The sudden winding down of USAID by the Trump Administration, the linchpin of America’s annual $40 billion vast footprint in global assistance programs led to wide ranging discussion on the future of foreign aid. Africa, a major recipient of foreign aid is now in the eye of the storm as United States and Western allies continue to reduce foreign aid commitments since 2018 according to the Carnegie Endowment for International Peace.
In this article, I argue that Africa has an extraordinary opportunity to recast its relationship with donor nations by focusing on durable partnerships. As noted recently by the Mo Ibrahim Foundation, foreign aid to Africa accounts for less than 10 percent of annual continental revenue. Africa can recast its relationship with external partners by maximizing its comparative advantages in a mutually beneficial partnership. I discuss key overarching issues critical to a successful transition to durable Africa-donor partnership. I then end by briefly discussing five key Africa-Donor durable partnerships that end dependency on foreign aid.
I briefly review critical overarching issues as Africa seeks durable partnerships outside of the continent. In context, the Mo Ibrahim Foundation indicates that foreign aid by rich donors to Africa in 2023 (year with latest numbers) at $73.6 billion was grossly less than total 2022 continental tax revenue of $479.7billion. It is still less than 2024 foreign direct investment to Africa of $97.1 billion, and less than 2023 remittances of $90.8 billion.
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Glorious days of expansive taxpayer funded foreign aid are gone
Glorious days of expansive global foreign and multisectoral mission responsibilities are not coming back as I noted in a recent article in the MEDIUM. Even a staunch donor ally to poor countries, Norway, is expanding military spending and decreasing foreign aid. European Union Commission earlier this year as I note in another article in the MEDIUM unveiled an ambitious military spending plan to protect and defend the continent as the Trump Administration unmistakably signaled retreat from military obligations to defend Europe.
Africa’s comparative advantages, if carefully harnessed, can make the continent an indispensable economic pillar of the global community
An envisaged Africa Common Market comprises 1.4 billion people and a GDP of approximately $3.4 trillion, according to the Africa Development Bank (AfDB), the United Nations Economic Commission for Africa (UNECA) and the United Nations Trade and Development (UNCTAD). The Africa Common Market, when fully operational, will be the largest trading block in the world. By 2050, one of four persons on earth will be African with enormous consumer purchasing potential. In 2030, consumer and business spending will reach $7 trillion in Africa. Out of twenty countries with the fastest growing economies in the world, more than 50 percent are in Africa according to the World Bank.
Africa can leverage its abundant natural resources in an interdependent global economy
Africa is the largest source of “natural” capital in the world according to the AfDB, UNECA, and UNCTAD. Africa is home to almost unlimited sources of solar energy, wind energy, and geothermal energy. The continent accounts for 65 percent of global uncultivated productive land, enough to feed a global population of 9.7 billion people by 2050.
Africa is home to approximately 30 percent of all mineral deposits in the world according to UNECA and AfDB. Africa accounts for 80 percent of global platinum deposits, 50 percent of the global deposit of cobalt key to advanced battery technology, 40 percent of green energy precursors such as manganese and 20 percent of world tropical rainforest. Africa has proven significant deposits of nickel, copper, and rare earth minerals, all critical in ongoing global technology transitions envisaged for the next three decades.
Democracy, rule of law and stable regulatory regime are anchors of Africa’s readiness to do business with the rest of the world
After more than 30 years of working and writing on Africa related issues, I know firsthand that antidemocratic tenets are inimical to durable engagements and partnerships with external partners. Africa should highlight and demonstrate continued commitment to population-based democracy through free and fair elections. Rule of law, sanctity of contracts and stable regulatory frameworks are key precursors of a durable partnership with donor countries.
United States is unlikely to back down from efforts to tame huge trade imbalances and overcome runaway, unsustainable national debts.
African leaders must plan long term for United States tariff policy as America battles runaway trade deficits and unsustainable debts. United States trade deficit for 2025 will be over $950 billion according to Global Statistics relying on US Government data. Since 2015, United States trade deficit has surpassed $700 billion every year. The United States Treasury Department indicates that in 2024, America’s national debt stood at $35.46 trillion in a $28.83 trillion economy, resulting in a staggering, unsustainable Debt to GDP ratio of 123 percent. United States government now and in the future will continue to aggressively tackle imploding trade deficits and unstainable debts.
Five Durable Africa-Donors Partnership Strategies
These strategies envisage an Africa that leverages its comparative advantages to become an indispensable economic hub of an interdependent global economy. An Africa that sets forth its priorities and invites development partners to engage accordingly. A continent increasingly economically resilient, forward-looking, united, democratic, and prosperous. A continent that anticipates and prepares meticulously for global political and economic transitions. An Africa that confidently and deliberately prepares future leaders to tackle emerging challenges. A continent that leverages highest level of technical support from its three premier continental institutions: the Africa Union Commission (AUC), AfDB and UNECA.
ENHANCE TRADE PARTNERSHIPS
Africa must trade, trade and trade within and outside the continent. Current Intra-Africa trade at 15 percent is one of the lowest worldwide, according to the AfDB, UNECA and UNCTAD. Low intra -regional trade in Africa represents a huge setback to three decades of regional integration efforts. Improving trade among African nations, deepening intra-regional trade, and facilitating trade with donor countries represent a critical durable partnership strategy.
African leaders are tackling decisively trade imbalances with the ratification and commencement of the continental trade agreement, the Africa Continental Free Trade Area, AfCFTA. This trade agreement aims to eliminate intra-Africa trade barriers and facilitate efficient movement of people, goods and services across national borders, regional economic communities and across the continent. Establishing aviation hubs that traverse Africa is a critical goal of AfCTA.
Creating and operationalizing regional investment value chains and regional economic industrial zones are additional goals. Establishing a continental Customs Union is another goal. The ultimate outcome of improved, efficient trade within and outside Africa is the creation of regional industrial hubs that can have catalytic impact on national and subnational economies.
CREATIVE OUT-OF-THE BOX THINKING ON FINANCE MODELS FOR DEVELOPMENT
Africa is a land of commerce. Millions of Africans support their families and communities through entrepreneurial activities. However, scaling up promising enterprises is not an easy task in the continent.
African entrepreneurs continuously struggle with limited and untimely access to traditional sources of capital according to AfDB, UNECA and UNCTAD. Cost of access to capital in Africa is three times higher compared to other developing regions. Limited understanding of the intricate linkages between adjudged political risk and market risk is a hindrance to investment financing in Africa. Exchange rate risks, including foreign currency availability, volatility and convertibility, represent lingering areas of concern. Counterparty risks such as the tenuous, unstable relationship between foreign currency denominated investment vehicles and local currencies in recipient countries are additional obstacles.
Creating out-of-box thinking financing models should be an especially important goal of durable partnerships between Africa and its external partners. New financing mechanisms are critical in identifying and mobilizing resources that can address debt financing for poorest countries and provide concessional financing for lowest income countries. Leveraging the private sector is critical to scale up funding in key areas such as insurance coverage, credit guarantees, investment risk management, public-private infrastructure projects, and securitization of investment platforms. It is also important to leverage abundant natural resources to securitize investment funding.
Any new financing mechanism should focus in the near term on millions of existing small and medium-scale enterprises (SMEs) in Africa. More than 80 percent of employment in Africa comes from SMEs according to the UNCTAD. Additionally, promising start-ups deserve support through enabling policy and technical assistance. Targeted vocational training programs are important to create viable pools of individuals with appropriate skillsets to start new businesses and create new jobs.
The huge informal sector in Africa should become mainstream. The United Nations International Labor Organizations (ILO) estimates the informal sector in Africa accounts for 57 percent of all economic activities. The informal sector should become a key component of official indices to accurately reflect national wealth and shore up national revenues.
Expanding entrepreneurial activities in Africa will create employment opportunities, advance community-based economic activities, expand local and national tax base and mitigate poverty at household levels.
Two recent initiatives provide a promising glimpse of creative, out-of-the box innovative financing models in Africa. The Africa Development Bank and KPMG South Africa recently created a financing mechanism that leverages and values Africa’s mineral wealth as counterpart funding streams in investment decision making. The new financing mechanism values Africa’s mineral wealth at conservatively $6.2 trillion. Africa leaders can pull together continental mineral resources and create a “non-circulating currency” that mitigates currency volatility and convertibility risk in the investment market.
Recently, Africa Development Bank and the Inter America Development Bank created a model that allows the leverage of IMF vast Special Drawing Rights (SDR) funds in three or four-times multiples to finance development projects in poor countries. SDR is a type of international reserve currency created by IMF to augment existing money reserves of member countries. A $25 billion SDR can lead to $100 billion SDR financing capacity in Africa according to the new model. AfDB estimates the SDR rechanneling would have zero additional costs for donor countries coupled with almost zero risk of investment loss.
MASSIVE INFRASTRUCTURE INVESTMENTS
Africa faces a massive infrastructure deficit. AfDB estimates an annual infrastructure funding gap between $130billion to $170 billion. Regional economic integration and industrialization plans and continental trade initiatives face serious infrastructure gaps.
Using the transportation sector as an example, Africa has only 53 percent paved roads despite continental road network accounting for the movement of 80 percent of all goods and 90 percent of all passenger traffic. All season roads are rarer, accounting for only 43 percent of continental road networks. Sixteen landlocked African countries must navigate poor transportation networks to reach ports in coastal countries.
At least six hundred million Africans lack access to electricity. Those that have access often endure frequent disrupted service and blackouts. Similar infrastructure bottlenecks exist in the rail, marine, agriculture, health, education, and manufacturing sectors. Africa’s effort to reduce infrastructure gaps should focus on (a) broad policy enhancing initiatives (b) the role of the organized private sector and (c) the role of Africans in the Diaspora. I briefly review each focal area.
Infrastructure Policy Enhancements
African leaders and continental institutions are working together to overcome infrastructure gaps according to the AfDB, UNECA and AUC. The broad Africa infrastructure goal is to interconnect Africa through regional infrastructure corridors. These regional infrastructure corridors will have special embedded industrial zones.
Another goal is to create, deploy and mainstream regional, innovative financing instruments that catalyze implementation of national and subnational infrastructure projects. The implementation of regional trade and competitive mechanisms focused on creating agile, enduring national value chains is another major thrust.
Role of the Private Sector in Enhancing Infrastructure Capacity
The organized private sector should have a prominent seat at the table on infrastructure capacity building in Africa. The organized private sector in both Africa and donor countries should establish investment partnerships on game-changing projects in areas such as electricity, transport, agriculture, and manufacturing sectors. Private sector intervention is also critical in financing infrastructure projects in health and education sectors.
An ongoing test case of global private sector lead investment in Africa is the 1,300 kilometer multi-billion-dollar Lobito Rail Corridor that would link the port of Lobito in the Atlantic Coast of Angola with critical mineral mines in the Democratic Republic of Congo and Zambia. This partnership has proposed significant investments from United States, the European Union, the AfDB, the organized private sector and affected African governments.
Role of the African Diaspora in Infrastructure Capacity Building
Africans in the Diaspora can play a key role in infrastructure investments in the continent. According to the World Bank, remittances to Africa average $65 billion a year, reaching over $90 billion in 2023. Africa Diaspora remittances to the continent surpass combined foreign direct investment and overseas development assistance in most African countries. It is important to note that impressive remittance data underestimates actual flows.
Remittances to Africa currently address family support needs and provide timely access for family and community members to healthcare, education, and social services. Remittances increasingly help poorer countries fund depleted current accounts and shore up fiscal shortfalls as noted by the World Bank and AfDB.
African leaders need to engage African Diaspora communities worldwide on pooled infrastructure investments. The African Diaspora in donor countries can create transparent, vetted, and regulated investment platforms such as Africa Diaspora Bonds, Africa Diaspora Private Equity Funds and Africa Diaspora Entrepreneurial Credit Facility to finance selected infrastructural projects in Africa.
PREPARING FOR THE FOURTH INDUSTRIAL REVOLUTION
Digital transformation of everyday life is the anchor of the fourth industrial revolution. Africa cannot lag behind on emerging digital transformation platforms such as artificial intelligence, robotics, cloud computing, cryptocurrency and blockchain technology. Africa must be ready to create, innovate, refine, and contribute to emerging global technologies.
Fortunately, a thriving digital economy is emerging in the continent. AfDB indicates that the digital economy in Africa powered principally by young entrepreneurs will add $180 billion to the continent’s GDP by the end of 2025. Africa’s digital economy will rise to a GDP contribution of $712 billion by 2050.
The Fintech industry in Africa is booming, projected to grow from $13 billion in 2023 to $20-30 billion in 2040, and $200 billion by 2050 according to AfDB, UNECA and UNCTAD. With 60 percent of Africans unbanked, the continent’s emerging fintech market could become a cornerstone of a durable, mutually beneficial Africa-Donor entrepreneurial partnership.
Additionally, internet penetration and smartphone usage even in remote parts of Africa signposts a bright future in telecommunications linked to commercial activities. AfDB indicates Africa will reach 67 percent smartphone usage by the end of 2025. Startup ecosystems are also growing in the continent buoyed by increasing availability of digital platforms in health, education, agriculture, and e-commerce.
African policy makers should provide enabling environments that encourage creation, growth, innovation and scale up of promising continent-based advances in digital technology.
PLAN FOR AFRICAN YOUTH OF TODAY TO LEAD IN THE FUTURE
Africa by 2050 will be home to1.8 billion people aged 35 years and below according to AfDB. These young individuals will constitute more than 75 percent of all Africans. Africa currently accounts for 70 percent of the working age population in the world, at 450 million and growing. Africa’s potential consumer purchasing power in coming years is unimaginable.
The AfDB estimates Africa’s working age population, and the continent’s youth bulge with appropriate education, skillsets, incentives and enabling environment can form the backbone of a global workforce against the backdrop of rich nation economies facing rapidly ageing population. With a growing middle class, rapid urbanization and tech savvy younger generation, Africa has the trappings of a potential global super economic power.
However, challenging work lies ahead to maximize the future impact of Africa’s young men and women. Today, to gain traction at the highest level of decision making in most African governments, African youth often resort to street protests. It remains a gargantuan struggle to complete secondary school education in Africa due to prohibitive cost of public education. Less than 36 percent of Africa’s youth complete secondary school according to AfDB and UNECA. Only 25 percent of African students in tertiary institutions pursue courses in science, technology, engineering and mathematic (STEM), critical in the emerging fourth industrial revolution.
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Every year, AfDB estimates that fifteen million youth in Africa enter the labor market chasing only three million available jobs, leaving twelve million stranded. Budding youth entrepreneurs in Africa have little government policy support to establish and grow new businesses. Organized and widespread opportunities for youth vocational training remain rare.
Africa leaders should deliberately institutionalize strategies that optimize Africa youth active participation in the decision-making processes of governance, economic prosperity, and social cohesion. A deliberate, long-term strategy to prepare the youth of today for jobs in the global digital economy of the future is critical.
The Role of China Foreign Aid Program in Africa
China is the second largest economy in the world and a key player in development assistance efforts. However, China’s famed silk and road development strategy is not comparable to traditional Western aid programs as noted from technical publications of respected think tank, academic and research institutions.
These institutions including China Africa Research Initiative of the Johns Hopkins University, the US China Dialogue of the Georgetown University, DC, the London School of Economics, the Borgen project, the DC Center for Global Development and the Carnegie indicate China’s development assistance is strongly tied to its commercial strategy of opening new markets, securing access to natural mineral resources and financing low concessionary loans for massive infrastructure projects anchored on implicit use of Chinese workforce.
The latest estimate by Johns Hopkins University Africa China Research Initiative is that China’s unencumbered global foreign aid grew from $631 million in 2003 to $3.46 billion in 2024, tiny compared to America’s annual $40 billion foreign aid budget during the same period. Africa accounted for 45 percent of China global foreign aid between 2013 and 2018. In 2024, China pledged $51 billion in financial assistance to Africa over three years, with 75 percent dedicated to commercial lines of credit and 19 percent allocated to fresh business investments by Chinese companies according to an analysis by Reuters.
Africa will benefit from revitalizing its relationship with China utilizing the five durable partnership strategies outlined in this article.
CONCLUSION
African leaders should come to grips with a shrinking foreign aid. Donor governments face economic headwinds at home. It is crucial that African leaders repurpose the continent at country, regional and continental levels to emerge as unavoidable destination of global investment and prosperity.
Additionally, African leaders should leverage value added assets resident in the continent to turbocharge a revamped partnership with external partners. Africa must prepare the youth of today, to become future leaders of Africa, ready to assume its rightful role in the emerging digital global economy.
Dr. Chinua Akukwe has extensive academic, technical and leadership experience in public health, global health, international development, and Africa Rising Issues. He is the author of five books on healthcare and development. In 1997, Dr Akukwe became the Vice Chair of the Executive Committee and Governing Board, National Council for International Health (NCIH), Washington, DC, then the largest voluntary health organization in the world. He chaired the NCIH Strategic Planning Committee that transitioned the organization into the Global Health Council, Washington, DC. Dr Akukwe served for five years as the Chair, Technical Advisory Board, the George Washington University Africa Center for Health and Human Security, Washington, DC. For 15 years, he served on the Board of Directors for the Constituency for Africa (CFA), Washington, DC, playing a critical role as the Lead Technical Resource Person on HIV/AIDS and Healthcare in CFA’s widely acclaimed successful policy advocacy effort to jumpstart United States engagement and intervention during the then rampaging HIV/AIDS crises in Africa.
