Guest blog: Unpacking Africa’s Youth Perspectives on current supply from non-African partners

More than 100 young African experts from the Mo Ibrahim Foundation’s Now Generation Network (NGN) were recently surveyed on their opinions on Africa’s financing agenda in order to explore youth perspectives and recommendations for the continent. In addition, three of our NGN members recently joined us for the second session of our webinar mini-series to assess the current funding supply from non-African partners, including bilateral, multilateral and private sources.

In this guest blog, we are honoured to share contributions from  Dr Richard Adu-Gyamfi, Research Fellow at the Doing Business in Africa Research Group; Valerie Jeche, Lecturer at Midlands State University and the University of Zimbabwe; and Modupeoluwa (Dupe) Ige, global markets professional and MBA Candidate at London Business School. They shared their perspectives on three key questions on the financing supply from non-African partners.

Research shows that Africa’s debt is not uniquely high in comparison to other world regions, yet there are often more investment risks associated with the continent. In the case of Japan, arguably the most indebted country in the world, investor confidence remains high. How can African countries also boost investor confidence?

First and foremost, we have to take a critical look at what investment we would want to attract to Africa and for what. From my point of view, Africa needs both foreign and local direct investment which add value to the resources on the continent. However, I would emphasise the role of local direct investment facilitated by a well-functioning fertile business ecosystem, particularly one that awards value-adding investment by taking a cue from Japan. By a fertile business ecosystem, I refer to a historically functioning institutional environment where Japanese companies coalescing into large and diversified entities received financial support from the Bank of Japan. Such high-level intervention already boosts investor confidence.

Since there is no officially acclaimed bank of/for Africa, the existing continental financial giants such as the African Development Bank, the African Export and Import Bank and others may create an African Consolidated Investor Fund to finance African multinationals and small and medium-sized enterprises for value-adding projects. When this works, as was the case of Japan, African countries will receive a boost in investor confidence, even if debt to GDP ratios are skyrocketing. I strongly believe that Africa’s success is tied to unity.

About a third of respondents from our recent NGN survey called for total debt cancellation for African countries. Do you think this option would alleviate countries from falling back into the viscous debt cycle?

The idea of total debt cancellation for African countries has garnered substantial support as it could potentially offer immediate relief from debt burdens and help stabilise economies. However, while total debt cancellation might provide temporary financial relief and allow for reallocation of resources towards development initiatives, it does not inherently change the underlying economic structures and policies that often lead to re-accumulation of debt. For debt cancellation to have a lasting impact and prevent countries from falling back into the cycle of debt, it needs to be paired with robust economic reforms, improved governance, better financial management, and enhanced revenue generation strategies.

These measures should focus on increasing productivity, diversifying economies, and promoting sustainable development practices that are less reliant on external borrowing. Debt relief should also come with provisions that encourage investment in critical sectors such as education, healthcare, and infrastructure to spur long-term growth. It's essential to create an enabling environment that attracts foreign direct investments and promotes private sector growth, thereby creating a more resilient and self-sustaining economy. Overall, comprehensive and systemic changes are crucial to ensuring that African countries do not return to a vicious cycle of debt, making economic stability and growth sustainable.

Foreign Direct Investment (FDI) is also a key resource from non-African partners. However, research shows that the extractives/mining sector still attracts the most FDI in Africa. How can countries attract more FDI for other sectors as well?

Africa as a continent has diverse resources that attract FDI. In order to ensure that other sectors also attract more FDI, deliberate effort needs to be made by the Governments of the respective African countries to encourage foreigners to invest in those sectors by creating more business-friendly conditions. This can be done by reducing bureaucratic obstacles and implementing proactive investment measures. An example of such an initiative is the establishment of an Office for Promoting Private Power Investments in Zambia. This office is responsible for providing businesses with research, identifying investment projects and helping to obtain permits. Also, countries can provide targeted incentives and support measures for investment in non-extractive sectors. These incentives could be tax breaks, investment grants, or some form of preferential treatment for investors within the other sectors. Highlighting the potential for growth and profitability in other sectors via marketing campaigns, roadshows and investor forums is another way of attracting more FDI. For example, in the energy sector, the IEA says Africa has 60% of the best solar resources globally; however, the African continent has only reached 1% of its installed solar PV capacity. This demonstrates great potential for FDI.