By Juliet ETEFE ([email protected])
Africa must take decisive action to strengthen tax systems and curb illicit financial flows (IFFs) to close the continent’s significant financing gap, President John Dramani Mahama has stated.
Speaking at a high-level side event on ‘Africa at the Forefront: Mobilizing African Investment and Financing for Implementing Agenda 2063’, at the African Union Commission Headquarters, he emphasised that domestic resource mobilisation is key to achieving the ambitious goals of Agenda 2063 and Sustainable Development Goals (SDGs).
However, with financing still a challenge, he stressed: “To address the financing gap, we must take a multifaceted approach. Domestic resource mobilisation is crucial. By improving tax administration, combatting illicit financial flows and fostering a culture of tax compliance, we can significantly increase our revenues”.
The financing gap for Africa’s development is estimated at approximately US$402billion annually until 2030. This gap represents critical investments in infrastructure, education, technology and healthcare, which are necessary for the continent’s transformation.
“To achieve sustainable development, we envision that strategic investments in health, education, energy, technology and infrastructure are essential.
However, the financing gap for these investments is substantial – estimated at approximately US$402billion annually until 2030 in order to achieve the ambitious targets of Agenda 2063 and meet the (SDGs).
“This financing gap is not merely a statistic – it represents the unrealised potential of millions of Africans whose dreams for a better life depend on our ability to invest wisely,” President Mahama noted.
He added: “Our challenge, therefore, is to mobilise domestic and African resources effectively, reducing our dependency on traditional external financing and charting a path toward self-reliance and sustainable growth”.
He lauded the African Union Commission’s ongoing efforts to build capacity among member-states and advocate for fair and equitable international tax rules.
Economic outlook and challenges
Despite economic resilience, Africa’s real gross domestic product (GDP) growth slowed to 3.1percent in 2023 from 4.1percent in 2022. However, projections indicate a rebound, with growth expectedly rising to 3.7 percent in 2024 and 4.3 percent in 2025.
“This optimistic outlook highlights the inherent strength of our economies and effectiveness of our policy interventions,” Mr. Mahama said.
He noted that Africa continues to grapple with structural challenges, with many economies remaining dependent on low-productivity sectors while geopolitical tensions, climate issues and pandemics disrupt growth.
As such, he stressed that without strategic investments in key sectors, economic growth would not translate into significant per capita income improvements.
He highlighted the need to improve tax systems and increase the median tax-to-GDP ratio by 13.2 percentage points to 27.2 percent of GDP by 2030.
He also welcomed ongoing global efforts such as the United Nations Framework Convention on International Tax Cooperation, aimed at eliminating the base erosion and profit shifting which undermine Africa’s tax revenues.
However, he cautioned that domestic efforts alone would not suffice and called for global financial architecture reforms to ensure equitable resource distribution.
Multilateral financial institutions
President Mahama underscored the role of African Multilateral Financial Institutions in financing sustainable development, saying: “These institutions are uniquely positioned to address significant trade, investment and development gaps across the continent”.
Establishing the Alliance of African Multilateral Financial Institutions (AAMFI), also known as the Africa Club, was highlighted as a critical initiative to strengthen Africa’s financial sovereignty.
“This initiative enhances the capacity of these institutions to advocate for homegrown solutions to our continent’s challenges,” he stated.
He also highlighted the African Virtual Investment Platform (AVIP) launch by the African Union Commission to foster sustainable investment.
“By aggregating comprehensive data on investments and related policies, this platform will provide the evidence-based foundation for informed policymaking,” he said.
He further stressed the urgency of accelerating implementation of African Union Financial Institutions, including the African Central Bank, African Investment Bank, African Monetary Fund and Pan-African Stock Exchange.
“By mobilising resources, facilitating trade and financing infrastructure projects, these institutions will help reduce dependency on external aid and foster a self-sustaining African economic ecosystem,” he stated.
Political will and strategic partnerships
President Mahama urged governments, private sector players, civil society and development partners to renew their commitment to mobilising resources for Africa’s development.
“Strong political will and effective policy coordination are crucial for the successful implementation and impact of our financial institutions,” he said.
Ghana, he added, remains committed to advocating for the expedited establishment of these institutions, recognising their significance in advancing Africa’s economic transformation.
