As aid shrinks, Africa looks inward to finance development

Faced with shrinking aid budgets and shifting donor priorities, African governments are exploring new ways to finance development, from mobilising pension funds to attracting private investment and strengthening regional partnerships. The change reflects a growing focus on funding development through domestic resources, investment, and regional partnerships rather than external assistance. Experts say that African governments should look inward, arguing that the continent already possesses substantial financial resources that could be mobilised to fund infrastructure, industrialisation, and social programmes. ALSO READ: Nduhungirehe urges knowledge transfer at first South-South, Triangular convention According to Maxwell Gomera, Resident Representative of the United Nations Development Programme (UNDP) in South Africa and Director of the Africa Sustainable Finance Hub, governments across the continent are already beginning to adapt. “South Africa has recently put in place mechanisms from its own budget to replace funding that previously supported HIV/AIDS programmes after that support was withdrawn. Rwanda and many other countries are also increasingly looking inward and asking how domestic resources can do more,” he said. Gomera maintained that the discussion should not focus only on declining aid flows, but on the vast resources that already exist within African economies. “For too long, we have assumed that Africa’s main challenge is a shortage of capital. In reality, Africa is not capital-scarce. It is disconnected. Across the continent there are pension funds, insurance assets, remittances, sovereign wealth funds and private savings worth trillions of dollars. The challenge is connecting those resources to the investments that countries need,” he noted. ALSO READ: How Rwanda contributes to South-South cooperation through knowledge sharing He pointed to pension funds as one example of domestic capital that could play a much larger role in financing development. The Rwanda Social Security Board (RSSB), for example, manages assets worth more than Rwf3 trillion (approximately $2.2 billion), he said. “Imagine a country needs to build a road to an airport, there is nothing that prevents a pension fund from helping finance that road. Users pay a toll, the toll revenues repay the investment. Pensioners receive a return, and the country gets the infrastructure it needs,” he said. According to Gomera, many of the world’s successful economies financed major infrastructure and industrial expansion using long-term domestic capital before turning to external sources. “Japan, Singapore, and South Korea did not build their prosperity through aid. They built institutions capable of turning domestic savings into productive investment. That is the lesson for Africa,” he said. African pension funds alone are estimated to be managing more than $2 trillion in assets, highlighting the scale of domestic capital already available on the continent. “The future of development is not simply about finding more money. It is about building the institutions, investment vehicles and project pipelines that allow long-term savings to finance long-term development,” he observed. Gomera highlighted that declining aid flows should be viewed not only as a challenge but also as an opportunity for African countries to strengthen economic self-reliance and unlock domestic sources of finance. “The future of African development will increasingly be financed by Africans themselves. The question is whether we build the systems that allow African savings to build African roads, African industries and African prosperity.” Stronger cooperation Beyond mobilising domestic resources, experts say stronger cooperation among developing countries will be critical as traditional sources of development assistance become less predictable. Doudou Sow, Ambassador of Senegal to Rwanda, argued that the current global environment presents an opportunity for countries in the Global South to deepen collaboration and share solutions that have proven effective in similar contexts. With many donor countries reducing development assistance and several UN agencies facing budget cuts, he said South-South and triangular cooperation offer an alternative pathway for countries seeking to sustain development gains. “Countries such as Rwanda have valuable experiences that can be adapted elsewhere on the continent, particularly through home-grown solutions and knowledge sharing,” he said. “In my country, we used to have USAID support in education, environment and health. These sectors now have no more funding, so we are now turning to home-grown solutions,” he added. Sow indicated that South-South cooperation presents an opportunity for countries facing similar challenges to learn from one another and adopt solutions that have already proven successful elsewhere. “We know that Rwanda, Kenya or another African country may have already solved some of the challenges we are facing today. We can draw on that experience to address our own challenges,” he said. “You are not starting from zero, and it eliminates much of the trial-and-error process, ultimately saving countries significant resources,” he added. According to Gilbert Ewehmeh, Chief Executive Officer and Continental Coordinator of Accelerate Africa, the challenge presents an opportunity to rethink Africa's development model altogether. “We have long depended on aid, but aid alone will not industrialise yet it’s the strong need mechanism for the continent to develop. What we need instead is partnership,” he argued. “We do not need aid in its traditional form because we already have significant resources within our countries that can be mobilised to drive development across the continent,” he added. Ewehmeh believes South-South cooperation could become an increasingly important mechanism for helping countries build stronger economies through investment, trade, and knowledge sharing. “It is important that South-South cooperation redesign a new partnership mechanism that will focus on Africa's industrialisation, focusing on investment.” Energy, digital transformation, and agribusiness sectors, he said, stand out as priorities for driving growth and reducing dependence on external assistance. Beyond financing, he stressed that cooperation among developing countries allows governments to learn from successful experiences elsewhere on the continent.

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As aid shrinks, Africa looks inward to finance development