Financing Sustainable Development in Africa: Taking Stock and Looking Forward

Introduction

Sustainable development in Africa, which includes the ability to meet present economic, social and environmental needs without compromising the capacity of future generations to meet their own prevailing needs, will require enormous economic resources to fund it. This implies that there must be a clear balance of prioritization of financing options on what works best for development in this region without further escalating other societal problems. The vast majority of the literature has focused on traditional financing means such as development aids (Alesina and Dollar, 2000), Foreign Direct Investment (Velde, 2006), even remittances from migrants (Maphosa, 2007; Osabuohien and Efobi, 2013; 2014; Efobi et al, 2015), and to a large extent, foreign debt from bilateral and multilateral institutions (Chipumbu, 1993; Omotola and Saliu, 2009).

The puzzle in this chapter is not that the current means have not favored African development – because it has, but that a significant fraction of these funds has not been channeled for development structures that will facilitate sustainability. For instance, Kharas (2007) notes that despite the magnanimous flow of foreign aid to developing countries, a significant number of them channel these funds to debt forgiveness and other unprecedented natural occurrences, leaving out issues like infrastructural development and even education and health care development. Also, Safiq, Mansoon & Rafique (2013) observed that apart from national debts and inflation that continuously threatens the gross domestic product (GDP) of developing economies, foreign direct investment negatively affects economic performance. The limiting prospects of foreign funds for financing sustainable development is largely hampered by government instability, internal and external conflict, corruption and ethnic tensions, bureaucracies, unresponsiveness and unaccountability of government (Busse & Hefeker, 2007)

This chapter, therefore, sets out findings from an examination of the traditional funding options that African countries have relied on overtime, and then discuss new funding options by taking cases on how they have worked in specific African countries. For instance, issues like empowering cooperative societies and mutual support networks, agricultural cooperatives, crowdfunding, fiscal responsibility, other forms of informal banking alternatives, were considered for sustainability in Africa. These issues are essential considering that the set-up of African countries is unique and the specific structures are different from countries in other regions (Asiedu, 2002; Nkume, 2018; Akinyemi, et al, 2019), and policies that work in other regions may not be adaptable for this region because the circumstances and informal institutions (i.e. the foundations on which policies thrive) differ so much.

The remainder of the chapter is distributed as follows: the next section discusses the trends in traditional means of financing development in Africa, which is followed by the linkage between these means of financing development and key indicators of human development. The fourth section discusses some relevant case studies of other financing option that can fit the development trajectories of African countries, while the fifth section concludes the paper with policy recommendations.