Domestic resource mobilization crucial for Africa to successfully implement SDGs, says ECA’s Elhiraika

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Domestic resource mobilization crucial for Africa to successfully implement SDGs, says ECA’s Elhiraika

Domestic resource mobilization crucial for Africa to successfully implement SDGs, says ECA’s Elhiraika
Photo credit: Focus on Land in Africa

Mobilising domestic resources, from both the public and private sectors, is central to Africa’s collective success in achieving the 2030 sustainable development goals (SDGs) and the continent’s 50-year development plan, Agenda 2063, says Adam Elhiraika, Director of the Macroeconomic Policy Division at the Economic Commission for Africa (ECA).

Speaking at the beginning of a three-day High Level Policy Dialogue on Development Planning in Africa that is being held in Cairo, Egypt, Mr. Elhiraika said the 2030 Agenda and the Addis Ababa Action Agenda on financing for development both underscore that countries need to mobilise greater financial resources if they are to achieve the SDGs.

“African countries will need to tap into diverse funding sources for their development programmes, from tax and non-tax public revenues, to public borrowing, to private investments, to innovative sources of finance,” he said, adding estimates of additional financing needs for Africa to achieve the SDGs range from $600 billion to over $1.2 trillion annually.

“It is also clear that we will need more effective use of the available resources. In particular, public financial management must be improved, including through good budgeting and effective resource allocation towards priority areas,” he told senior government officials from member States, including Finance and Planning Ministers.

These challenges, he said, necessitate a financing framework that can manage the finance mobilised from various different sources.

“It also needs to make sure that the allocation of finance to particular areas of spending is done efficiently so that each type of finance is directed towards funding the programmes to which it is best suited,” the Director said.

Tax revenues, said Mr. Elhiraika, are a key part of domestic resources. In 2016, Africa’s tax revenues totalled $500 billion, which is around 3 times the level of ODA, FDI and remittances combined. Yet tax to GDP ratios on the continent are around 18 per cent, which is low compared to other regions.

Boosting tax collection could significantly increase available finance for development, he said.

“There are a number of ways in which tax revenues can be increased, for example by formalising or otherwise taxing the informal sector, which is estimated to account for 50 to 80 per cent of GDP in some African countries and remains largely untaxed,” said Mr. Elhiraika.

He said tackling illicit financial flows, particularly abusive tax practices of multinational corporations, could mobilise substantial additional revenues needed for Africa’s development.

Africa is losing over $100 billion annually through IFFs.

“IFFs not only reduce the rate of taxpayer compliance throughout the economy, they also draw the economy’s factors of production and resources into the illicit economy, which will affect overall economic activity and then undermine important social spending or productive investment programmes,” Mr. Elhiraika said, adding African countries that have used provisions for international exchange of information have been able to recover up to tens of millions of dollars in revenue.

He said the ECA was proud to co-organize this meeting which offers an opportunity for African development planners to discuss key issues facing them as they implement the two agendas.

The theme of the meeting is ‘Financing the Sustainable Development Goals in Africa: Strategies for planning and resource mobilization’.

Professor Alaa Zahran, President of the Institute of National Planning in Egypt, said like other countries, Egypt was experiencing challenges in implementing the SDGs but was conquering the challenges through concerted efforts involving every stakeholder.

He said planning was crucial if the continent was to successfully implement the SDGs and change the lives of ordinary people.


Financing the SDGs in Africa: Strategies for Planning and Resource Mobilization

Background

The Sustainable Development Goals (SDGs), otherwise known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. The 2030 Agenda includes 17 goals, 169 target and indicators that constitute major challenges in terms of technical and institutional capacities. The means of implementation for the Agenda include financing, technological innovation and capacity building.

Achieving the ambitious targets of the 2030 Agenda requires a revitalized and enhanced global partnership that brings together Governments, civil society, the private sector, the United Nations system and other actors and mobilizes all available resources. Indeed, according to a World Bank (WB) and International Monetary Fund (IMF) report, in order to meet the investment needs of the SDGs, the global community needs to move the discussion from “Billions” in Official Development Assistance (ODA) to “Trillions” in investments of all kinds: public and private, national and global, in both capital and capacity. And all funds should be put to the best possible use. UNCTAD estimates that the additional finance required to fund only the infrastructure (physical and social) needs associated with the SDGs for developing countries alone will be at least US$2.5tn per year. Recent estimates of the amount of additional finance that Africa will need to mobilise to achieve the Goals range from $600 billion to $1.2 trillion per year.

Thus, enhancing support to developing countries, particularly Least Developed Countries (LDCs) and Small Island Developing States (SIDS) is fundamental to ensuring equitable progress for all. And a stronger commitment to partnership and cooperation is needed to achieve the SDGs. That effort will require coherent policies, an enabling environment for sustainable development at all levels and by all actors, including effective coordination between public sector organizations and private institutions. This calls for a reinvigorated Global Partnership for Sustainable Development, as well as significant reform to global financial regulations and financial institutions, especially in the areas of equitable taxation of raw material exports from Africa and controlling capital loss through illicit financial flows. A meaningful commitment from all corporations – large and small – to tackle the challenges outlined by the SDGs are also key.

One of the major differences between the MDGs and the SDGs in terms of financing is that while the achievement of the MDGs mainly depended on external financing, in particular on Official Development Assistance (ODA), the SDGs are mainly expected to rely on domestic resource mobilization for their implementation. While recognizing ODA as an important complementary source of development finance, in particular in Least Developed Countries (LDCs), African governments have generally welcomed this shift in emphasis and committed themselves to enhancing domestic resource mobilization to finance their own sustainable development. Overdependence on resources supplied by external development partners is being increasingly considered as compromising African countries’ commitment to pursue the development priorities they have set for themselves. Therefore, it is vital for African member states to assess the level of funding required to realize the SDGs and identify strategies for resource mobilization.

Rationale

In the light of the foregoing, the 2018 High Level Policy Dialogue on Development Planning (2018-HLPD) will deliberate on the theme Financing the SDGs: Strategies for Planning and Resource Mobilization. The theme was proposed by the 2017-HLPD, which was held in Abuja, Nigeria, under the theme Mainstreaming the SDGs into National Development Plans. This was in recognition of the need for effective resource mobilization to meet the financing needs of the SDGs. The high level policy dialogue series was established by ECA in 2014 to serve as a platform for coordination and experience sharing among African planners and Chief Executives of planning bodies. Five events have been organized since its establishment.

The Addis Ababa Action Agenda (AAAA) of the Third International Conference on Financing for Development (FFD) of July 2015 identifies various measures of mobilizing domestic and external resources. Among other things, AAAA identifies strategies for developing countries to mobilize domestic resources through optimal taxation, regulation, good governance and institutional reforms; promotion of safer, faster and cheaper transfer of remittances; encourage the growth of private investment and public-private partnerships (PPPs); foster greater advancement in science, technology and innovation; as well as institutional, national and international assistance in capacity building.