According to the Mo Ibrahim Foundation's report "Financing Africa: Where is the Money?" the African continent cannot continue to rely on external financing. Other solutions exist, but they must be used effectively.
To achieve development goals and combat climate change, Africa must rely on itself, the Mo Ibrahim Foundation recommends in a report dedicated to the issue of financing on the continent. Its assessment is clear: Official Development Assistance (ODA) represents only 10% of the continent's financial resources. Even then, Africa does not control the decisions regarding how this money is used, as its allocation often comes with specific conditions. Debt is not the solution either. The costs of borrowing and servicing debt have tripled since 2009. Moreover, the very structure of debt has become increasingly complex, making traditional relief mechanisms obsolete.
"We need a complete paradigm shift. It's not about Africa continuing to stand before the developed world with a begging bowl,” Mo Ibrahim asserts when commenting on these realities. Questioning how much more developed countries can promise, the founder and chairman of the Mo Ibrahim Foundation emphasizes that the focus should now be on mobilizing not only more money but "smarter money.”
In its data-rich report, filled with key indicators, the Mo Ibrahim Foundation argues that the main source of financing in Africa could be domestic resources, which, according to the African Union, should cover between 75% and 90% of the financing needs for the Agenda 2063. The problem is that many of these resources are either at their peak potential, dormant, or too often misused, notes the Foundation, which offers numerous recommendations throughout its 165-page report.
Preventing leaks through Illicit Financial Flows (IFFs) could boost resources by up to $100 billion per year, surpassing both the ODA received ($81 billion per year) and remittances to the continent ($97 billion per year).
With an average tax-to-GDP ratio of only 15.6% in Africa, which is half the OECD average, strengthening tax systems seems like a quick win. In fact, Africa lost $46 billion in corporate tax revenue due to tax incentives in 2019, more than half of the ODA it received.
The report also highlights the potential of mobilizing remittances, sovereign funds, pension funds, and private wealth. Furthermore, monetizing Africa’s green assets, including biodiversity, critical minerals, and carbon sequestration potential, could unlock significant financial resources, provided good governance and resource allocation towards population development are ensured.