Policymakers Urge Strong Action at Botswana Conference
During the African Economic Conference held in Gaborone, Botswana, this past November, policymakers and experts underscored the immediate necessity for African leaders to implement decisive measures to restructure their economies and strengthen resilience in an increasingly daunting global landscape. Hosted by the African Development Bank, the United Nations Development Program, and the UN Economic Commission for Africa, the conference gathered thinkers and specialists from within the continent and beyond to explore strategies for securing Africa’s economic future amidst rising uncertainty.
Accountable Leadership
President Duma Boko of Botswana (pictured), who recently rose to power with a mandate for economic rejuvenation and youth job creation, urged African leaders to confront the tough truths facing the continent and accept responsibility for policy failures that may have worsened existing challenges.
“We must transcend self-praise and confront the realities that our actions impose on our citizens. If we do not challenge one another, we will become our own gravest adversaries,” he stated.
He called on leaders to amplify efforts toward economic diversification, accentuating initiatives his administration has introduced to lessen Botswana’s dependency on diamonds while promoting sectors such as infrastructure, agriculture, and tourism.
Boko articulated that Africa’s vast natural resources provide a strong basis for economic diversification and developing regional value chains.
“Africa still possesses rich natural resources, and it is essential to cultivate and enhance value chain systems for adding value to these resources, prioritizing their utilization within Africa. This not only significantly diversifies African economies but also generates increased employment opportunities within our nations.”
He also expressed concern over the rising conflicts across the region, indicating that they undermine hard-fought advancements in poverty reduction and development. The Geneva Academy of International Humanitarian Law and Human Rights reports over 45 armed conflicts presently occurring throughout the continent.
“The ongoing and unnecessary wars must cease, as they perpetuate immeasurable human suffering, loss of life, displacement, and leave lasting damage on societies,” Boko asserted.
He highlighted Africa’s demographic dividend as its most significant asset. However, he pointed out that high unemployment, inadequate skills, and policies lacking an inclusivity focus mean this potential remains largely unrealized.
“Africa is endowed with a young and energetic population, which is a major asset if invested in wisely. Our youth are the innovators, entrepreneurs, and future leaders who will steer our economic development and create inclusive, resilient societies that leave no one behind.”
Outsourcing Development Not an Option
Kevin Urama, chief economist and vice president for economic governance and knowledge management at the AfDB, emphasized the necessity for a shift in mindset across Africa. Often, leaders and policymakers rely on global institutions for solutions, whereas local answers to Africa’s challenges can be found within the continent.
“Nations must now recognize that national development cannot be outsourced. Development is fundamentally a self-driven endeavor,” he remarked, further stating that “Africa requires home-grown solutions rooted in local realities.”
He highlighted the urgent need for pro-industrial policies to diversify African economies and promote inclusive growth. However, he warned that such policies must avoid rigidity and encourage innovation; without this flexibility, they will be inadequate to create the millions of jobs necessary for Africa’s growing youth population.
“It is crucial to understand that industrial policy alone cannot resolve slow growth, employment issues, and poverty alleviation. Instead, a pro-innovation policy mix prioritizing strategic value chain development in competitive sectors can significantly boost inclusive economic growth and sustainable development,” he argued.
Urama also condemned poor governance, which results in revenue losses and inefficiencies, noting that Africa loses approximately $1.6 billion daily due to corruption, rent-seeking behaviors, and illicit financial flows.
Ahunna Eziakonwa, regional director for Africa at UNDP, remarked that escalating global conflicts are diverting resources away from development spending in favor of increased military expenditure. This shift poses significant challenges for Africa, which has substantial development financing needs.
“Conflicts in Ukraine and Palestine have driven annual global military spending above $2.4 trillion, the highest since 2009, diverting resources away from Sustainable Development Goals investments,” she pointed out.
Eziakonwa criticized the exorbitant borrowing costs facing African nations, attributing this largely to “inaccurate” credit ratings from global agencies that misinterpret the continent’s risk realities. According to UNDP, inaccuracies in credit ratings burden African countries with $75 billion in excessive interest and lost lending opportunities.
“To aid African nations in improving their credit ratings, we have established a publicly available Africa Credit Ratings Resource Platform, serving as a comprehensive source of data, methodological information, and research on credit ratings.”
“We also extend custom technical assistance and capacity-building initiatives for countries preparing for credit ratings or evaluations,” she added.
Domestic Resource Mobilization Key
Claver Gatete, executive secretary of the UN Economic Commission for Africa, stressed that in a world where development finance is increasingly scarce and debt costs are rising, Africa must enhance its tax infrastructures and focus on domestic resource mobilization to fortify its economic prospects.
“Africa’s tax-to-GDP ratio stands at 15.6%, a figure significantly below the global average. Even a slight increase could yield billions in revenue,” he noted.
He argued that improving revenues doesn’t necessarily mean increasing taxes. Digitizing tax administration and boosting compliance can help secure billions more in tax revenues. Rethinking tax incentives aimed at attracting private investors can also strengthen national finances. He stressed that only those private investors who demonstrate their operations yield employment, income, and growth should benefit from such incentives.
“It’s imperative we modernize our tax systems, expand our tax bases to incorporate the informal sector, utilize digital technologies for efficiency, and close loopholes facilitating illicit financial flows. Furthermore, we need to ensure that fiscal incentives for private investors are appropriately targeted,” he stated.
Gatete pointed out that Africa’s potential lies in its ability to transform resources into value-added products. “It is crucial to establish regional value chains across significant sectors. With 94 value chains identified in 23 sectors among an estimated 240 Special Economic Zones, there is no reason Africa cannot achieve success in this regard,” he remarked.
“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 countries can emulate,” he highlighted.
He further urged African leaders to amplify efforts to draw in private investors by mitigating investment risks, asserting that this is the sole approach to reducing reliance on foreign aid. By enhancing governance, implementing transparent systems, and developing innovative insurance mechanisms, Africa can minimize investor risks, he asserted.
“For instance, South Africa’s pharmaceutical sector and Rwanda’s vaccine manufacturing facility exemplify the power of local value creation in attracting international partnerships. We must strive to replicate such triumphs across various sectors and regions in the continent,” he argued.
He emphasized the necessity for leaders to make every effort to ensure the success of the African Continental Free Trade Area (AfCFTA). This would facilitate the scale needed not just to attract private investments but also to develop the regional value chains vital for Africa’s industrial growth and high-income job creation.
Climate Finance Should Be Concessional
Recognizing the crippling effects of climate change on the continent’s vulnerable populations, Eziakonwa criticized the sluggish flow of financing aimed at addressing this concern. She also pointed out that the costs associated with climate financing are unsustainable.
“Our continent continues to shoulder an outsized burden regarding climate change—a crisis we did not instigate. African nations face the formidable challenge of raising approximately $250 billion yearly (10% of GDP) for climate initiatives, yet less than 10% has been generated,” she stated.
“Moreover, over three-quarters of available funds are in the form of loans rather than grants. This further exacerbates the debt situation for a continent expected to pay over $160 billion in debt servicing this year alone.”
Urama concurred on the urgent requirement for more concessional financing and grants to bolster climate finance endeavors.
“In my view, climate finance should not be classified as a loan since it is intended to alleviate vulnerabilities in an economy, and often, the most at-risk economies contribute minimally to climate change,” he remarked.
“To draw in more climate finance, nations must intentionally build capacity to formulate climate projects and navigate the intricate climate finance landscape. Thus, capacity building is essential to securing increased climate finance for Africa,” he stated.
However, Gatete indicated that while concessional funding and grants are more suitable for climate finance, Africa lacks control over the volumes and timing of funds pledged by wealthier nations. The solution, he asserted, lies in Africa accurately valuing its natural capital to secure further resources for mitigation and adaptation efforts. He cited the case of carbon credits within Africa, which are significantly undervalued compared to other areas worldwide.
“Other nations sell carbon credits for over $100 per tonne, while in Africa, it is below $10 per tonne,” he noted, indicating that steps are being taken to address this by incorporating Africa’s green wealth into GDP calculations.