DRM study: Executive summary, January 2014
The return to growth in Africa in the course of the first decade of the new millennium led to the aspiration that the continent could possibly serve as a growth pole for global prosperity and the next frontier for investors. Undoubtedly, Africa is rising partly as a result of transformative governance that has witnessed policy reforms in political and socio-economic systems and prolonged boom in commodity prices. This has, in turn, enabled many African countries to experience higher growth rates. These changes have lifted Africa out of an era of Afro-pessimism to a new epoch of Afro-enthusiasm, accompanied by an amazing shift in demographic profiles, rapid urbanization, a strong voice of the continent’s civil society and broad acceptance of the urgent need for sustainable development.
However, for the continent to realise its development goals, African leaders are addressing the development finance constraint, which underlies the enormous infrastructure gaps, food insecurity and other critical sectors to boost national development and regional integration. To thrust their economies into middle-income class, Africa requires a sustained flow of significant amount of finance for the implementation of development programmes at national, regional and continental levels. NEPAD, as an African Union strategic initiative, has put forward a number of well-designed programmes but is experiencing modest implementation due to a critical shortage of financial resources. Therefore, Africa’s return to the path of growth will not be sustainable, if the continent still faces the inadequacy of domestic financial resources for development.
Official Development Assistance (ODA) is falling well short of pledges and commitments and is largely unfulfilled. Indeed, prior to and in the midst of the current difficult global financial crisis, many development partners have cut back on ODA. In 2011, Aid flows declined in real terms for the first time in many years. The imperative for additional development financing in Africa has led to a concerted search for alternative, innovative and more predictable sources. A number of initiatives have been launched during the past decade but with limited effect in most cases. Hence, the availability of development finance on the continent remains scarce, leaving many attractive and potentially beneficial national and regional development programmes stunted at conception and design stages.
Thanks to its new growth trajectory, Africa has today increasingly become more attractive to new key partners in the global economy. The world may have its own particular interest in a rising Africa, but the growth that must matter for Africans is one that is primarily inclusive, equitable, balanced and anchored on their interests. On the basis of consensually identified priorities, Africans must own and drive the continental agenda utilizing their own financial resources to deliver the much-desired structural transformation. Fifty years of political independence with the establishment of the then Organization of African Unity (OAU) and its successor, the African Union (AU) ten years on, some African countries are still largely dependent on external resources for public finance and domestic investment. A fully sovereign Africa should exude self-reliance and value-driven partnership, not dependence. Therefore, the effective mobilization of requisite domestic resources to finance African-owned programmes and projects is most urgent and paramount.
Africa must now look more purposefully and decisively inwards to raise extra resources for stable growth and effective development. There is a dire need for a break with the past. NEPAD has long concentrated on traditional public investment schemes to finance its programmes and projects, a trend which is creating dependency on partner funding. However, the new financial landscape has changed radically in Africa over the last decade, which offers more opportunities to reduce this financial dependency. In furtherance of the AU core principles, Africa should regain the full ownership and leadership in the implementation of NEPAD programmes and projects to impact on the realization of the continent’s development agenda.
This should be achieved by better engaging all stakeholders at national, regional and continental levels to mobilize more domestic resources as well as significantly improve the partnership with African private sector. From now, the success of NEPAD will depend on a well-articulated results-based strategy for Africa’s transformation. Thus, policy and institutional reforms remain the fulcrum and cornerstone for a re-orientation of development by AU Member States and Regional Economic Communities that foster savings and other sources of domestic resources for investment.
The study is a collaborative effort by the NEPAD Agency and the United Nations Economic Commission for Africa (UNECA) in collaboration with UNDP, African Development Bank, UNCTAD and other key partner institutions, under the guidance of the NEPAD Heads of State and Government Orientation Committee (HSGOC) through the NEPAD Steering Committee. It provides an overview of the recent developments and trends in Africa in the effort to mobilize domestic financial resources and recommends carefully thought-through instruments to foster the implementation of NEPAD national and regional programmes.