AfDB meeting opens in Congo as Africa looks inward for development finance

The meeting opened on Monday in the Republic of Congo against a challenging backdrop: overseas development assistance from the world’s richest countries to poorer nations fell by nearly a quarter last year to $174.3 billion.

The United States led the reductions, including cuts to funding for the concessional lending arm of the AfDB, Africa’s largest development lender.

The drop has intensified debate over how African countries can mobilise more domestic capital to finance infrastructure, energy, food security, climate adaptation and job creation.

“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.”

New push for African-led financing

AfDB President Sidi Ould Tah, who took office last September, has made domestic capital mobilisation a central part of his agenda.

His proposed New African Financial Architecture for Development, known as NAFAD, aims to help African countries raise development finance at scale, faster and at lower cost, primarily from the continent’s own resources.

Supporters of the plan say Africa has around $4 trillion in institutional capital, including pension funds, sovereign wealth funds and national savings schemes, that could be better directed toward development projects.

At present, much of that capital remains fragmented or invested in ways that do not sufficiently support the continent’s infrastructure and industrial needs.

“There is capital in Africa, but Africa’s development projects remain starved of financing,” Kenyan President William Ruto said at a conference in Nairobi earlier this month.

Ebola outbreak overshadows attendance

The AfDB annual meeting is usually a major event for policymakers, investors and development finance institutions.

But this year’s gathering has been overshadowed by an Ebola outbreak in neighbouring Democratic Republic of Congo, which has spread to Uganda and caused more than 170 suspected deaths.

No cases have been reported in the Republic of Congo, and the government has said there are no restrictions on the AfDB meeting, in line with World Health Organization guidance.

Still, the outbreak may affect attendance and add another layer of concern to an already difficult regional environment.

Can African capital close the gap?

The AfDB estimates that Africa faces an annual development financing gap of around $400 billion.

NAFAD aims to pool and better organise African financial resources to support viable projects, particularly in sectors such as infrastructure and energy.

However, some economists caution that domestic capital alone will not be enough.

Critics argue that much of the institutional capital cited by officials is already invested, and that governments should focus on increasing savings rates and improving the investment environment.

Sub-Saharan Africa’s savings rate is around 18%, less than half the global average, according to World Bank data — a reflection of low incomes, demographic pressures and limited household financial capacity.

“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.

The debate in Brazzaville is therefore likely to focus not only on how Africa can use its own capital more effectively, but also on how it can attract external investment at a time when traditional aid flows are shrinking.