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How African Leaders Can Finance Development And Transformation

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This is a Guest Post and does not necessarily reflect the thoughts and opinions of Techzim. We have a strong filtering process of what makes it to our blog and are confident that you’ll enjoy the article below.

There is an African proverb that says the eater of a goat pays back a cow. For years African countries have focused their efforts in securing financial aid from Bretton Woods institutions and others for development and transformation. Unfortunately, this has proven to be an expensive, unsustainable model as the loans from these institutions have high interest rates as well as imposed conditionality crippling Africa in never-ending debt. It is time that African leaders look within Africa for solutions and find ways to improve the quality and quantity of domestic finance as this is more sustainable.  Africa has a wide range of financial options beyond foreign aid and there is need to focus on how best to grow further the scarce resources at our disposal for development and transformation.

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So if I was an African leader how would I join other leaders in raising domestic revenue? Firstly I would invest in encouraging and empowering young entrepreneurs by strengthening their skills through education and relevant training, addressing financial gaps and encouraging innovation. Entrepreneurship has always been significant in shaping economic landscapes as it leads to the expansion and promotion of productive activities in key sectors of local economies. This would also result in more bankable projects, attracting Foreign Direct Investment whilst addressing the challenges of high unemployment rates and poverty.

Investing in innovation and technology will also be a major focus area for me. Examples would include working towards phasing out fossil fuel subsidies, upgrading banking systems and improving the agricultural sector and other sectors where Africa has a comparative advantage. There are also opportunities in the investment in sustainable energy technologies to alleviate energy poverty. There is need to anchor modern science and technology to allow Africa to increase the level of production whilst reducing associated costs in all sectors, maximise returns through beneficiation and also building greener economies.

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Foreign Direct Investment and remittances have overtaken Official Development Assistance with remittances amounting to triple the amount of Official Development Assistance and Foreign Direct Investment amounting to over one trillion in 2016 according to the World Bank. If I were an African leader I would remove tariff barriers to investment facilitation and reduce the cost of remittances as these are major financial sources for Africa’s development and transformation.

Money is like a river. It flows where the conditions are conducive to its flow. Another crucial focus area for me is the creation of an enabling environment for economic growth and investment. Policy uncertainty, a weak regulatory environment, poor law enforcement and infrastructure, gross corruption, political violence, war and terrorism all increase business risk, reduce investor confidence and disrupt business activities. Hence there is need for African leaders to be ready to invest in improving transparency and accountability, the respect for Human Rights, more democratic political processes, effective law enforcement as well as work towards reducing financial crime and illicit financial flows.

African leaders should also increase local revenue by improving the tax base. National budgets in Africa have been insufficient in the implementation of progressive policies and increasing the tax base can help solve this problem. According to Eurodad (2011) tax evasions by Multi-National Companies has reduced developing countries’ ability to mobilize local resources. Overall tax systems have not been credible and there is need for great improvement in tax administration. Tax exemptions need to be done away with and levels of tax collection need to be increased.

Over the years the opportunities that the informal sector presents have not been sufficiently recognised. Africa has a robust informal sector that is contributing immensely to economic growth hence formalising this sector will also increase domestic revenue. The informal sector is a creator of wealth and also employment with over 55 percent contribution to GDP and with over 80 per cent of the labour force in Sub Saharan Africa alone.

African leaders should not forget the opportunities that Public-Private Partnerships present for financing the continent’s development and transformation. Governments, Civil Society and private companies can co-design, co-finance and guide implementation of vital projects within Africa. Public-Private Partnerships have mostly shown to increase the quality of social service delivery and accelerating infrastructural development which are vital components of development.

The United Nations Development Program (2011) estimates that African countries together with other poor countries lose about two billion per day due to unjust international trade rules and discriminatory pricing which is fourteen times the amount they receive in foreign aid. There have been high import duties on produce from Africa in the west and higher tariffs on processed goods all negating Africa’s returns from trade. Strengthening South to South Cooperation in creating regional markets such as the case of the proposed African Continental Free Trade Area will minimise such losses and create greater opportunities for growing domestic revenue.

Also, adopting a “financing together” approach by strengthening the partnerships of major financial institutions such as the New Partnership for Africa’s Development and African Development Bank will give birth to best financial practices and more coherent strategies as opposed to isolated efforts. This approach will lead to greater effectiveness in tackling Africa’s financial challenges.

African leaders also need to step out of their comfort zone and consider non- traditional sources of funding such as funding from individual philanthropists, sovereign wealth funds, pension funds and the international bond markets. For example, indigenous grant makers such as Tony Elemu, Mo Ibrahim and Aliko Dangote are channelling resources to key development initiatives in Africa.

However, African leaders should not radically discard foreign aid as we work towards more sustainable sources of funding with the intention to reduce dependency and eventually attain self-resilience. In the long run, the child must grow teeth and be weaned off the mother’s breast.

Conclusively, in Africa our elders say that which gains the attention of the leader will be solved. Hence we can have all the financial resources needed but with unconcerned leaders, resources will not reach the ones most in need and development and transformation will remain a dream. What Africa needs more than ever is leadership that will not follow the traditional pattern of personal aggrandizement through corruption and financial mismanagement but ethical leaders that are ready to leave their comfortable thrones and get into the villages, cities, hospitals and schools to see and hear first-hand the pressing needs of the people and are ready to actively involve them in all vital developmental processes. Africa needs leaders who breathe and live to bring sustainable development and transformation to the poorest and most forgotten African.

About the author

Karen Whitney Maturure is a young woman aged 26 who lives for writing (articles, research pieces, women-centred fiction and poetry) researching and development work. My life and career have been driven by a strong passion to contribute to the improvement of the position of disadvantaged people in my country and the world over. I am currently an intern at ROOTS Africa, volunteering at the Zimbabwe German Society whilst studying towards a Professional Certificate in Monitoring and Evaluation with the University of Zimbabwe. I have a strong academic grounding in human rights and project management having completed a Bachelor of Arts in Development Studies at Midlands State University.

I am a qualified, dedicated and experienced development worker, with over three years’ experience in project management particularly over two years under the Zimbabwe Human Rights Fund at Hivos, the Urban Space Harare environmental project and the Adolescent Sexual and Adolescent Sexual and Reproductive Health and Rights department at the United Nations Population Fund Zimbabwe.

6 thoughts on “How African Leaders Can Finance Development And Transformation

  1. Great article but sadly people in Africa go into politics to enrich themselves not to serve the public. There is no interest in finding true solutions for Africa.

  2. Gross corruption and a weak regulatory enviroment caught my attention there,those need proper enforcement otherwise we will be going one step further and 2 steps backwards..

    And also on the informal sector especially in our country…..how do we legalise it and to a point where people understand that it is for the good of the nation ???

    Great article 👍🏽

  3. The saddest thing is that most African leaders are asleep on the wheel. Few examples:
    1. Sugar factories that employ many and reduce poverty on Kenya are killed by sleazy government ministers who allow rejected duty free sugar to be imported and then bribe members of parliament to stop a critical report about this. Who cares about development?
    2. Reject frozen chicken is imported into most African countries from Brazil and Ukraine at throw away prices, killing any hope for poultry farmers commercial farms, with few exceptions such as Kenya and South Africa. The day these countries allow importation of rejected cheap frozen chicken, then successful companies such as Kenchic will be eliminated, creating more poverty for contract farmers who supply them. Who cares about development?
    3. Powder milk is imported from desert countries who produce milk at high cost or from EU countries who subsidize farmers. African countries tax producers at high rates, instead of giving duty free privileges.

    Net result is that majority of African children grow up with protein deficiency and cannot think properly as adults.

    No wonder African leaders are sleeping on the wheel.

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