Webinar recap - Financing Africa: where is the money? Assessing the supply

On Friday, 3 May 2024, the Mo Ibrahim Foundation hosted the second session of the mini-webinar series on Financing Africa: where is the money? This session assessed the current supply from non-African partners (bilateral, multilateral, private) using the 2024 Now Generation Network (NGN) survey.

The webinar was hosted by Tracy Kituyi, NGN Lead at the Mo Ibrahim Foundation. The session featured insightful contributions from Dr Richard Adu-Gyamfi, Research Fellow at the Doing Business in Africa research group, Modupeoluwa (Dupe) Ige, a global financial markets expert and Valerie Jeche, who specialises in international development at Midlands State University, Zimbabwe. Drawing from the 2024 NGN Survey, the panel unpacked key insights into Africa's financial landscape.

African youth perspectives - highlights

• Half of Africa's youth support borrowing for development, while the other half is against it.
• Almost 60% of Africa’s youth believe countries should reduce government expenditure to address the debt servicing costs.
• Africa’s youth are calling for a more inclusive global financial architecture with greater African representation.
• 38.1% of respondents called for fairer credit ratings from the main credit rating agencies (CRAs) and 37.1% recommended alternative multilateral financial organisations e.g. BRICS etc.

Sustainable debt finance in Africa, with a focus on private sector involvement

Richard emphasised the need for sustainable debt finance to drive positive environmental and social impact. However, concerns were raised over high debt-to-GDP ratios in many African countries, signalling the need for strategic shifts towards private sector-led growth. Tracy and Richard also stressed the need to foster financial self-sufficiency to mitigate escalating debt burdens. The panel also argued that African nations should adopt sustainable debt finance practices, highlighting the disparity between borrowing and tangible returns. With many countries burdened by high debt-to-GDP ratios, Richard claimed that it is important that there is a strategic shift, advocating for a symbiotic relationship between reduced government expenditure and heightened private sector involvement. Tracy reinforced Richard's position and echoed the importance of fostering financial self-sufficiency alongside support for small and medium-sized enterprises (SMEs), shedding light on a pathway that prioritises sustainable debt finance and empowers the private sector to drive economic growth and resilience.

As Africa grapples with its debt dilemma, Richard and Tracy's dialogue serves as an urgent call for transformative actions. By embracing sustainable finance principles and leveraging the potential of the private sector, African nations can navigate towards a more prosperous future. This entails reimagining economic structures and fostering an environment conducive to innovation and growth.

Harnessing Africa’s wealth requires unity and sound fiscal management

Dupe brought attention to Africa's immense natural resources, which hold the promise of driving economic growth and development. However, she also highlighted the critical need for sound fiscal management and unity among African nations to effectively harness these resources. Stressing the importance of good governance and a united front, Dupe emphasised the need for African governments and stakeholders to align on shared development goals. Drawing parallels with initiatives like those undertaken by the European Union, she suggested setting clear targets and goals for deficit and debt servicing ratios as a means to enhance fiscal responsibility. Moreover, Dupe proposed that increasing taxes could be more appetising appealing to citizens if they see tangible improvements in infrastructure and public services, fostering a sense of accountability and trust between governments and their constituents.

As Dupe's insights resonate, it becomes evident that Africa stands at a critical juncture, poised for transformative change. By embracing sound fiscal policies, fostering unity, and prioritising transparency in governance, African nations can unlock the full potential of their abundant resources.

Focus on increasing efficiency in government expenditure

Valerie raised a critical concern regarding the sustainability of reducing government expenditure, particularly in the context of Africa's rapidly growing population and the associated development costs. While acknowledging the need for fiscal responsibility, she emphasises the potential drawbacks of indiscriminate spending cuts, cautioning against the negative impacts on public services and essential projects vital for economic growth and social stability. Valerie contended that while cutting public spending may seem like a short-term solution to alleviate debt burdens, it risks undermining long-term development goals and exacerbating poverty and inequality, especially among vulnerable groups.

Valerie's perspective underscores the multifaceted challenges inherent in fiscal management within African nations. Instead of solely focusing on austerity measures, Valerie advocates for a more nuanced approach that prioritises sustainable development goals (SDGs), increases domestic revenue, and rationalises spending. Drawing parallels with Ghana's public financial management reform strategy, which successfully improved the efficiency of public spending while prioritising high-impact projects, Valerie suggests that African countries can enhance fiscal responsibility by implementing growth-oriented policies. By striking a balance between expenditure cuts and targeted investments in essential services, infrastructure, and economic diversification, African nations can navigate the complexities of fiscal management while advancing towards sustainable development and inclusive growth.