By Emmanuel Nnadozie
On 13–16 July 2015, Addis Ababa (Ethiopia) will once again be the capital of the world. High-level political representatives – Heads of State and Government, Ministers of Finance, Foreign Affairs and Development Cooperation, relevant institutional stakeholders, non-governmental organizations and business sector entities, etc. – will gather for the Third International Conference on Financing for Development (FfD 3). The Addis Ababa Conference will assess the progress made in the implementation of the Monterrey Consensus and the Doha Declaration; address new and emerging issues, including in the context of the recent multilateral efforts to promote international development cooperation; and reinvigorate and strengthen the financing for development follow-up process.
Critical time for Africa:The Addis Ababa Conference is happening at a critical juncture when there is an almost perfect match between the international agenda and the African development vision: the world is looking at the post-2015 international development agenda while Africa is, in addition, setting its transformative Agenda 2063. The common denominator is that both agendas are paying a special attention on how to finance sustainable development and its means of implementation.
As it develops the continental Agenda 2063 and partners with the international community, Africa needs to address the challenges of financing its development. The internal financing gap needs to be closed. For example, evidence shows that the cost of halving the number of people living in extreme poverty – below the international poverty benchmark of US$1.25 per day at purchasing power parity – is estimated to be US$4.2 billion for sub-Saharan Africa; 3.8 million teachers are needed within five years to achieve universal primary education; and the estimated spending required to address Africa’s infrastructure needs is approximately $93 billion per year.
The dynamic shifts in the international development landscape makes it imperative to pay more attention to financing development mostly from within: the 2008-2009 global financial and economic crisis; donor fatigue and volatility of foreign aid; commercial interest-led foreign direct investment and new emerging partnerships such as BRICS.
The need for domestic resource mobilization (DRM). For the continent to own and account for its development process, DRM would play a significant role via various means such as broadening the tax base, tackling tax evasion and avoidance, and fighting illicit financial flows. There are possibilities for African countries to raise additional funds via: African diaspora remittances, which have the potential to generate some additional US$ 10 billion annually through securitization and rise up to US$ 20 billion when including diaspora bonds; debt relief measures that could amount to US$ 114 billion; and curtailing of illicit financial flows which could make some US$ 50-60 billion available for development.
A major challenge for resource mobilization, therefore, is, as much as possible, to find mechanisms to raise revenue from taxation as well as savings from income earners. This means, first of all, that the interests of those who pay taxes and those who save must be taken into account when determining economic policies, especially taxation and financial sector policies. Second, it also means that both government expenditure policy and financial sector policy must enable the funds mobilized to be used efficiently, using criteria of efficiency that would, with appropriate information, be generally acceptable to the populace at large.
Call for integrated capacity building at national, regional and continental levels: The development of capacity at all these levels is central to delivering on the planning, implementation and evaluation of the sustainable development goals, and needs a much more prominent place within the FfD 3.. Specific references which need to be emphasized include investments in human and institutional capacity, specifically capacity that enables African institutions and countries to adequately finance and implement their development agenda. Capacity, which should be at the heart of the SDGs will ensure an effective management of development processes and leverage on innovative financial sources of all kinds. Capacity for DRM is determined by the ability of the relevant economic agents (in particular, government and financial sector operators) to perform the necessary intermediation tasks that result in tax receipts and savings. Building requisite capacity requires addressing the binding constraints on domestic resources and on the capacity for their mobilization by government and financial sector organizations, including low disposable incomes, pervasive corruption, underdeveloped financial systems, large-scale informality, tax policy weaknesses and legal system inadequacies.
Emmanuel Nnadozie is the Executive Secretary of the African Capacity Building Foundation (ACBF)
