Africa has abundant natural resources including arable land, water sources, and mines. It is also one of the populous continents in the world with more than 1.2 billion people. Africa's main stay of the economy is agriculture, and it is rain fed and vulnerable to climate change and global warming.
Nevertheless, due to shortage of finance, technology and well trained man power, the continent remains as the pauperized continent in the world. According to the World Bank report, Africa contributes only 3% of the world export share and its 40% of food demand is covered by importation and aid. Africa's export commodities are mainly unprocessed raw materials which are extracted from agriculture and mining.
The political instability rampant in the last half century left many countries to experience political upheaval, revolution, civil war and violence, which in turn hampered the continent's economic development. Though the continent's image is overshadowed by poverty and political instability, some countries' economic performance is encouraging. Some countries relatively secured peace and political stability, could resist external challenges and stabilized their economy and registered remarkable progress. They also developed confidence to attain some of the sustainable development goals.
The ongoing infrastructural developments such as roads, railways, energy and export boost enabled the countries to withstand external economic shakes and attract foreign investment.
Professor Alemayehu Geda is Senior Economic Researcher and Instructor at Addis Ababa University. As he underlined, many African economies are better placed to cope with harsh external conditions than they were in the past two decades. Global conditions have eased slightly since mid2016, improving the outlook for Africa, but countries in the continent still face major macroeconomic challenges.
He further explained that, commodity prices are recovered, but it is not to pre-crisis levels, and demand for traditional and nontraditional exports from Africa remains modest. Regarding the exchange of money, though the current account positions have improved, they are not sufficiently robust; Dollar interest rates are expected to edge up and bidding up the cost of capital. Besides this external debt ratios have begun to rise across the continent.
Infrastructure investment in the continent is largely financed by external borrowing. Therefore, it needs careful monitoring to ensure that revenue streams (generated in local currencies) are strong enough to meet the debt obligations when they fall due. Fiscal policy should not undercut the growth-promoting effects of the recent surge in public investment and reverse the inroads made in poverty reduction, health, and education across the continent. In short, macroeconomic policy must blend the real exchange rate, flexibility and legal framework.
Recently, a new joint report by the United Nations Development Program (UNDP), the United Nations Economic Commission for Africa (UNECA), the African Development Bank (AfDB), and the African Union Commission (AUC) has found that Africa is off track to meet the majority of its sustainable development targets in 2030.
The 2024 African Sustainable Development Report (ASDR), titled "Reinforcing the 2030 Agenda and Agenda 2063 and Eradicating Poverty in Times of Multiple Crises: The Effective Delivery of Sustainable, Resilient and Innovative Solutions," was presented recently at an event on the margins of the UN High-Level Political Forum for Sustainable Development in New York.
The report's key findings highlight the critical importance of scaled-up development financing to help African countries get back on track and accelerate progress towards the Sustainable Development Goals (SDGs) and the African Union's Agenda 2063.
"Advanced economies have rebounded from COVID-19, but many countries in Africa struggle with high debt, double-digit inflation, and limited access to crucial development and climate funding," Claver Gatete, UNECA Executive Secretary said.
He added that disparities in the Human Development Index are widening between top-ranking nations and those at the bottom, highlighting significant challenges across Africa despite some progress in recent decades.
The research shows that Africa is on track to reach only less than three of the 32 SDG targets assessed in the report, while setbacks have been recorded for 8 targets, and slow progress or status quo registered for the remaining targets.
Matthias Naab, UNDP Africa Deputy Regional Director stressed the urgency of the situation, stating: "African countries have made some significant progress in important areas, but we are running out of time. It is imperative we reinforce partnerships and look at innovative solutions to stop the current deceleration - and even reversal in some areas - and work more closely with African countries and people to get back on track towards our Global Goals and the Africa We Want."
The report highlighted several key areas of concern, including Official Development Assistance (ODA) to Africa increased by only 2 % in 2023, with the total ODA remaining well below the 0.7 % of donors' combined Gross National Income target.
According to the report, Africa needs between 118.2 billion USD and 145.5 billion USD per year to implement its climate action commitments and Nationally Determined Contributions, but only 29.5 billion USD has been mobilized so far. Poverty reduction efforts have been set back by crises like COVID-19, with Africa now accounting for more than half (54.8%) of people living in poverty worldwide, as stated by the report.
Progress on combating hunger and undernourishment remains a major challenge, with the number of hungry people in Africa rising to 281.6 million in 2022.
The ASDR called for urgent action to address these threats, including strengthening partnerships, leveraging innovative financing solutions, and enhancing domestic resource mobilization through reforms such as digitizing tax administration and implementing progressive taxation Financing remains a challenge for Africa, said Al Hamndou Dorsouma, Manager of the AfDB Climate Change and Green Growth Division.
"This requires the development partners to scale up their support by strengthening the system of public development banks focusing on enhancing productive capacities, infrastructure, and human capital development and for African countries to prioritize domestic resource mobilization," he said. The report also highlighted the critical need to improve data collection and monitoring capacities across the continent to better track progress and inform policymaking.
"This new report underscores African countries' commitment and progress, but it also highlights the challenges that remain for us to shape up 'The Africa We Want'," Monique Nsanzabaganwa, Deputy Chairperson of the African Union said.
He stressed the urgent need to accelerate sustainable development actions and the imperative for African countries to step up their efforts and empower communities for a more inclusive growth.
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For decades, African countries crafted their economic policies to meet their aspirations. But, due to insufficient finance drawn from local sources, they resorted to borrow money from international financial institutions such as the World Bank and the International Monetary Fund. But, due to inefficient management and corruption, some of the development projects supported by donor institutions remained incomplete, which in turn incurred additional costs for the accomplishment of the projects. These again hinder countries' efforts to reduce poverty.
Reflecting his view on Africa's debt crisis, Professor Alemayehu said that the continent exports raw materials and imports industrial and capital goods, which are more expensive than its exports. As a result, Africa imports 20% fold than it exports, and this makes Africa to remain as the most indebted continent in the world. He further expressed that, in addition to the debt crisis, the continent lost a huge amount of wealth because of illegal trade worth 50 billion Dollars annually.
According to his justification, in order to enhance their debt service capacity, African countries usually resort to negotiating with loan-provider international institutions. But the criterion put by lender institutions are unmet by borrower countries. Mostly, borrower countries were required to lower their currency exchange rate against the Dollar which again pushed the countries to suffer from inflation and unemployment.
To bring remedy to the crises, as to Prof. Alemayehu, Africa should transform its export commodities from the raw form into the finished goods through value addition. Moreover, to curb illegal trade it has to root out corruption through establishing strong and independent institutions.
