Financing Development and Transformation in Africa

By Paul Elebute

Following reports, it is noted that the African continent is reputed to be on the verge of a major economic breakthrough. Recent analyses and econometrics have it that the continent is undergoing steady economic growth rates tending towards achieving sustainable development.

Core areas of development like industrialization, ICT, renewable energy resources have been noted as areas that can help accentuate the desired level of sustainability in record time. Yet, financing these investment areas has posed no little challenge.

The traditional channels of Foreign Direct Investment (FDI), Official Development Assistance (ODA), concessional financing are appropriable but are not entirely dependable; hence, the need to innovate new models of financing the expected transformation. 

This short essay seeks to underscore the means by which development can be financed in Africa. The prevailing need is quickly appraised while states’ efforts at financing transformation are briefly highlighted while significant directions in development financing are examined.
The work concludes submitting that firm political will and commitment would be greatly needed to realize a Pan-African development and transformation.

Introduction: Development and Sustainability in Africa

According to Nobel prize-winning economist, Amartya Sen, development must be judged by its impact on people, not only by changes in their income but more generally in terms of their choices, capabilities and freedoms. It is viewed that Amartya sought to reckon that the empowerment of the people is best enlivened when their development is premised upon the fulfillment of their innate tendencies.

It is insisted that the original desire of Africans – in pockets of communities - is to keep and foster a sustainable environment. Prior to White intrusion into the continent, the loam of the continent has been maintained in a manner as to ensure the measured usage of her environment.

Africans yearn to grow and Amartya Sen appears to be appraising the important truth that the capabilities to define what development means to them - the sustenance of the environment alongside industrial ambitions - must not be despised in the whole pursuit of it.

Adventurers such as Henry Stanley have identified that Africa was replete with the natural resource sufficient to ensure her industrial revolution. In The Scramble for Africa, it is found that the Europeans dubbed Africa as the ‘Dark Continent’ because it was unknown to them.

The legacy of overexploitation of resources was left for the peoples’ heads to embrace when much before then the peoples already led a communal lifestyle that helped attain environmental sustainability. The idea of sustainability, in general, prior to European arrivals, has not always been foreign to the Africans, even though the theme stood in its unwritten stage.

As the disruptive 1987 Brundlandt Report came to limelight, the world was left to concede that development must be considered in terms of its lasting impact; its sustainability. Without sounding like playing the victim card, experts have scientifically and statistically established that Africa bears the major brunt of the world’s industrial capitals’ excessive drive to develop without considering its sustainability.

Lessons learned from Africa’s existential trajectory over the past three decades have prompted a fresh wave of thinking towards a post-2015 and an even 2063 African Agenda as a transformative developmental framework designed to ensure self-reliance for Africa.

Highly essential is the need to reflect that sustainable development may anyways scuttle the immediate needs and wants of the populations in the interim, but in the long-term, the results are projected as those that will pay off.

In short, the risk-reward ratio of embracing sustainability is not for now but for some later time. Needless to say, the ills that would have been occasioned due to the nagging reliance on the unsustainable approaches for day-to-day survival are extremely inimical to the overall wherewithal of the human livelihood.

The exclusive challenge only lies in the approaches dedicated to implementing the nationally determined contributions (NDCs) of the member-nations to the relevant treaties. As Mr. Wu Hongbo, United Nations Department of Economic and Social Affairs (UNDESA)’s Under-Secretary-General considers that ‘arriving at a comprehensive financing framework will be central to any agreement on a sustainable development agenda’ (UNDESA, 2014).

There are financing models that can well brace Africa for the challenge to bolster her sustainability ambitions. As would be seen, these will be considered in this essay. 

The Prevailing need for Development Investment in Africa

Discovery is the essence of economic life’ – F.A. Hayek, 1974 Economics Nobel laureate

Although funding development can be implemented via available funnels, the argument for Africa to access windows that emphasize the more on sustainable transformation seems nuanced. On a comparative note of wherefrom Africa may source its finance, it is suggested that Africa looks inward, and resort to channeling its finances domestically.

The ever-bourgeoning rate at which external debts escalate for most African nations is way discouraging, and reason calls for a radical shift in mindset and consequently, planning, so as to improve the sources of finance for funding transformation in Africa.

Culpeper and Bhushan (2010) have precisely reasoned that first, domestic finance is less volatile than most sources of external finance and do not increase a nation’s vulnerability to external shocks that may lead to debt crises.

Sometime ago, a NEPAD-OECD report (2010) reveals that the external debt for African countries was estimated to be US$300 billion in 2009 and about 16 per cent of the continent’s export earnings were spent on servicing it that year. A little above a decade after, a UN Conference on Trade and Development (UNCTAD) Report (2022) reveals that African governments owe nothing less than $1.8 trillion. This shows a remarkable 600% increase in debts proving the unmanageable nature of external debts.

Second, it is politically sound to rely on domestic resources because they increase a country’s ownership of public policy and tie accountability to the citizens rather than external investors and donor organizations.

Mournfully, fiscal returns on the traditional income outlets such as the exploitation of clean energy power resources in Africa remain at an all-time low. As a result, innovative exploitative methods need to be brought to the fore. In the writer’s view, the question is not so much about finding the methods but adopting strategies that best ensure they are maximally and effectively exploited.

Bold Efforts at Financing Development and Transformation

A number of African states have been found at the forefront of taking the bull by the horns when it comes to championing the cause for sustainability in their sovereign territories. Murai (2015) appraises Kenya’s leadership in promoting financial inclusion which has led to innovative financing mechanisms that support access to health services and renewable energy.

Also, following the Stock Exchange of Mauritius, the efforts to align her stock exchange to sustainable development have seen the launch of the Sustainability Index.

In Nigeria, the Central Bank of Nigeria-founded Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) provides risk mitigation, financing, trading, and other strategic assistance to agribusinesses in Nigeria and boasts a capital base of $500 million. Lately, the Nigerian government rolled out $617m for investment in digital and creative enterprises (IDICE) funds in conjunction with the African Development Bank in what is commended may be worthy of emulation for other African countries.

Time and again, as these approaches are commendable for the nature of their inwardness, the internationality of the drive to the realization must also be reckoned with. In his Royal Message at the Ninth African Development Forum, King Mohammed VI declared that for Morocco an ‘intra-African process is essential’ (Hamdok, 2015).

The recent launch of an insurance facility by the African Development Bank to unveil a novel initiative to cushion farmers from climate change implications is a step in the right direction when it comes to holisticity of these approaches to sustainable development. Akin to the African Continental Free Trade Agreement seeking to create a single market and liberalization for goods and services to improve the movement of natural persons and capital, the Africa Climate Risk Insurance Facility for Adaptation (ACRIFA) can as well leverage its commonwealth to improve African lives and businesses.  

Inventive Models to Financing Development in Africa

1. Local Resources Mobilization

By formalizing virtually all the informal sectors of their economies, sovereign African nations will be poised to expand their financial markets. Innovative moves need to be geared towards harnessing the resource potentials of Africa’s financial markets.

Impediments such as undue tax exemptions, tax evasions, and underdeveloped tools via which taxes are collected must be removed. Tellingly, African nations sorely need tax reforms. Capital market securities may also be functionally mobilized while tourism and hospitality can be considered as goldmines today. They should be exploited.

2. Quality Policy Simulation and Regulatory Compliance

According to a development economist of great renown, Wolfgang Kasper, ‘economic development is not hindered so much by lack of capital as by bad institutions’ (Kasper, 2005). Adapting the words of the Former US President Barack Obama in an interview granted the New York Times as though it were Africa, it is observedly remarked that ‘in growing our economic pie…we also need a more vigorous regulatory regime’.

For instance, a policy such as import-substitution strategy may be adopted to impose high levy on imports and insurance premiums while credit-guarantee schemes may also be initiated and strengthened.

To finance the kind of transformation which Africa needs the issues that are highlighted in the Action Agenda 2015 such as domestic public resources; international trade as an engine for development; debt and debt servicing; addressing systemic issues; Science, Technology and innovation (STI) and capacity building must be given frontline policy attention.

3. Regionalization

Friedrich Hayek cautions in his classic, Road to Serfdom, ‘to be controlled in our economy is to be controlled in all things’. An intra-African process towards achieving sustainability is truly pertinent.

To enable more regional economic interactions, border restrictions which elicit high tariffs should be removed. This is to deliver on a more workable pan-African trade hinged on liberalization and enhancement of individual economic freedom and empowerment.

Many times, if taken rightly, the more a thing is the merrier. The more African countries rally round themselves to help their fellow counterparts flex as players on the field of market play, the better excesses can make for deficits and strengths can be exchanged for weaknesses.

4. Illicit Financial Flows (IFFs)

Illicit financial flows are commonly referred to as “money that is illegally earned, transferred, or utilized” (ECA, 2014b in Hamdok). Statistics reveal that Africa lost between $854 billion and $1.8 trillion in illicit financial flows between 1970 and 2008.

Whilst the drivers of IFFs are checkmated, the gleanings from IFFs are vastly serviceable for sustainability ends. However, whatever sigh of relief heaved by the peoples is continuously doused by the cancer of recovered loots. The Abacha loots the Nigerian government has recovered from the West over the time cannot be accounted for due to the lack of responsibility on the part of the successive governments.

As such, it is thought that it is not about getting money all around after all but more about proper handling and strategic execution. A design must be contrived in law – an enactment sanctioning a framework for the sustainable use of IFFs - to make the most of it. 

5. Private Equity

According to Ncube, over $200 billion has been raised by private-equity firms, with Kenya, Nigeria and South Africa being the major beneficiaries. Private-equity investment deals in Africa increased from $890 million in 2010 to $3 billion in 2011 (Ncube, 2012 in Hamdok). In the coming times, there is so much for the African governments to explore about private equity as a medium to finance sustainability. 

6. Impact Investing

Impact Investment may also be coveted for sustainable projects. To Carlo Lopes, Executive Secretary of ECA, global impact investments have been seen to account for about $8 billion in 2012, a third of it going to Africa. 

7. Climate Financing

Established in 2010, the Green Climate Fund is to provide a significant proportion of the medium-term financing goal of $100 billion a year by 2020, a target set by developed countries in 2009.

In a similar vein, the African Development Bank has concluded that adaptation costs in Africa will be in the region of $20–$30 billion over the next 10–20 years, while the World Bank puts that figure at $18 million per year from 2010 to 2050. (Hamdok, 2015)

Novel Models of Partnership

Public and Private Partnership and the South-South alliance are good instances of partnerships that can be entered into. Euro-bonds and no-interest bonds may as well be sourced to furnish the fiscal wherewithal for sustainability projects in Africa in relevant investment sectors.


The ‘Action Agenda’ of Addis Ababa have been well prepared and financing, innovative financing, remains the viable way to walking the talk.

The Action Agenda may be augmented by efficient policy-making and strong political will and commitment. The Bretton Woods Institutions seem to help but Africa ought to begin to pioneer home-grown methods by which she can profitably finance development and transformation.

What Africa needs to fund its societal and technological transformation in view of its net-zero ambitions in 2050 and the 2063 Agenda for sustainability are novel initiatives of finance offered at almost no cost. Concessional and external financing must align with home-grown methods and private financing to step up the sustainability game.

While it is possible to use climate mitigation financing to enhance the renewable energy penetration in the energy mix, such ideal approaches ought to stress adaptation-associated financing the more. In a bid to achieve this, an Afro-pessimistic attitude must be quelled. The world must believe in Africa. More importantly, Africans must have faith in the Africa of their dreams.


  • Africa dominates list of the world’s 20 fastest-growing economies in 2024 – African Development Banks says in macroeconomic report African Development Bank
  • Azour, J., Selassie, A. (2023) “Africa’s fragile states are greatest climate change casualties” Intl. Monetary Fund 
  • Abdalla Hamdok (2015), Innovative Financing for the Economic Transformation of Africa, UNECA publications, Addis Ababa, Ethiopia.
  • Abugre, Charles, and Atieno Ndomo (2014). Structural Transformation and the Challenge of Financing Africa’s Post 2015 Development Agenda. Nairobi: United Nations Millennium Campaign Africa and United Nations Development Programme Regional Service Centre for Africa.
  • Culpeper, R. and Bhushan, A. (2010) “Domestic Resource Mobilization in Africa: An Overview” The North-South Institute available at:
  • F. A. Hayek (1978). "Competition as a Discovery Procedure", in New Studies in Philosophy, Politics, Economics and the History of Ideas (London: Routledge Kegan Paul), pp. 179-190
  • F. A. Hayek (1945), Road to Serfdom, Institute of Economic Affairs, London.
  • Leadership Newspapers (2017) Available at  
  • Murai, C. and Kirima, W. (2015) Aligning Kenya’s Financial System with Inclusive Green Investment UNEP Inquiry/IFC
  • Nathaniel, S. “Hannatu Musawa rolls out $617m IDICE Fund in collaboration with AfDV” Channels TV February 2, 2024
  • Ncube, Mthuli (2012). “Private equity in Africa” Tunis: African Development Bank. 12 July 2012 Available at
  • NEPAD-OECD (2010), “Africa investment initiative ‘external debt in Africa’”, Policy Brief No. 3, available at:
  • Relief Web (2013)
  • Richard Joseph (2009), Economic transformation and developmental governance in Nigeria – the promise of the Obama era Available at
  • Stock Exchange of Mauritius (2015) “The Stock Exchange of Mauritius (SEM) launches its Sustainability Index (SEMSI), and joins the league of Sustainable Stock Exchanges.”
  • UNEP Inquiry (2016) Green Finance for Developing Countries  
  • UNDESA (2014)
  • UNCTAD (2023) “A world of debt – regional stories”
Tiseo, I. (2023) “Greenhouse gas emissions worldwide – statistics and facts” Statista
Wolfgang Kasper (2005). Economic Freedom and Development, Sydney

0/Post a Comment/Comments