Domestic resources needed to fund Africa’s sustainable development, panel hears
Domestic resource mobilization is key for Africa’s growth. That was the consensus reached Tuesday at the “Financing Africa’s Transformation: Billions to Trillions” seminar during the African Development Bank Group’s (AfDB) 50th Annual Meetings in Abidjan. “If you really want to get to the trillions there is no way you can get there unless you start looking at domestic resources,” said Daniel Zelikow, Global Head of the Public Sector Group at JP Morgan.
With the adoption this year of the Sustainable Development Goals (SDGs), nations are scrambling to fund the process that will lead to sustainable and inclusive development that embraces economic, social and environmental dimensions. That will take a lot of financing. Estimates show investment needs for SDGs are US $5 to $6 trillion per year globally. For the developing world, it is expected to take US $3 to 4 trillion annually. The high price tag for developing nations would go to improve for basic infrastructure, allow for food security, establish climate change mitigation and adaption as well as go into health and education.
Weighing in on what will work and what will not when it comes to increasing Africa’s move toward those SDGs were Zelikow along with the Prime Minister of the Democratic Republic of Congo Augustin Matata Ponyo, Former Minister of Finance of South Africa Trevor Manual, the Executive Secretary of United Nations Economic Commission for Africa Carlos Lopes and AfDB President Donald Kaberuka. Uduak Amimo of the Royal Media Services moderated the discussion.
Improved governance of nations was another fundraising avenue raised by panelists and Ponyo said it is key. “Africa’s transformation can only be done by Africans,” he said, adding that Official Development Assistance (ODA), public sector and even private sector cannot money cannot stand alone. “We should be geared towards sectors that should lead to transformation and growth,” Ponyo said. “We should also enhance and scale up our living standards,” which includes education and health.
Lopes said there is a whole shift that needs to take place across the continent when it comes to the best way to spur economic growth and stability. He agreed with Ponyo adding that there is a need “to put money into vehicles that will unleash investment potential,” like education and health. One way to illustrate the impact he said is to “show how much GDP loss there will be if you don’t put money into health, for example.”
Redesigning and reinforcing taxation mechanisms, stemming illicit flows and rethinking the functions of development banks were other moves the group said could bolster the economic growth needed to achieve the SDGs.
Zelikow suggested that “the development finance community needs to look at themselves as agents of development.” He said that institutions like AfDB should also practice more risk mitigation so private sector investors will feel more comfortable doing business in the developing world. That means looking at how best to deal with commodity price risk, interest rate risk and weather related risk given the vast agricultural market in Africa, he said. “Maybe it makes sense for multilaterals to behave more like insurers rather than lenders.”
Kaberuka said the bottom line is that multilateral banks need to reengineer the way they operate in order to spur the kind of growth and economic stability the developing world needs. So, he said, the answer to Zelikow’s question regarding MDBs acting as insurers is, yes, they can. But, Kaberuka clarified, “not in the form in which they are today.”
The panel was a small part in an ongoing conversation on how Africa can achieve the SDGs. The thoughts and ideas from this gathering will be taken to Third International Development Conference on Financing for Development, which will take place in Addis Ababa, Ethiopia, this July.