Building Africa's capacity to finance its own development

Africa's journey towards self-financed development faces numerous challenges, including little fiscal space, a heavy debt burden, and external shocks. In an exclusive interview with CNBC Africa, the Director of Macroeconomics and Governance Division at UNECA, Adam Elhiraika, shed light on the strategies and opportunities for Africa to finance its own development. Elhiraika emphasized the importance of leveraging external support to strengthen African countries' capacity to mobilize more domestic resources. While Africa currently funds about 62% of its public spending from domestic sources, there is room for growth by expanding the tax base, combating tax evasion, and addressing illicit financial flows that drain billions of dollars from the continent annually. The Director highlighted success stories in countries like Morocco and Kenya, where financial inclusion has improved significantly, enabling local financing for private investments. Notably, Elhiraika underscored the need for multilateral development banks to play a more substantial role in Africa's development finance landscape, advocating for the expansion of financial institutions operating across national borders. Furthermore, addressing challenges in the financial markets, such as currency depreciation and capital flight, requires sound macroeconomic policies to stabilize economies and attract investments. Elhiraika stressed the importance of value addition and industrialization to create sustainable growth and job opportunities. However, Africa's growth trajectory has been hindered by climate change, conflict, and the pandemic, leading to fluctuating growth rates and inadequate contributions to global trade. To foster local investments and achieve a level playing field, Elhiraika urged African governments to provide incentives for domestic investors, expand access to finance, and avoid favoritism towards foreign investments. By accelerating the implementation of the African Continental Free Trade Agreement, African countries can create a conducive environment for local investors to compete regionally and globally, ultimately driving sustainable economic growth and development.