APA – Addis Ababa (Ethiopia) The 2023 edition of Africa’s Development Dynamics Report, released this week, put Africa’s “huge sustainable financing gap” until 2030 at $1.6 trillion.
The continent also needs additional financing of about $194 billion annually to achieve the SDGs on time, the report estimates.
This annual gap is equivalent to 7 percent of Africa’s gross domestic product (GDP) and 34 percent of its investments in 2021.
With the rising gap, countries are now advised to find the right balance between the benefits and costs of their investments to ensure sustainability.
According to the AU report, investments are sustainable if their economic, social and environmental benefits outweigh their total cost.
The AU members states also urged to exploit domestic resource mobilization effectively after its latest report revealed the continent Africa’s rising financial need for sustainable development goals (SDGs).
When mobilizing and allocating investments, African countries need to manage tensions between development goals and resilience to climate change, the report argues.
This includes balancing energy production and carbon mitigation, developing agricultural land use and conserving ecosystems, or creating mass employment while promoting labor standards.
To bridge the financing gap, AU Commissioner for Economic Development and Trade Albert Muchanga has also proposed “actionable African-driven solutions” including effective domestic financial resource mobilization.
Per the AU report, domestic government revenues amounted to $466 billion in 2021, equivalent to 17 percent of GDP, and assets held by African institutional investors hit $1.8 trillion in 2020, equivalent to 73 percent of GDP,
Muchanga says African countries could mobilize taxes as effectively as the country with the highest tax revenues on the continent – Tunisia at 32.5 percent of GDP – and governments could collect as much as $500 billion more in revenues, boosted by efficiency in curbing illicit financial flows, he argues.
His proposal also entails setting up a group of African billionaires to enhance their local investments, citing their overall underwhelming impact. More than half of the 46 billionaires in Africa do not invest in the continent, per AU.
Muchanga has also proposed for more African countries to establish pension funds after 15 African countries accumulated $380 billion of assets by 2020.
MG/as/APA