During the African Economic Conference that took place in Gaborone, Botswana, last November, policymakers and experts stressed the urgent need for African leaders to take decisive steps toward restructuring their economies and enhancing resilience in a challenging global environment. Organized by the African Development Bank, the United Nations Development Program, and the UN Economic Commission for Africa, the conference brought together thinkers and specialists from across the continent and beyond to discuss strategies for securing Africa’s economic future amid increasing uncertainties.

Responsible Leadership

President Duma Boko of Botswana (pictured), who recently ascended to power with a focus on economic revitalization and job creation for youth, called upon African leaders to face the harsh realities the continent is facing and to take accountability for the policy failures that may have exacerbated current issues.

“We must move beyond self-congratulation and acknowledge the impacts our decisions have on our citizens. If we fail to hold each other accountable, we risk becoming our own worst enemies,” he stated.

He urged leaders to intensify efforts toward economic diversification, highlighting initiatives his administration has launched to reduce Botswana’s reliance on diamonds and to promote sectors like infrastructure, agriculture, and tourism.

Boko emphasized that Africa’s abundant natural resources present a robust foundation for economic diversification and the development of regional value chains.

“Africa is rich in natural resources, and it is crucial to develop and enhance value chain systems that add worth to these resources, prioritizing their use within Africa itself. This approach not only diversifies African economies but also creates additional job opportunities in our countries.”

He also expressed his worries regarding the escalating conflicts in the region, which threaten the hard-won advancements in poverty alleviation and development. The Geneva Academy of International Humanitarian Law and Human Rights reports that there are currently over 45 armed conflicts occurring across the continent.

“The ongoing and needless wars must come to an end, as they lead to immense human suffering, loss of life, displacement, and lasting damage to societies,” Boko asserted.

He underscored Africa’s demographic dividend as its most vital asset but also noted that high unemployment, skills shortages, and a lack of inclusive policies mean this potential remains largely untapped.

“Africa boasts a young and dynamic population that can be a tremendous asset if leveraged correctly. Our youth are the innovators, entrepreneurs, and future leaders who will drive our economic growth and build inclusive, resilient societies that leave nobody behind.”

Local Solutions Essential

Kevin Urama, chief economist and vice president for economic governance and knowledge management at the AfDB, stressed the critical need for a change in mindset throughout Africa. He noted that leaders and policymakers often look to global institutions for solutions, despite the fact that many of Africa’s challenges can be addressed with local solutions.

“Countries must now understand that national development cannot be outsourced. Development is inherently a self-driven process,” he remarked, adding that “Africa needs unique solutions grounded in local circumstances.”

He pointed out the urgent requirement for pro-industrial policies to diversify African economies and foster inclusive growth. However, he cautioned that these policies should avoid being overly rigid and should encourage innovation; without such flexibility, they will not be sufficient to create the millions of jobs needed for Africa’s growing youth demographic.

“It’s vital to recognize that an industrial policy alone cannot solve issues of slow growth, unemployment, and poverty reduction. Instead, a mix of pro-innovation policies that focus on developing strategic value chains in competitive sectors can substantially enhance inclusive economic growth and sustainable development,” he argued.

Urama also condemned poor governance, which leads to revenue losses and inefficiencies, highlighting that Africa loses about $1.6 billion every day due to corruption, rent-seeking activities, and illicit financial flows.

Ahunna Eziakonwa, regional director for Africa at UNDP, noted that escalating global conflicts are siphoning resources away from development spending in favor of increased military expenditure, presenting significant challenges for Africa, which has vast development financing needs.

“Conflicts in Ukraine and Palestine have pushed global military spending to over $2.4 trillion annually, the highest level since 2009, diverting funds that could be used for Sustainable Development Goals investments,” she pointed out.

Eziakonwa criticized the exorbitant borrowing costs that African nations face, mainly due to “inaccurate” credit ratings from global agencies that misinterpret the continent’s risk landscape. According to UNDP, these inaccurate ratings cost African countries approximately $75 billion in excessive interest and lost lending opportunities.

“To assist African nations in improving their credit ratings, we have created a publicly accessible Africa Credit Ratings Resource Platform, which serves as a comprehensive repository of data, methodologies, and research on credit ratings,” she explained.

“We also provide tailored technical assistance and capacity-building initiatives for countries getting ready for credit ratings or evaluations,” she added.

Key to Mobilizing Domestic Resources

Claver Gatete, executive secretary of the UN Economic Commission for Africa, emphasized that as development finance becomes increasingly scarce and debt costs rise, Africa must enhance its tax infrastructures and focus on mobilizing domestic resources to bolster its economic opportunities.

“Africa’s tax-to-GDP ratio is currently at 15.6%, significantly below the global average. Even a minor increase could generate billions in revenue,” he noted.

He argued that boosting revenues does not necessarily mean raising taxes. Digitizing tax administration and enhancing compliance can secure billions more in tax revenue. Rethinking tax incentives designed to attract private investors can also fortify national finances. He stressed that only those private investors demonstrating their operations create jobs, income, and growth should benefit from such incentives.

“It is crucial that we modernize our tax systems, broaden our tax bases to include the informal sector, utilize digital technologies for efficiency, and close loopholes that allow illicit financial flows. Moreover, we need to ensure that fiscal incentives for private investors are well-targeted,” he insisted.

Gatete highlighted that Africa’s potential lies in its ability to convert resources into value-added products. “Establishing regional value chains across major sectors is essential. With 94 identified value chains in 23 sectors among an estimated 240 Special Economic Zones, there is no reason Africa cannot achieve success in this area,” he noted.

“We already have successful models on the continent, such as Botswana’s beef industry, Ethiopia’s leather production, and the cocoa sectors in Ghana and Côte d’Ivoire that other nations can replicate,” he emphasized.

He also urged African leaders to intensify efforts to attract private investors by reducing investment risks, stating that this is the only way to diminish reliance on foreign aid. By improving governance, instituting transparent systems, and developing innovative insurance mechanisms, Africa can lessen investor risks, he argued.

“For instance, South Africa’s pharmaceutical sector and Rwanda’s vaccine manufacturing facility illustrate the potential of local value creation in drawing international partnerships. We must aim to replicate such successes across various sectors and regions of the continent,” he asserted.

He stressed the importance of ensuring the success of the African Continental Free Trade Area (AfCFTA). This would enable the scale necessary not only to attract private investments but also to create the regional value chains essential for Africa’s industrial growth and the generation of high-income jobs.

Concessional Climate Finance Necessary

Eziakonwa, recognizing the devastating impacts of climate change on the continent’s vulnerable populations, criticized the sluggish flow of financing designed to address these issues. She also mentioned that the costs associated with climate financing are becoming unsustainable.

“Our continent continues to bear an excessive burden concerning climate change—a crisis we did not create. African nations face the daunting task of securing approximately $250 billion annually (10% of GDP) for climate initiatives, yet less than 10% has been generated so far,” she indicated.

“Furthermore, over 75% of available funds are in the form of loans instead of grants. This situation exacerbates the debt crisis for a continent that is expected to spend over $160 billion on debt servicing this year alone.”

Urama echoed the critical need for more concessional financing and grants to enhance climate finance efforts.

“In my opinion, climate finance should not be categorized as a loan, as it is meant to alleviate vulnerabilities in an economy, and often, the countries most at risk have minimal contributions to climate change,” he argued.

“To attract more climate finance, nations must purposefully build capacity to create climate projects and navigate the complex landscape of climate finance. Therefore, capacity building is essential for securing increased climate funding for Africa,” he stated.

However, Gatete remarked that while concessional funding and grants are more suitable for climate finance, Africa does not control the volumes and timing of the funds promised by wealthier nations. The solution, he contended, lies in Africa accurately valuing its natural capital to secure more resources for mitigation and adaptation efforts. He cited the example of carbon credits in Africa, which are significantly undervalued in comparison to other regions globally.

“Other countries sell carbon credits for over $100 per tonne, whereas in Africa, they are priced below $10 per tonne,” he highlighted, noting that steps are being taken to rectify this by incorporating Africa’s green wealth into GDP calculations.