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External financial flows and tax revenues for Africa

Feb 25 '16 | By La Afrique Media | Views: 56 | Comments: 0

The financial landscape has changed considerably in Africa since 2000. Private external flows in the form of investment and remittances now drive growth in external finance. Foreign investments are expected to reach USD 73.5 billion in 2015, underpinned by increasing greenfield investment from China, India and South Africa. Foreign direct investment (FDI) is diversifying away from mineral resources into consumer goods and services and is increasingly targeting large urban centres in response to the needs of a rising middle class. African sovereign borrowing is rocketing. Remittances have increased six-fold since 2000 and are projected to reach USD 64.6 billion in 2015 with Egypt and Nigeria receiving the bulk of flows. Conversely, official development assistance (ODA) will decline in 2015 to USD 54.9 billion and is projected to diminish further. More than two-thirds of states in sub-Saharan Africa, the majority of which are low-income countries, will receive less aid in 2017 than in 2014. Despite significant improvements in tax revenue collection over the last decade, domestic resource mobilisation remains low. Financing the post-2015 development goals will depend on the capacity of African policy makers and the international community to harness these diverse funding options and exploit their potential to leverage additional finance.

Figure 2.3 Sources of greenfield investment in Africa (by number of projects), 2003-08 and 2009-14Figure 2.3 Sources of greenfield investment in Africa (by number of projects), 2003-08 and 2009-14

Sources: Authors’ calculations based on fDi Markets (2014) and UNCTAD (2014).

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