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The annual flagship report Africa’s Development Dynamics provides the latest information on economic policies on the African continent and in its five regions. It proposes a new narrative assessing Africa’s economic, social and institutional performance in light of the targets set by the African Union’s Agenda 2063. This 2023 edition explores how Africa can attract investments that offer the best balance between economic, social and environmental objectives.
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Investment is key to propel Africa’s development, and to attain the African Union’s Agenda 2063 and the Sustainable Development Goals. Yet, global crises have widened the African continent’s sustainable financing gap. Africa needs an extra USD 1.6 trillion by 2030 – USD 194 billion annually – to achieve the Sustainable Development Goals. The sustainable financing gap can be bridged: it is equivalent to less than 0.2% of the value of global financial assets, or 10.5% of the African-held financial assets.
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Africa’s sustainable financing gap until 2030 is about USD 1.6 trillion. According to this report’s estimates, the continent needs additional financing of about USD 194 billion annually to achieve the Sustainable Development Goals by 2030. This annual sustainable financing gap is equivalent to 7% of Africa’s gross domestic product (GDP) and 34% of its investments in 2021. The annual gap equals less than 0.2% of the global and 10.5% of the African-held stock of financial assets.
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Sustainable investments are essential for Africa’s economic, social and environmental development. Investments are sustainable if their economic, social and environmental benefits outweigh their total cost. When mobilising and allocating investments, African countries need to manage tensions between economic, social and environmental goals such as productive transformation, social inclusion and resilience to climate change. This includes balancing energy production and carbon mitigation, developing agricultural land use and conserving ecosystems, or creating mass employment while promoting labour standards. The Africa’s Development Dynamics 2023 report provides an evidence-based analysis of Africa’s investment landscape and identifies important investment-related policies that promote sustainable development on the continent as a whole and in each of its five regions.
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This chapter makes the case that African countries need more sustainable investments to create jobs and promote inclusive growth. It outlines the extent to which sustainable investments and financing have not met the many opportunities that the continent offers and analyses the potential for improvement. The chapter first assesses the sustainable investment landscape that is emerging from the concurrent crises of the COVID-19 pandemic, the global repercussions of conflicts and climate change and provides an estimate for the continent’s sustainable financing gap. Second, it examines low investor confidence and the high cost of capital as specific investment barriers that these crises have amplified. Third, the chapter identifies investment linkages with small and medium-sized enterprises, intra-African investments and institutional investors as three domains offering untapped potential to support Africa’s regional integration and sustainable growth.
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This chapter identifies policy priorities for African policy makers to mobilise more sustainable investments and better allocate existing resources towards sustainable development. First, it outlines ways in which African institutions can enhance the availability of the information and data necessary for risk and sustainability assessments. Second, the chapter discusses how African-led partnerships and institutions can unlock sustainable finance in line with development priorities. Third, it outlines how effective regional integration policies can scale up sustainable investments.
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This chapter examines the development of sustainable investments with a focus on the renewable energy sector in Southern Africa (Angola, Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe). The first section shows that multiple global crises have exacerbated sustainable investment needs, while the region’s sources of finance offer untapped potential to spur sustainable growth. The second section explores how investments in the region’s renewable energy sector can generate social, economic and environmental development gains. It identifies major constraints hampering the investments that are needed to achieve energy security and a just energy transition. The third section proposes policy priorities to catalyse investments in Southern Africa’s renewable energy sector.
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This chapter focuses on mobilising sustainable investment in Central Africa’s nine countries [Burundi, Cameroon, the Central African Republic (CAR), Chad, the Republic of the Congo (Congo), the Democratic Republic of the Congo (DRC), Equatorial Guinea, Gabon and São Tomé and Príncipe]. It analyses the region’s financial inflows and considers how they are allocated to sustainable activities that promote regional integration. It then proposes a case study on the potential monetisation of natural ecosystems to attract investment and help transform production in the region. It provides a baseline study of natural ecosystems and existing monetisation mechanisms, before analysing the main challenges facing their development. Finally, this chapter proposes public policies to quantitatively and qualitatively increase the monetisation of natural ecosystems in Central Africa.
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This chapter analyses the investment trends and dynamics in East Africa (Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda), with a focus on the renewable energy sector. The chapter first shows that investments have been a major driver of East Africa’s recent growth, but their allocation towards social and environmental sustainability remains insufficient. Second, it discusses East Africa’s vast renewable energy potential while highlighting that current investments are insufficient to meet the region’s energy access needs. It outlines major investment barriers hampering the growth of the renewable energy market and identifies the potential of innovative enterprises to both accelerate the uptake of renewable energies and contribute to productive transformation in the region. Finally, the chapter offers policy recommendations for mobilising greater renewable energy investments across East Africa.
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This chapter focuses on mobilising sustainable investment in North Africa’s six countries (Algeria, Egypt, Libya, Mauritania, Morocco and Tunisia). It analyses the region’s financial inflows and considers in particular how they are allocated to sustainable activities that promote regional integration. Next it explores the potential of sustainable finance markets to attract investment for climate action in North Africa. It examines the vulnerability of the region’s economies to climate change and identifies their sustainable development financing needs. Finally, this chapter suggests public policies that would allow sustainable finance markets to be developed and integrated into North Africa.
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This chapter identifies policy options to strengthen sustainable investments in West Africa’s agri-food sector. The sector is chosen due to its large contribution to employment and economic growth in West Africa. The chapter first discusses how investments flow into and out of the region and how they are distributed across sectors and countries (Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo). It then analyses in detail the potentials and limitations of West Africa’s agri-food sector. The chapter concludes with concrete suggestions for West African policy makers on how to attract more sustainable investment.
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