Africa turns to local capital for development

African leaders and financiers at the African Development Bank's (AfDB) annual meeting pushed for a fundamental shift: tapping Africa's own financial resources to plug what it estimates is a $400bn annual development financing gap, reports Polity. Overseas development aid from the world's richest nations to poorer countries dropped by nearly a quarter last year to $174.3bn. The US led the cuts, including reduced funding to the concessional lending arm of the AfDB, Africa's largest development lender. ‘Africa needs long-term finance for energy, food security, climate adaptation, infrastructure and jobs for a growing and anxious population,’ the AfDB said in a pre-meeting statement. ‘That chasm demands audacious solutions.’ AfDB president Sidi Ould Tah, who took office last September, has made that shift central to his agenda and proposed the New African Financial Architecture for Development (Nafad) to help Africa ‘raise development finance at scale, at speed and at lower cost, primarily from its own resources’. Backers of the Nafad plan, including African governments, say the continent has $4trn in institutional capital – including in pensions, sovereign wealth funds and savings schemes – which could be tapped to fund development. At the moment, however, much of it is fragmented and invested in a disjointed manner, they say. ‘There is capital in Africa, but Africa's development projects remain starved of financing,’ said Kenyan President William Ruto at a conference in Nairobi this month.