NAIROBI — As external financing conditions are expected to worsen in the medium term, the African continent needs to focus on domestic resource mobilization in order to meet development goals, according to “Foresight Africa: Top priorities for Africa in 2018,” a recently released report from The Brookings Institution.
The weak outlook for commodity prices means that countries can’t depend on export earnings; rising public debt puts pressures on external financing costs; monetary policy accommodation reduction in advanced economies could depreciate local currencies in Africa; and the future of official development assistance is unclear, says the report.
“What is a good development plan if you don’t have financing? That is critical,” Brahima Coulibaly, senior fellow and director of the Africa Growth Initiative at The Brookings Institution, said during a panel on Wednesday in Washington, D.C., discussing the report. “We are highlighting the importance of Africa to look a bit more inward.”
The African continent is estimated to be losing at least $50 billion through illicit financial outflows each year. Experts at the Pan African Conference on Illicit Financial Flows and Tax in Nairobi say that money is needed in order to reach the SDGs.
The elimination of illicit financial flow will be key to the continent picking up this slack in funding, David Mehdi Hamam, acting special adviser to the secretary-general on Africa at the United Nations, said during the panel. Illicit financial flows, mispricing, and other forms of capital flight, is costing Africa over $50 billion per year, according to the report. The majority of this comes from tax evasion and tax avoidance of multinational corporations.
“Just capturing that $50 billion a year is already the equivalent of the official development assistance in Africa,” he said.
Another priority should be ensuring that there is value added to exports coming from African nations, said Hamam. For example, Africa produces about 60 percent of the world cocoa production, but farmers only receive about 7 percent of the final price, he said.
Ensuring that these goals are met rests on improving the quality of the leadership on the continent, some of the panelists argued.
“If we don’t have leadership, we cannot implement the change we need,” said Thione Niang, co-founder of Akon Lighting Africa.
Read more Devex coverage on domestic resource mobilization.