PR TIMES AFRICA PRTimesAfrica (March 2016) | Page 61

significant financing shortfall,” African heads of
state and governments affirmed in a zero draft
of the outcome document of the Third Financing
for Development (FfD) Conference, to be held in
Addis Ababa, Ethiopia, in July.
What are the options?
Development analysts say Africa has realized
that traditional sources of development finance,
such as official development assistance and
foreign direct investment, which have buoyed
the continent’s development efforts over the
years, are not sustainable and cannot be relied
upon as its main sources of funding, as was
shown during the 2007–2008 global financial
crisis.
Oswell Binha, president of the Association of
SADC (Southern African Development Commu-
nity) Chambers of Commerce and Industry, says
Africa can create a $2 trillion dollar economy if it
can simplify rules that govern trade and domes-
tic investment. “When you look at the thread of
World Trade Organisation and economic part-
nership discussions around the continent, Afri-
ca has realised that intra-Africa trade is a se-
rious opportunity from which to raise internal
resources,” Binha told Africa Renewal.
Mateus Magala, African Development Bank
(AfDB) resident representative in Zimbabwe,
says Africa has the greatest investment poten-
tial of all frontier markets globally.
“These include sovereign wealth funds, pension
funds, foreign reserves and remittances, among
others. In addition, the continent has substan-
tial natural resources and countries with ex-
tractive industries can tap into this important
source of revenue,” Magala said in an interview
with Africa Renewal.
He noted that with political determination and
leadership to create appropriate governance
mechanisms, Africa’s extractive revenues could
drive the continent’s transformation by enabling
it to invest in competitiveness, diversification
and efficient and sustainable use of resources.
At an African Group Perspective Conference on
FfD in March, stakeholders said they were com-
mitted to funding sustainable development by
mobilizing domestic resources, clamping down
on corruption and illicit financial flows (IFFs)
and addressing issues surrounding good gov-
ernance.
“To finance its development priorities, Africa
has developed a financing framework that pri-
oritises domestic resource mobilization and
trade as main sources of financing structural
transformation and sustainable development,
with a focus on infrastructure, human capital
and sustainable agriculture, which is essential
for achieving African Sustainable Development
Goals [SDGs],” Adam Elhiraika, the director of
macroeconomic policy at the ECA, said at a re-
cent regional meeting in Addis Ababa.
ECA says Africa’s resource potential is enor-
mous. The continent can support, develop and
implement viable domestic finance instruments
such as financial flows from securitizing remit-
tances, earnings from minerals and mineral fu-
els, international reserves held by central banks
and the growing marketplace for private equity
funds.
This is bolstered by evidence from the New
Partnership for Africa’s Development (NEPAD)
and other sources, which show that African
countries raise more than $527.3 billion annu-
ally from domestic taxes, compared to $73.7
billion received in private flows and $51.4 billion
in official development assistance.
Mr. Magala says $550 billion can be raised from
official foreign reserves, $200 billion from pen-
sion funds, $150 billion from sovereign wealth
funds, $50 billion from foreign direct invest-
ments, $60 billion from remittances and $20
trillion from monetizing natural resources.
Domestic savings
Carbon-finance mechanisms can also be ex-
plored in greater depth for the implementation
of some of the continent’s projects. A number of
African countries are considering carbon taxa-
tion as a form of mobilizing additional financial
resources and tackling the challenges posed by
climate change.
However, the ECA says that compared to do-
mestic savings in other developing regions,
those in Africa remain low largely due to an un-
banked population, though the potential exists
if the informal sector’s resources are tapped
and the sector is given incentives to use formal
banking services. Africa’s savings-to-GDP was
about 22% between 2005 and 2010, compared
to 46% in East Asia and the Pacific and 30% for
middle-income countries.
Mr. Binha says African governments should
also foster an environment for high-level pub-
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