DailySun
At the African Economic Conference held in Gaborone, Botswana, this past November, experts and policymakers emphasized the urgent need for African leaders to adopt bold measures to revamp their economies and enhance resilience in an increasingly challenging global environment. Organized by the African Development Bank, the United Nations Development Program, and the UN Economic Commission for Africa, the conference convened thinkers and specialists from both the continent and abroad to discuss strategies for safeguarding Africa’s economic future amid growing uncertainties.
Responsible Leadership
President Duma Boko of Botswana (pictured), who recently assumed office with a commitment towards economic revitalization and job creation for youth, called on African leaders to address the hard truths confronting the continent and take responsibility for policy shortcomings that may have exacerbated current issues.
“We must move beyond self-congratulation and face the realities our decisions impose on our citizens. If we fail to challenge one another, we become our own greatest enemies,” he asserted.
Boko urged leaders to intensify efforts towards economic diversification, highlighting initiatives his government has launched to reduce Botswana’s reliance on diamonds while fostering growth in sectors like infrastructure, agriculture, and tourism.
He stated that Africa’s abundant natural resources provide a solid foundation for economic diversification and the development of regional value chains.
“Africa is still rich in natural resources, and it’s vital to cultivate and enhance value chain systems that add value to these resources, prioritizing their use within Africa. This approach not only diversifies African economies but also creates more employment opportunities in our countries,” he explained.
Boko also expressed his concerns about escalating conflicts in the region, which threaten hard-won progress in poverty alleviation and development. According to the Geneva Academy of International Humanitarian Law and Human Rights, there are currently over 45 armed conflicts active across the continent.
“The ongoing and needless wars must come to an end, as they cause untold human suffering, loss of life, displacement, and enduring damage to communities,” Boko declared.
He emphasized that Africa’s demographic dividend is its greatest asset. However, he cautioned that high unemployment rates, skills shortages, and policies lacking an inclusive approach mean this potential is not fully realized.
“Africa boasts a young and dynamic population, which can be a tremendous asset if wisely invested in. Our youth are the innovators, entrepreneurs, and leaders of tomorrow who will drive our economic development and build inclusive, resilient societies that ensure no one is left behind,” he concluded.
Local Solutions Essential
Kevin Urama, chief economist and vice president for economic governance and knowledge management at the AfDB, stressed the essential need for a shift in perspective throughout Africa. Often, leaders and policymakers depend on global institutions for solutions, while local answers to Africa’s issues can be found within its own borders.
“Countries must now acknowledge that national development cannot be outsourced. Development is fundamentally a self-driven process,” he stated, adding that “Africa requires solutions that are homegrown and rooted in local contexts.”
He highlighted the urgent need for pro-industrial policies to diversify African economies and promote inclusive growth. However, he cautioned that such policies should foster innovation rather than be rigid; without flexibility, they will fall short of creating the millions of jobs required for Africa’s expanding youth population.
“It’s vital to recognize that an industrial policy alone cannot address slow growth, employment challenges, and poverty alleviation. Instead, a balanced policy mix that emphasizes strategic value chain development in competitive sectors can significantly enhance inclusive economic growth and sustainable development,” he articulated.
Urama also condemned ineffective governance, which leads to revenue losses and inefficiencies, mentioning that Africa loses nearly $1.6 billion each day due to corruption, rent-seeking habits, and illicit financial flows.
Ahunna Eziakonwa, regional director for Africa at UNDP, highlighted that increasing global conflicts are redirecting resources away from development initiatives towards heightened military spending. This shift poses considerable hurdles for Africa, which has significant development financing requirements.
“The conflicts in Ukraine and Palestine have pushed global military spending to exceed $2.4 trillion annually, the highest level since 2009, diverting funding away from Sustainable Development Goals investments,” she pointed out.
Eziakonwa criticized the steep borrowing costs that African countries face, attributing this largely to “inaccurate” credit ratings from global agencies that misrepresent the continent’s risk profiles. UNDP estimates that inaccuracies in credit ratings cost African nations $75 billion in inflated interest and lost lending opportunities.
“To assist African nations in improving their credit ratings, we have created a publicly available Africa Credit Ratings Resource Platform, which acts as a comprehensive source of data, methodological details, and research on credit ratings,” she noted.
“Additionally, we offer tailored technical assistance and capacity-building programs for countries preparing for credit ratings or evaluations,” she added.
Enhancing Domestic Resource Mobilization
Claver Gatete, executive secretary of the UN Economic Commission for Africa, emphasized that in an era where development finance is becoming scarcer and debt costs are climbing, Africa must strengthen its tax systems and focus on domestic resource mobilization to improve its economic prospects.
“Africa’s tax-to-GDP ratio stands at 15.6%, significantly below the global average. Even a modest increase could generate billions in revenues,” he said.
He argued that enhancing revenues doesn’t necessarily mean increasing taxes. Digitizing tax administration and improving compliance could secure billions more in tax revenues. Reevaluating tax incentives designed to attract private investment can also bolster national finances. He stressed that only those private investors whose operations generate employment, income, and growth should benefit from such incentives.
“It is crucial to modernize our tax systems, expand our tax bases to include the informal sector, leverage digital technologies for efficiency, and close loopholes that facilitate illicit financial flows. Moreover, we need to ensure that fiscal incentives for private investors are well-targeted,” he stated.
Gatete pointed out that Africa’s promise lies in its ability to convert resources into value-added products. “Establishing regional value chains across key sectors is essential. With 94 value chains identified in 23 sectors across an estimated 240 Special Economic Zones, there’s no reason Africa cannot succeed in this area,” he stated.
“Existing successful models on the continent, such as Botswana’s beef industry, Ethiopia’s leather production, and the cocoa sectors in Ghana and Côte d’Ivoire, offer templates for others to follow,” he noted.
He further urged African leaders to heighten efforts to attract private investment by mitigating associated risks, asserting that this is the only way to decrease reliance on foreign aid. By improving governance, implementing transparent systems, and developing innovative insurance mechanisms, Africa can reduce risks for investors, he claimed.
“For example, South Africa’s pharmaceutical sector and Rwanda’s vaccine manufacturing facility showcase how local value creation can attract international partnerships. We must aim to replicate such successes across different sectors and regions throughout the continent,” he argued.
He underscored the need for leaders to diligently support the success of the African Continental Free Trade Area (AfCFTA), as it would create the scale necessary not only to attract private investment but also to develop the regional value chains essential for Africa’s industrial growth and the creation of high-income jobs.
Concessional Climate Finance Needed
Given the devastating impacts of climate change on vulnerable populations in Africa, Eziakonwa criticized the slow progress of financing directed at addressing climate challenges. She also noted that the costs associated with climate financing are becoming unsustainable.
“Our continent continues to bear an unjust burden regarding climate change—a crisis we did not cause. African nations are tasked with raising roughly $250 billion annually (10% of GDP) for climate initiatives, yet less than 10% of this amount has been mobilized,” she stated.
“Moreover, over three-quarters of the available funds are in the form of loans rather than grants. This arrangement deepens the debt crisis for a continent expected to pay over $160 billion in debt servicing this year alone.”
Urama agreed on the pressing need for more concessional financing and grants to strengthen climate finance efforts.
“To attract more climate finance, nations must actively build capacity to develop climate projects and navigate the complexities of the climate finance landscape. Therefore, capacity building is vital for securing increased climate finance for Africa,” he noted.
However, Gatete mentioned that while concessional funding and grants are better suited for climate financing, Africa lacks control over the volume and timing of funds committed by richer nations. He posited that the solution lies in Africa accurately valuing its natural capital to attract more resources for mitigation and adaptation efforts. He referenced the example of carbon credits in Africa, which are significantly undervalued compared to their counterparts worldwide.
“Other countries sell carbon credits for over $100 per ton, while in Africa, it remains below $10 per ton,” he remarked, adding that measures are being taken to address this by incorporating Africa’s green wealth into GDP calculations.
