Overview

To fast-track actions toward achieving the goals outlined in the 2030 Agenda for Sustainable Development, the Paris Agreement, and the African Union Agenda 2063, African economies urgently need to scale up the mobilization of innovative resources. This has become expedient, given less than six years to the Sustainable Development Goals (SDGs) targets and the huge financing gap for development in the continent. Africa needs strategic investment in key SDG areas such as poverty eradication projects, energy, climate change, social investments, productivity-enhancing technology and innovation, and productive transport infrastructure.  

The estimates by the African Development Bank reveal an annual financing shortfall of $4 trillion in 2024, up from $2.5 trillion in 2015, threatening to derail achieving the SDGs by 2030  . Although, with a projected population growth of 43% between 2015 and 2030, the total amount required to achieve SDGs in Africa by 2030 may rise to $19.5 trillion. The lingering impact of the COVID-19 pandemic and the global economic shocks exacerbated the SDG financing gap. More so, realizing the objectives of the African Continental Free Trade Area (AfCFTA)  requires expanding access to financing and investment in critical infrastructures. The AfDB also identified the critical sectors that require immediate action and funding, such as climate change, food security, energy access, health security, and mobilizing more resources for SDGs. 

Incidentally, Africa still grapples with over-dependence on foreign aid/loans, high borrowing costs, unfavourable loan conditions, untapped green funds, high bureaucracy in accessing green funds, and poor operationalization of climate resilience and adaptation finance, among others. Yet, despite its low contribution to greenhouse gas emissions, the continent remains the most vulnerable to the impact of climate change. The loss and damage costs in Africa due to climate change are projected to range between US$ 290 billion and US$ 440 billion, depending on the degree of warming, according to UNECA’s African Climate Policy Centre . This, among others, renders achieving the SDGs in Africa by 2030 somewhat elusive, particularly for the goals to end extreme poverty, hunger, and inequality, tackle climate change, and build resilient infrastructure .

African economies heavily rely on natural resources as valuable assets. Africa’s natural capital accounts for 19% of its overall wealth, compared to 7% and 3% in America and the Caribbean-developing Asia, respectively. However, these natural resources are being depleted in various forms without commensurate values, posing a danger to the continents’ quest for sustainable development. The domestic financial resources in Africa have significant potential for promoting sustainable development. In 2021, the African government earned USD 466 billion, which is 17% of the GDP. 

Additionally, African institutional investors had assets worth USD 1.8 trillion in 2020, which is equivalent to 73% of the GDP. During the COVID-19 pandemic in 2020–21, intra-African Foreign Direct Investment (FDI) showed three times greater resilience compared to foreign direct investment from outside the continent . This bolstered growth in renewable energy and Information and Communications Technology (ICTs). 

Despite these potentials in Africa, investment in the continent is more significantly affected by global shocks compared to other regions. The estimated average inflation rate for the continent was about 15.5% in 2023, which was the highest level in twenty-seven (27) years. Eight African countries were classified as being in a state of debt distress, which accounted for nine out of the total number of countries globally in this situation. Thirteen (13) African countries were deemed to be at a high risk of debt distress out of twenty-seven (27) countries globally in this category. In recent years, Africa’s portion of global greenfield FDI has been declining, reaching a low of 6% in 2021, which is the lowest it has been in 17 years. Compared to 61%, 17%, 17%, and 10% in developed economies, developing Asia, Latin America, and the Caribbean, respectively . 

Furthermore, the risk profiling of Africa and the cost of finance have surpassed that of other global regions, making it difficult for most African governments to access bond markets, mobilize resources, and hinder investments in industries with transformative potential. The spread on an average African Eurobond, which indicates the probable cost of sovereign borrowing, is at an all-time high of 10%. The cost of funding for energy projects in Africa was around seven times greater than in Europe and North America in 2021 . Also, Africa experiences an annual loss of tens of billions of USD due to illicit financial flows (IFFs), which prevents its economies from accessing essential domestic resources necessary for promoting inclusive growth . 

All facts and figures point to the urgent need for massive resources to support sustainable development in Africa. Therefore, as Africa adjusts to global financial shocks, DFIs must adapt innovative development financing models. This underscores the rationale for discourse at the 2024 CEOs of African DFIs to discuss measures to fast-track financing for Africa’s sustainable development. The forum brings key stakeholders and partners in Africa’s quest for development to deliberate on the way forward for Africa. As major stakeholders involved in critical decisions for the future of Africa, it’s paramount that the CEOs focus on sustainable development finance options tailored and designed to meet African interests. The future of growth and its impact on poverty reduction in Africa hinges on what happens to the transformation of Africa’s financial architecture, mobilization of domestic resources to complement external resources, and taking advantage of the continent’s comparative advantages.