Africa: New Development Financing Models for Africa - A Look Back at ADF9
The ninth edition of the African Development Forum (ADF9), which took place in October in Morocco, focused on innovative mechanisms for the development of financing in Africa.The ninth edition of the African Development Forum (ADF9), which took place in October in Morocco, focused on innovative mechanisms for the development of financing in Africa.
It was argued that Africa should rely less on Official Development Assistance (ODA)
programs and more on the private sector to finance its infrastructure needs.
The private sector,
as a development partner and financing mechanism,
was the highlight of the opening speech of
Senegalese president, Macky Sall. The president explained the way build-operate-transfer initiatives work in his country: a private company builds the asset, runs it and generates income for a limited time period, before transferring it back to the government.
Taxation was the topic of a later panel. It was noted that tax revenues represent only 27% of GDP across Africa. However, this ratio is well below 10% in many countries. Countries benefiting from high rent revenues from natural resources, like Nigeria, rely very little on tax revenue, while others like Zimbabwe have one of the highest tax revenue to GDP ratios in the world (46.3 per cent for this last country). According to panelist Machiko Nissanke, professor of economics at the School of Oriental and African Studies in London, "there is the need to re-establish the social contract between taxation and the provision of public service".
The importance of developing private equity financing was also discussed. Companies with growth prospects can approach "private equity players who will, after analysing the risk-return potential, provide a combination of debt (sourced from a bank) and equity (which they raise from institutional investors) to that company", according to UNECA. Its issue paper takes the example of Ethos, a South African fund manager, raising $900 million in 2012 and African Private Equity and AVCA, both raising $1.14 billion in 2012.
UNECA also recommended that African countries look at catastrophe (“cat”) bonds to deal with the impact of climate change.