The European Commission has published their progress report on investing insustainable development. Relating to investments in Africa the report covers the recent EU-Africa Business Forum and how it highlighted the important role of private sector development and investment to promote jobs and growth in Africa. It also covers the Investment Climate Reform Facility and its support of public-private dialogue on investment climates in African countries. 

Financing the Sustainable Development Goals (SDGs) requires massive public and private investment to make them a reality for all people, everywhere. The COVID-19 pandemic has added to the urgency of tackling development challenges. This report on investing in sustainable development comes at a critical juncture, as resources are dwindling while needs are rising. The decline in financial resources for sustainable development is largely ascribable to COVID-19. GDP in developing countries in 2022 is projected to be about 7.5% lower, on average, than what was expected before the health crisis. Estimates provided by the International Monetary Fund in April 2021 (IMF, 2021) show that fiscal balances in low-income developing countries deteriorated by 1.6% of GDP between 2019 and 2020, growing from -3.9% to -5.6%. Resources generated by external flows also declined: foreign direct investment in developing countries fell by EUR 450 billion (-40%), developing countries’ merchandise exports to the European Union (EU) by almost EUR 100 billion, and remittances by close to EUR 10 billion (UN, 2021).

The current geopolitical crisis, including the war in Ukraine, is expected to create another huge economic shock to the world economy. At the same time, COVID-19 has increased developing countries’ needs. Progress towards the SDGs slowed with the onset of COVID-19, with poverty increasing for the first time in 20 years1. But even before COVID-19, progress towards the SDGs, while on an upward trend for all income groups, was uneven. Once the pandemic set in, progress worsened for all developing countries, with the 2021 SDG Index dropping by 1.5 percentage points for both low-income and lower middle-income countries, and by 2.4 for upper-middle-income countries (Sachs, Kroll et al. 2021). The Organisation for Economic Co-operation and Development (OECD, 2020a) estimates that COVID-19 has caused an overall decline in resources of USD 700 billion, and an increase in needs of USD 1 trillion (the scissor effect). As a consequence, the SDG funding gap in developing countries is projected to grow from USD 2.5 trillion before COVID to USD 4.2 trillion a year for the foreseeable future – a 70% increase. A massive step up in domestic resource mobilisation, greater efficiency in public spending and better SDG alignment are fundamental to finance the SDGs, but even coupled with the billions in official flows to developing countries, they will not be enough to fill the widening funding gap. There is an urgent need to tap into more private financial assets, growing shares of which have been invested in sustainable activities in recent years. One of the main challenges is that, while 84% of the world’s population (OECD, 2020) and 99% of the 700 million extremely poor2 live in developing countries, less than 20% of the USD 379 trillion in global financial assets are invested there – and most of that in the upper-middle-income group.

Please read the full report here.