Can Africa Access Global Finances Equitably?
- Hamza Kyeyune
- 25 Haz
- 4 dakikada okunur
Access to international financing to invest in growth enablers is often hampered by elevated risk perceptions attributed to Africa’s deprivation.
Despite its 55 states, 1.3 billion people and resources on which developed economies depend for their prosperity, Africa has remained slow on economic performance, which dropped to 3.7 percent in 2024 from 4.1 percent in 2022 and registered minimal gains in GDP per capita based on purchasing power parity.
Africa’s major challenge for economic transformation remains access to finance, to invest in growth enablers.
Access to international financing is often hampered by the unfairness in risk profiles criterion such as credit ratings, public indebtedness, and the ability to offer adequate guarantees attributed to the continent’s deprivation. The elevated risk perceptions and unfair credit ratings often disadvantage the continent.
Africa's GDP declined to $2.8 trillion in 2024 from $3.1 trillion in 2023, and in order to achieve the International Monetary Fund (IMF) projected GDP growth rate of 4.3 percent this year 2025, and further, projected growth of 4.0 per cent in 2026 by the United Nations, there is need for fundamental reforms of the global financial architecture.
For far too long, the need of immediate necessity for transparent and fairer assessment frameworks to lower risk premiums and borrowing costs that align with inclusive resource allocations essential for financing Africa's development goals has remained in vain.
To move forward, existing global credit rating practices need to be completely overhauled, so that they conform to debt sustainability mechanisms and alternative financing models also need to be established to improve access to affordable capital for developing countries. Africa's economic potential cannot be ignored, it is fundamental for global prosperity.
With South Africa assuming presidency of the Group of Twenty (G20, now G21), comprising the world's richest and most powerful countries, on 1 December 2024, and earlier the African Union’s (AU) admission to the G20 in 2023 offers a pivotal moment for Africa to influence global economic policies, implement tangible reforms and advocate for fairer global financial practices while prioritizing the continent’s interests.
The G20 (now G21), an intergovernmental economic forum comprising 19 of the most advanced and key economies including Türkiye, Russia, South Africa, USA, UK, Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Saudi Arabia, and two regional unions, the European Union (EU), and recently the African Union (AU), represent 85% of the global economy, 75% of the world’s GDP, shaping global economic and political cooperation and 67% of the global population. The grouping has evolved into a significant platform for global governance focusing on mobilizing policy responses to economic stability and global decision-making.
In the current multipolar world, the G20 (now G21), needs Africa just as much as Africa needs it in order to reinvent itself and prevent the risk of being consumed by the increasing significance of the BRICS alliance.
For Africa however to pick up pace and take part in decision making, reforming the global financial architecture is inevitable. This would see the continent gain by having power in the major international financial institutions, so as to have its priorities better appreciated.
Speeding up reformation of institutions of global economic governance would also enable Africa to benefit from more concessional financing through improved access to regional and global financing windows to mobilize resources by taking advantage of concessional financing from multilateral banks, raising funds on regional and international financial markets, strengthening its domestic financial sector to facilitate local business financing and the issuance of green bonds, focusing on efficient and productive investment, and leveraging its substantial natural capital to generate additional resources.
The continent needs to step up efforts to mobilize not only domestic resources but also scale up external financial flows as complementary sources to finance developmental Projects at affordable rates.
Mending the global financial framework would also help reshape the IMF and World Bank, which will facilitate debt restructuring and create fiscal space for investments in productive sectors. This also allows mobilizing more private funding at lower cost as the perception of risk in African countries would decline, enabling access to external financing and stimulating productivity growth and expanding market access.
Internally, the continent needs to improve its institutional governance and natural resources management, mobilize domestic resources and boost overall factor productivity, particularly human capital, which will see Africa crowd in investment.
The unique challenges and vulnerabilities of developing countries need attention too. Uganda for example has improved productivity to 294% in manufacturing and 164% in trade services, manufactured exports remain minimal at less than 20%.
The east African country receives $2 billion annually from development partners, but these funds are conditioned to social sectors, not to the productive sectors and such are the unique challenges that need unique solutions.
References
Unlocking Africa's potential: https://www.sciencedirect.com/science/article/pii/S2405844024025386
New UN report: Africa's economy to improve:
Why African Union’s membership in the G20 matters:
Elson A (2010), The current financial crisis and reform of the global financial architecture
Alexandroff S (2025), South Africa in a complex global order
ADB (2024), African Economic Outlook is Driving Africa’s Transformation
UNDP (2024), Decoding the Future: Global Financial Architecture Reforms
Amani (2024), How Africa organizes itself
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