Greater efficiency in revenue collection and public spending by governments of African countries could deliver between $85 billion and $125 billion per annum for Africa’s governance. This is the latest discovery of research carried out by McKinsey & Company.
According to The Nation, Acha Leke, a senior partner in McKinsey’s Johannesburg office and co-author of the report, disclosed that the solutions to financial difficulties amongst African countries in the public sector already exist but proper implementation is all that is lacking
“African governments have more scope than is often assumed to mobilize domestic resources for their own development and improve efficiencies in public spending.
“If scaled up across the continent, such solutions could eliminate Africa’s entire budget deficit or unlock sufficient funding to close the $100 billion infrastructure-spending gap within a few years,” said Acha Leke.
Meanwhile, Mr Acha reportedly disclosed that several African countries are presently facing serious fiscal difficulties such as declining revenues and increasing fiscal deficits which are preventing the continent from growing and fulfilling its potential. Therefore, he called for urgent implementation of these solutions so as to bridge infrastructural deficit.
Countries in Africa for 2018 raised $443 billion in government-revenue, representing 19% of Africa’s GDP which compared to 2016 dropped from 23%. By contrast, the ratio of public revenues to GDP in most non-African emerging economies stands between 25% and 35%.
Yaw Agyenim-Boateng, co-author of the report and a partner in McKinsey’s Lagos office reportedly said that compared with other countries around the world, Africa generally has a low ratio of public revenues to GDP, meaning that the continent is not “monetising” its economy as much as it could.
“Africa right now faces a perfect storm of a slowdown in growth, depressed commodity prices, stagnant tax revenues and rising public debt, without appropriate action, many governments will face mounting fiscal pressure and find their ability to invest severely constrained.”
“A balanced focus on aggressive revenue growth and on cost control, with sustained pressure to maximise impact on both sides of the equation, will yield best results, and sufficient commitment to transformation, governments can create new headroom to pursue spending priorities without threatening fiscal sustainability,” Agyenim-Boateng said.