Effective Financial Markets Key to Sustainable Development in Africa: ECA

Addis Ababa, October 13/2023(ENA)- Africa needs strong financial markets to unlock much needed capital to drive sustainable development on the continent, the acting Executive Secretary of the Economic Commission for Africa, Antonio Pedro said.

Pedro, in an address at the launch of the Absa Africa Financial Markets Index 2023, highlighted that effective financial markets are key to Africa’s development prospects. 

He said Africa risked realizing the Sustainable Development Goals and the African Union Agenda 2063 owing to heightened financial and social challenges triggered by a combination of the COVID19 pandemic, growing inflation and geopolitical turbulence.

“Strengthening financial markets and diversifying the investor base would not only enable governments to mobilize more funding for economic recovery, sustainable development but also enhance financial resilience to future shocks,” he underlined.

Moreover, he elaborated that to foster the development of their financial markets, countries require a comprehensive approach, encompassing capacity building, robust infrastructure, essential reference tools, benchmarks and opportunities for peer learning.

Africa has huge investment needs to achieve sustainable development he said, adding for instance, Africa alone is estimated to require up to 86 billion USD annually to implement adequate adaptation measures by 2030 while the cost of transport and service infrastructure required to enable the implementation of the African Continental Free Trade Area were at  about 500 billion USD.

“To close the financing gap African countries need to make better use of their domestic capital and gain greater access to global capital, for example, African pension funds should be incentivized to invest locally, special purpose vehicles (SPVs) should be created accordingly,” he said.

Pedro added that SPVs could equally harness Diaspora remittances that could be channeled to more productive investments but these required “deeper, healthier, more efficient and more inclusive financial markets.”

Financial markets which include bond markets, commodities markets and foreign exchange markets trade in capital and credit which is vital for economic development of countries.

The Absa Africa Financial Markets Index 2023  reveals that there has been continued progress in developing financial markets across Africa in the past year despite global shocks.