African leaders and financiers gathered for the annual meeting of the African Development Bank on Monday as the continent grapples with shrinking foreign aid flows and mounting pressure to finance its own development priorities.
This year’s meeting, hosted in Congo Republic, comes as global development assistance declines sharply and an Ebola outbreak in neighbouring Democratic Republic of Congo casts a shadow over proceedings.
Official development assistance from wealthy nations fell nearly 25 percent last year to US$174.3 billion, according to international aid data, with the United States leading cuts that included reduced contributions to the AfDB’s concessional lending arm.
The decline in external financing has intensified calls for African economies to rely more heavily on domestic resources to close what the bank estimates is a US$400 billion annual development financing gap.
“Africa needs long-term finance for energy, food security, climate adaptation, infrastructure, and jobs for a growing and anxious population,” the AfDB said ahead of the meeting. “That chasm demands audacious solutions.”
The bank’s new president, Sidi Ould Tah, who assumed office in September, has made domestic resource mobilisation a central pillar of his agenda.
He is championing a strategy known as the New African Financial Architecture for Development (NAFAD), aimed at helping African countries raise development finance “at scale, at speed, and at lower cost” using the continent’s own savings and institutional capital.
Supporters of the initiative say Africa has around US$4 trillion in institutional assets held in pension funds, sovereign wealth funds, insurance schemes and other savings pools that could be better channelled into infrastructure and industrial development.
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However, much of that capital remains fragmented, invested conservatively, or directed outside the continent.
“There is capital in Africa, but Africa’s development projects remain starved of financing,” Kenyan President William Ruto said at a finance conference in Nairobi earlier this month.
Ruto said the NAFAD proposal seeks to pool financial resources and direct them toward viable projects, particularly in infrastructure, energy and industrialisation.
The annual AfDB gathering is one of Africa’s most important economic forums, bringing together finance ministers, central bankers, investors and development institutions to debate the continent’s economic priorities and funding strategies.
But this year’s meeting has also been overshadowed by growing concerns over Ebola.
The outbreak in neighbouring Democratic Republic of Congo, caused by the Bundibugyo strain of the virus, has spread into Uganda and resulted in more than 170 suspected deaths, according to health authorities.
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No Ebola cases have been reported in Congo Republic, where the meetings are taking place. Authorities there said last week that no travel restrictions had been imposed on delegates, citing guidance from the World Health Organization.
Still, concerns over the outbreak could affect attendance at the summit, delegates and analysts said.
The financing debate taking place at the meeting also reflects broader concerns over Africa’s vulnerability to shifts in global capital flows and donor priorities.
Critics of the AfDB’s domestic financing push argue that much of the institutional capital cited by policymakers is already committed to existing investments and cannot easily be redirected toward development projects.
Instead, they say African governments should focus on policies that increase household and national savings rates.
According to World Bank data, sub-Saharan Africa’s savings rate stands at about 18% of gross domestic product, less than half the global average, constrained by low incomes, weak formal financial systems and the continent’s young population.
“The size of the continent’s developmental needs means that domestic savings and other forms of domestic capital will not be able to do the job,” said Jacques Nel, head of Africa macro at Oxford Economics.
Nel said African policymakers should instead focus on using domestic resources to attract larger volumes of foreign capital by reducing investor risk through guarantees and blended finance mechanisms.
“Focus should be on leveraging domestic capital to catalyse foreign capital inflows,” he said, adding that derisking projects would remain essential to attracting long-term investment into African infrastructure and industry.
