Onome Amuge
Africa’s untapped financial potential, hidden in the cracks of mismanaged or underutilised domestic resources, could yield an annual windfall worth $100 billion, eclipsing both the $81 billion in Official Development Assistance (ODA) and $97 billion in remittances received by Africa each year, according to a report by the Mo Ibrahim Foundation.
The report, titled “Financing Africa: Where is the Money?”, however, bemoaned the rapidly growing gulf between Africa’s aspirations for sustainable development, as outlined in both the UN’s Agenda 2030 and the AU’s Agenda 2063, and the financial resources required to achieve these goals.
Compounding the problem, the report noted that Africa’s already uphill battle is further hindered by the cumulative impact of climate change, the enduring effects of the COVID-19 pandemic, and ongoing global crises in Russia-Ukraine and Israel-Gaza, highlighting the urgent need for a change in approach to financing if progress is to be accelerated.
With conflicting financial data overshadowing the true scale of Africa’s development and climate financing needs, the Mo Ibrahim Foundation’s report unravels the conflicting data surrounding Africa’s development and climate financing needs, stating that without clear prioritisation and effective management of resources, countries on the continent risk being plunged into a dilemma between immediate human welfare and long-term environmental sustainability.
The intricate role of debt in Africa’s financial ecosystem was also highlighted in the Mo Ibrahim Foundation’s report, revealing a complex and rapidly escalating financial burden that has left the continent grappling for answers. The analysis also exposes a host of dire issues, from inadequate risk assessment and mitigation practices to the controversial surcharges imposed by the International Monetary Fund (IMF), and even the persistent issue of Official Development Assistance (ODA) funds lying idle.
The 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 added that reigniting 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 percent tax-to-GDP ratio and the OECD average.
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.
The report also pointed out that Africa’s green assets, including its biodiversity, critical minerals, and carbon-sinking potential, if monetised, could provide much-needed financial resources for development.
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.”
