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“Financing development in Africa”
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“Financing development in Africa”

Africa’s aspirations for socio-economic transformation over the next 50 years are captured in Africa Agenda 2063. But how should these and other development goals be financed? Enitan Damilola Temidayo, 23, a Correspondent from Nigeria now studying in Moscow, explores some of the options he believes are available to the African continent. 

According to Suzy Ross, “Transformation is an ongoing process that tends to appear ordinary, when, in fact, something extraordinary is taking place.”  Oftentimes,  the youth have been made to believe that they are the leaders of tomorrow and that Africa has great potential but these questions remain: When will tomorrow come? When will the potential of Mother Africa come to fruition and very importantly, how will the transformation of Africa be financed?

It is no longer news that most developed countries powered their transformation through debt financing, public-private partnerships, foreign direct investment, revenue from taxes and so on. However, they have crucially been able to sustain their development by investing in quality education systems. In Africa’s case, we must first direct a large percentage of our revenue to improve the quality and purpose of education. This is our best shot at financing and sustaining Africa’s transformation.

Secondly, our governments should make reforming the system of tax administration a priority. In most developed countries, tax revenue accounts for over a third of the Gross Domestic Product (GDP) and remains the most important source of revenue. However, in most African countries, tax revenue accounts for less than a fifth of GDP. To correct this anomaly, we must review our system of taxation by restructuring the cost and administrative systems in place for tax collection. Additionally,  reviewing the various tax rates and giving consideration to dropping or introducing new forms of taxes are all important. One major challenge to improving tax collection will, however, be tax evasion and corruption. The latter has been the enemy of development in Africa over the years.

The next area of focus should be developing strong public-private partnerships across different fields. The result of this source of development finance can be colossal in Africa’s transformation because it covers more ground than leaving the development task to the government.

These partnerships should be available in education, social amenities (power supply and water), transport, health, business (exploration of natural resources) and so on. In developed economies, public-private partnerships have proven to be a major source of job creation and an alternative to government-only funded development. To encourage more partnerships, tax breaks should be offered in certain sectors, with specific terms and conditions attached. 

Foreign debt has been another vital source of financing for developed economies. However, unlike African countries where these funds are spent on recurrent expenditures, developed countries use the funds to improve capital projects and expenditures.

Similarly, we should channel these borrowed funds towards capital development projects – providing social amenities, building medical facilities, academic institutions and improving security facilities. 

Finally, the importance of foreign direct investment to fuel development cannot be overemphasized. To make our development all-encompassing, we must open up our borders to foreign businesses in order to expand our economies and create jobs. However, to attract foreign investors, good social amenities and infrastructure, security and political stability are needed. 

Revenues from debt financing, public-private partnerships, foreign direct investment,  and taxes should be directed at improving the state of social amenities, security,  and education.  This investment in education will pay dividends not only in poverty reduction and economic development but also in enabling our continent to tackle corruption and political instability.

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About me: I am a vibrant student of International Economics aspiring to work with professionals in the World Bank Group or International Monetary Fund to help sustain the steady development of global economics. Over the years, I have taken interest in reading and researching but only recently discovered my writing potential. I have enjoyed the recent publication of several academic papers.

Photo credit: via The Commonwealth’s Asset Bank

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Opinions expressed in this article are those of the author and do not necessarily represent the views of the Commonwealth Youth Programme. Articles are published in a spirit of dialogue, respect and understanding. If you disagree, why not submit a response?
To learn more about becoming a Commonwealth Correspondent please visit: http://www.yourcommonwealth.org/submit-articles/

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