In recent years, Official Development Assistance for developing countries has declined by billions of dollars, with the share allocated to Least Developed Countries – mainly in Africa – dropping to just 22% in 2022, marking its lowest level in more than a decade.
Beyond the overall reduction, aid is increasingly constrained, often earmarked for specific purposes or delivered through concessional loans.
The evolving geopolitical dynamics, global economic pressures and shifting donor priorities are rapidly transforming the development landscape, underscoring the need to rethink how development is financed in Africa.
In an era of constrained global development funding, shifting to a development model that prioritises government financing is not only a necessity, but an opportunity to strengthen the social contract and enhance government accountability. We must focus on catalysing African money to accelerate African development.
Growing population
In Africa, governments face mounting pressure to deliver development dividends for the world’s fastest-growing population. With 70% of the population under 30 and the total population expected to nearly double to 2.5 billion by 2050, the continent is on the cusp of a significant transformation.
Africa’s evolving demographics bring rising expectations, particularly among youth, for economic opportunities, better governance and equitable development. The growing frustration is evident in movements from Kenya's #RejectFinanceBill2024, which opposes tax increases to Nigeria's #EndBadGovernanceInNigeria and anti-corruption youth protests in Uganda.
The slew of protests over the past few years reflects a broader demand for change across the continent and a need for a new social contract.
With more than 670 million mobile phones in circulation – equivalent to one for every second person on the continent – the ability to connect, mobilise and organise is unparalleled, increasing the pressure on governments to deliver, especially when it comes to the basics – infrastructure, access to social services and economic opportunities.
Failure to respond will be a ticking time bomb with regional and global ramifications.
Development resources
Even in countries experiencing high debt burdens with a debt-to-GDP ratio over 70%, governments retain fiscal space to invest meaningfully in development.
For example, according to the Kenyan National Treasury’s Annual Public Debt Management Report for 2022/2023, total revenue collected by the government was around $15.3-billion and total government expenditure in 2023 was around $24.4-billion, of which $9.2-billion went to debt servicing, $14.6-billion went to recurrent expenditures and $4.7-billion went to development initiatives.
Despite the large proportion dedicated to debt servicing, there remain substantial resources for development, provided these funds are used efficiently and effectively. If done strategically, these resources can support increased domestic resource mobilisation and contribute to long-term fiscal autonomy, enabling countries to invest in development that responds to national priorities, needs and aspirations.
Effective reforms
Maximising the impact of domestic financing depends on parallel reforms that promote good governance, reduce corruption, and strengthen tax collection mechanisms.
Policies such as anti-corruption policies in Rwanda that encourage a zero-tolerance culture against corruption in line with the use of digital platforms for more transparent public financial management and procurement, and the establishment of strong whistle-blower and protection mechanisms, are examples of reforms that can be scaled in other countries across the continent.
Increased transparency and accountability will, over time, expand the tax base which will help promote inclusive growth through improved wages, social benefits and greater opportunities to build a skilled labour force. This shift will also provide more predictable and stable funding that is not subject to the volatility of international aid, enabling longer-term development planning.
To kick off the necessary reforms needed to adopt this funding model, governments can partner with specialised development agencies such as the United Nations Development Programme (UNDP) to support the implementation of national development plans and put in place necessary reforms in areas such as digital finance and governance reforms.
Exit strategies
This engagement would be time-bound and programmes will be designed with clear exit strategies that outline how capacities will be transferred to national institutions throughout implementation.
Successful examples across Africa, such as Senegal’s and Gabon’s Programme d’Urgence de Développement Communautaire (PUDC) and the Democratic Republic of the Congo’s Programme de Développement Local (PDL), demonstrate the UNDP’s effectiveness in supporting governments to implement transformative development initiatives.
While this shift towards domestic revenue-centred financing will not be easy, it is a crucial step in safeguarding Africa’s development amid growing global volatility and the increasing demand for effective, responsive investments in public services and economic opportunities.
Embracing this model can empower African nations to build a resilient, self-sustained future and secure the development dividends their populations need and deserve. DM