For decades, African governments have struggled to raise enough revenue to regularly fund their own development, whether that be for education, medicine, or infrastructure. They have relied instead on foreign aid to keep institutions running.
During the Financing for Development conference in Sevilla, Spain, this year, experts said that there’s a $4 trillion annual financing gap in achieving the Sustainable Development Goals — and 40% of that gap, or $1.7 trillion, is in Africa. One of the primary culprits of this is tax collection. On average, sub-Saharan Africa collects just 16% of its GDP in taxes, far below the Organisation for Economic Co-operation and Development, or OECD, average of 34%. Between large informal economies, volatile revenues from oil and mining, weak tax administrations, illicit financial flows, and the eroding public trust that results from a lack of visible services, many countries on the continent struggle to secure a regular tax income, which leaves them with extremely limited public funds.
But the landscape is shifting — largely because it has to. With massive cuts in foreign aid, debt crises squeezing national budgets, and global lenders pushing for stronger fiscal independence, governments across Africa are turning to digital tax systems, levies on multinational tech companies, and regional cooperation to capture revenues that once slipped away. In addition, countries are moving forward on developing a tax convention under the United Nations — something low- and middle-income countries have been pushing for over a decade. Some said it’s a silver lining to the aid cuts.