Following the Sevilla Summit, a discussion with an African diplomat highlighted a crucial truth: while global commitments, such as pledges to double Official Development Assistance (ODA) for Domestic Resource Mobilisation (DRM) by 2030, are welcome, the real work begins at home. The diplomat emphasized that doubling aid from a very low base will not generate transformative change. Instead, Africa’s development future hinges on building strong national institutions capable of mobilizing domestic resources and controlling financial flows.
Africa faces a staggering $1.6 trillion financing gap to achieve the Sustainable Development Goals (SDGs), a shortfall that cannot be filled solely by external aid. Even if ODA commitments are fully met, they would remain a modest portion of the funding needed. The most powerful lever for change lies within Africa: creating institutions that enable countries to fund their own development and reclaim ownership of their economic agendas.
Currently, African countries collect insufficient revenue and lose billions to illicit financial flows (IFFs). With an average tax-to-GDP ratio of 16% and annual IFFs estimated at $88.6 billion—often exceeding ODA and foreign direct investment—African nations face a dual challenge. This loss of resources directly impacts the ability to build schools, equip hospitals, and construct infrastructure. A single-country study cited in the UN report found that IFFs were three and a half times the ODA received, underscoring the need for nationally owned, sustainable development finance.
The solution lies in a holistic strategy built on three interconnected pillars: robust economic governance, digital transformation, and strategic financing frameworks.
First, Africa must strengthen economic governance to gain control over resources. The legacy of colonial-era extractive economic models persists, limiting opportunities for value addition. Transparent, accountable natural resource management is essential to buffer economies against commodity price shocks and ensure revenues are invested in diversification. Institutions like the African Peer Review Mechanism (APRM) play a key role by fostering accountability through peer reviews and knowledge sharing.
Second, digitalization of state functions, particularly tax administration, must accelerate. African countries have reduced tax collection costs from 9.5% in 2018 to 1.4% in 2022, yet ICT investment remains low, with only 5% of tax administration budgets allocated to technology compared to 12% in Latin America and 16% in Asia. Initiatives such as the African Digital Public Infrastructure Stack (A-DPI-Stack) can modernize revenue collection, expand the tax base, and combat evasion through AI analytics, blockchain, and integrated digital platforms. Some countries have already begun leveraging these tools to increase efficiency and formalize informal economies.
Third, public financial management strategies need rationalization. Eliminating redundant tax incentives, which cost an estimated 1.8% of GDP annually, and implementing Integrated National Financing Frameworks (INFFs) can align domestic, international, public, and private funding with national development priorities. Thirty-six African countries are currently advancing INFFs, signaling a shift toward strategic, coordinated financing.
The potential payoff is substantial. IMF analysis indicates that strengthening institutions and improving tax effort could raise African countries’ revenues by up to 13.6 percentage points of GDP. By building effective states that deliver services, foster resilience, and earn citizens’ trust, African governments can transition from dependency to ownership, harness their own resources, and finance sustainable development from within.
Africa’s path to prosperity depends not on external pledges but on investing in strong national institutions that empower countries to control their financial destiny and achieve long-term development goals.
