues needed for Africa’s development.

Africa is losing over $100 billion annually through IFFs.

“IFFs not only reduce the rate of taxpayer compliance throughout the economy, they also draw the economy’s factors of production and resources into the illicit economy, which will affect overall economic activity and then undermine important social spending or productive investment programmes,” Mr. Elhiraika said, adding African countries that have used provisions for international exchange of information have been able to recover up to tens of millions of dollars in revenue.

He said the ECA was proud to co-organize this meeting which offers an opportunity for African development planners to discuss key issues facing them as they implement the two agendas.

The theme of the meeting is ‘Financing the Sustainable Development Goals in Africa: Strategies for planning and resource mobilization’.

Alaa Zahran, professor and president of the Institute of National Planning in Egypt, said like other countries, Egypt was experiencing challenges in implementing the SDGs but was conquering the challenges through concerted efforts involving every stakeholder.

He said planning was crucial if the continent was to successfully implement the SDGs and change the lives of ordinary people.