Africa struggles to finance the Sustainable Development Goals

by MMC
0 comment

Poorer countries face a potentially disastrous cash flow crisis as aid and capital flows dry up. But innovative financing models can, with international support, bridge the gap. Report by Neil Ford.

There is no doubt that progress towards achieving the Sustainable Development Goals (SDGs) has been hampered by the perfect storm of challenges that has hit the African continent: the Covid-19 pandemic and associated containment measures. , climate change, the war in Ukraine and restrictions. donor support.

However, it is essential that the financing of investments and measures supporting the achievement of the SDGs continues if we do not want these objectives to disappear.

The pandemic has had a negative effect on living standards, leading to increased unemployment and underemployment, as well as increased poverty. Average economic growth of 2.5% among least developed countries over the period 2020-2022 was well below the 7% targeted by SDG 8.

At the same time, the global poverty rate rose from 8.5% in 2019 to 9.3% in 2020, reversing more than four years of progress.

It also achieved Target 5 by widening the gender gap, with women experiencing greater employment declines than men, while taking on additional care work.

According to the UN, countries that had already made more progress towards achieving the goals were better placed to cope with the impact of Covid-19. However, it is also possible that those who made the most progress were also those who had the resources needed both to improve living standards and to deal with the pandemic.

The combination of the Russian invasion of Ukraine, the resulting supply chain disruption, and the imposition of international sanctions against Russia has led to food and energy shortages in Africa, fueling inflation and increasing food and energy poverty on the continent.

Countries with the lowest per capita incomes suffer the most because food and transport represent a higher proportion of their income. According to the United Nations Conference on Trade and Development (UNCTAD), Russia and Ukraine together accounted for 48% of African wheat imports during 2018-20.

The pandemic and the war in Ukraine have also triggered a series of financial problems, with high inflation and rising interest rates intended to counter that inflation. This has increased costs for African governments, particularly in terms of financing, which limits their ability to support programs in favor of the SDGs.

Downgrades of African sovereign ratings by major credit rating agencies have also impacted financing options, as sovereign ratings are key to accessing debt markets.

Of the 32 African countries whose credit rating is assigned by one of the three main agencies, around half have been downgraded since the start of the pandemic.

Limited donor support

Some Western governments have responded to the increased pressure on their own finances since the pandemic by cutting their overseas development budgets. Among other things, the UK’s aid budget has been falling since 2019, while Sweden’s new government is cutting its aid spending.

Behind these policy shifts is often the right’s desire to focus on domestic priorities and move away from multilateral solutions to global challenges. Yet global initiatives such as the SDGs help address global issues, such as international insecurity, while promoting global growth and strengthening Western influence through soft power.

In May 2022, UN Secretary-General António Guterres warned that recent significant reductions in foreign aid budgets by some governments would have “direct and negative impacts” on the world’s ability to achieve the SDGs.

He said predictable and additional financing, backed by a commitment to spend 0.7% of industrialized countries’ gross national income on foreign aid, was needed to “save” the SDGs.

Even before the pandemic, the war in Ukraine and the series of financial constraints currently affecting most economies, the United Nations said: “Progress has been made in many places, but, overall, action to achieving goals is not yet progressing at the pace or scale required. 2020 must mark the start of a decade of ambitious action to achieve the goals by 2030.” Unfortunately, the situation has deteriorated considerably since then.

Yet progress is possible even with reduced donor support and more limited domestic financial resources on the African continent.

UNDP argues that reorienting public and private actors to work together more effectively is as important as the amount of funds available.

It also suggests social impact and development bonds, pay-for-success systems, forecast-based financing and equity investments in social good projects.

Green finance has perhaps the greatest potential and has already been planned as part of COP27, although the industrialized world has not yet actually started to provide the required level of green finance.

Additionally, the Sustainable Debt Coalition initiative, launched by Egypt during COP27 in Sharm el-Sheikh last November, aims to provide a space for like-minded countries to examine and promote applicable solutions to the intersection debt, development and climate change.

The Coalition aims to increase the financing available for green development efforts, helping to reduce green borrowing costs for developing countries, improve financing conditions and ease of implementation, and resolve other debt problems. The ECA serves as the secretariat of the Coalition.

Encourage appropriate FDI

UNDP Africa Investment Outlook Report, which was produced by the Africa Sustainable Finance Hub in July 2023, examined opportunities for private companies to invest in sustainable economic projects in Africa to help achieve the SDGs, often through public-private partnerships.

He says: “The potential of investment for the advancement of Africa’s sustainable development cannot be overestimated. Transferring just 3.7% of the $100 trillion in global assets under management by institutional investors each year would enable us to achieve the SDGs.

Technological advances could encourage the private sector to take the lead in certain areas, notably in the agriculture and energy sectors. Africa has a large part of the world’s available arable land and 40% of the world’s solar irradiation, which favors agriculture and offers enormous solar energy potential.

The African Development Bank believes that the energy transition offers enormous opportunities to promote the SDGs, both socially and environmentally and in terms of generating returns for investors.

Africa also contains a large portion of the resources needed for the energy transition, including 71% and 77% of global cobalt and platinum production respectively, as well as significant copper production.

Ensuring that a significant proportion of mined raw materials are used in Africa could create significant automotive and renewable energy industries that would specifically contribute to achieving SDG 17 on access to clean and affordable energy, but also support the achievement of several other objectives by stimulating economic growth and creating qualified employment.

More abundant and reliable access to electricity would also contribute to progress towards universal access to drinking water, access to health services and the reduction of poverty.

In the longer term, attracting a greater share of global manufacturing capacity and making maximum use of the African Continental Free Trade Area (AfCFTA) could make a huge difference to economic development and living standards.

Securing the infrastructure investment needed to attract the former could create several million well-paying jobs, particularly as wage rates rise in East Asia, while the latter would help build supply chains intra-African trade in order to reduce trade dependence on the rest of the world.

Taken together, these two developments would promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all under SDG 8.

The global community must decide: are the SDGs concrete goals for which the world will work together, or are they vague aspirations for a better world, with insufficient political will to make them a reality?

It now seems likely that few specific goals will be achieved, raising the question of what the SDGs are really for. Still, having specific goals at least sets standards to achieve against which progress can be measured, and setting a deadline of 2030 helps inject some urgency into the process. It is up to countries in a position to help finance SDG programs to step up their efforts to help achieve such laudable goals.

Saving the SDGs in Africa – learn more

The United Nations Sustainable Development Goals (SDGs) are a comprehensive set of global goals aimed at ending poverty, protecting our planet and improving living conditions for the world’s people. To assess where Africa stands in achieving these crucial goals, we invited Antonio Pedro, Acting Executive Secretary of the United Nations Economic Commission for Africa, to guest edit a special issue of the magazine New African timed to coincide with the 2023 United Nations General Assembly. To access more articles Click here.

You may also like

Leave a Comment

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign