Tax compliance is crucial for closing Africa’s financing gap – Mahama urges African leaders

Former President John Dramani Mahama has urged African Heads of State to strengthen tax compliance as a critical step in addressing the continent’s significant financing shortfall.

Speaking as the Champion on African Union Financial Institutions at the Heads of State and Government breakfast dialogue in Addis Ababa on February 16, Mahama highlighted the estimated $402 billion annual financing gap Africa faces until 2030.

“Addressing the financial gap requires a multifaceted approach. Domestic resource mobilization is crucial for improving tax administration, combating illicit financial flows, and encouraging the culture of tax compliance,” he said.

Urgency for strategic investments

Mahama stressed that Africa’s financial shortfall is not just a statistic but a direct threat to the continent’s growth and sustainable development, exacerbated by climate crises, geopolitical tensions, and disease outbreaks.

“This financing gap is not merely a statistic. It represents the unrealized potential of millions of Africans whose dream for a better life depends on our ability to invest wisely in infrastructure, education, technology, and health,” he noted.

He called for strategic investments in these key sectors, emphasizing that sustainable development hinges on Africa’s ability to generate and manage its financial resources effectively.

Call for reduced borrowing

The Director-General of the World Trade Organization (WTO), Dr Ngozi Okonjo-Iweala, also addressed the forum, cautioning African leaders against excessive borrowing and instead urging them to explore innovative ways to attract and sustain investments.

“We must take advantage of investment that comes to Africa and be able to sustain them for our own development,” she said.

She suggested that African nations could raise funds by adding value to natural resources and leveraging pension funds to generate long-term capital for development.