After Hurricane Beryl stomped across the Caribbean, days after torrential rainfall destroyed thousands of homes in Ghana and Niger, it was evident that the two regions face many of the same challenges. Weeks of catastrophic events underscore the increasing necessity to transform the world’s financial architecture to support these areas.
Earlier this summer, two big conferences happened simultaneously, about 7,000 miles apart. One in the Caribbean, Antigua, and the other in Africa,Kenya. The themes were similar: the financial conundrum and developmental crises plaguing the regions.
The fourth Small Island Developing States (Sids4) conference and the African Development Bank (AfDB) conference brought to the forefront all of the present issues. Africa’s optimist-in-chief, Akinwumi Adesina, AfDB president, gave multiple speeches accentuating the widespread hope for the region, that Africa was finally taking the wheel, navigating its own way towards sustainable development in the face of the climate crisis.
In contrast, over in Antigua, politicians berated western superpowers for empty promises made at Cop27.
On the opening day of the Nairobi conference, entitled “Africa’s transformation, the AfDB group and the reform of the global financial architecture”, Adesina outlined the crucial role of the bank in driving transformation. Numerous African heads of state spoke, including Kenya’s beleaguered President Ruto, himself facing an avalanche of violent repercussions over taxation and financial austerity measures.
Africa and the Caribbean face similar and significant issues – a mixed bag of opportunities and challenges.
Although contributing least to the global climate crisis, these regions bear the brunt of its devastating impacts. “Africa loses $7-$15bn annually to climate change, projected to reach $50bn by 2030,” Adesina said, a reality that resonates in the Caribbean.
Both regions suffer disproportionately from extreme weather events and environmental degradation, despite their minimal carbon emissions.
The accessibility and availability of loss and damage funds is paramount for Africa and the Caribbean. These funds are essential for rebuilding and adapting to the frequent and severe climate-related disasters. “Building resilience against climate shocks is crucial for Africa’s economic future,” says Adesina. This sentiment is equally true for the Caribbean, where hurricanes and tropical storms cause extensive damage and economic disruption.
Africa and the Caribbean face significant disparities in the allocation of special drawing rights (SDRs) from global financial institutions. SDRs, a type of monetary resource in the form of reserve assets created by the International Monetary Fund, are crucial for providing liquidity to countries facing economic crises.
However, the current system disproportionately favours wealthier nations that do not need it, leaving the likes of Africa and the Caribbean with insufficient support.
“The outdated global financial system needs a radical reboot to address Africa’s financial needs,” a recent Mo Ibrahim Foundation report stated. This call for reform is equally relevant for the Caribbean, which also struggles with the inequitable distribution of SDRs. Enhanced representation and more equitable financial mechanisms are necessary to ensure that both regions receive the support they need to build resilience and achieve sustainable development.
Debt is a pervasive issue that hampers the economic growth and development of Africa and the Caribbean. African countries face high borrowing costs due to perceived risk premiums, which Adesina argues are unfairly assessed. “There needs to be a fairer assessment of Africa’s risk,” he said, advocating for more concessional financing and efficient public expenditure.
Mia Mottley, the prime minister of Barbados, has spoken many times on significant debt burdens aggravated by frequent natural disasters and economic volatility. This debt crisis limits countries’ ability to invest in critical infrastructure and social services, making it imperative to address these disparities through global financial reforms.
Both regions need more concessional financing options and debt-relief mechanisms that reflect their unique vulnerabilities and developmental needs.
Corruption and illicit financial flows (IFFs) are significant impediments to economic development in Africa and the Caribbean. These issues drain essential resources that could otherwise be invested in public services and infrastructure. The Mo Ibrahim Foundation report emphasises the importance of preventing IFFs and strengthening tax systems to mobilise domestic resources effectively.
“Africa needs not more money, but smarter money,” the report concludes. This paradigm shift involves improving governance, enhancing transparency and leveraging domestic assets for sustainable growth. The Caribbean, facing similar challenges, must also adopt robust measures to combat corruption and IFFs, ensuring that resources are used effectively for the benefit of all citizens.
Conflict and crime are additional challenges that undermine stability and development in both regions. In Africa, geopolitical tensions and internal conflicts disrupt economic activities and exacerbate poverty. The Caribbean, while not facing the same scale of armed conflict, grapples with high crime rates fuelled by the drug trade and social unrest that hinder economic progress and deter investment.
Addressing these issues requires comprehensive strategies that include economic opportunities, social cohesion, and robust law enforcement. Both regions must prioritise peace building and crime reduction as part of their broader development agendas.
Africa’s demographic potential, with a youthful population that will become a significant portion of the global workforce, is mirrored in the Caribbean, where young people also represent a critical resource for future growth. By 2050, Africa will account for a quarter of the global labour force, rising above 40% by 2100. This demographic dividend presents immense opportunities for economic development through skill development, entrepreneurship and innovation.
However, youth unemployment remains a critical issue in both regions. One in four young people in Africa are not in employment, education or training (Neet), a challenge that also resonates in the Caribbean.
Furthermore, brain drain is a serious concern in Africa and the Caribbean; according to the Ichikowitz Family Foundation’s 2022 African Youth Survey, about half of respondents aged 18 to 24 would consider leaving their native country in the next three years due to lack of employment and education opportunities. Both regions must invest in education and job creation to harness the potential of their young populations and drive sustainable development.
Africa and the Caribbean are rich in natural resources, yet they often do not receive fair value for their exports. Africa’s vast reserves of critical minerals are essential for the global green transition, while the Caribbean’s biodiversity and marine resources hold significant potential for sustainable development.
Africa must move beyond merely exporting raw materials and develop refining and manufacturing capacity to fully benefit from global value chains. This approach is equally relevant for the Caribbean, which can leverage its natural resources for higher value-added activities in agriculture, renewable energy and tourism.
Home to 1.26 billion people and possessing vast natural resources, yet Africa and the Caribbean account for a small fraction of global GDP. Their futures hinge on investing in human capital, boosting domestic productivity and leveraging revenue gaps.
These regions are at a crossroads, bearing immense potential but blocked by the critical need for strategic investments, partnerships and reforms in the global financial architecture. By harnessing their resources, building resilience and fostering collaboration, Africa and the Caribbean can be transformed. Their sustainable development and economic resilience is a shared responsibility, demanding a shared and global commitment to justice, equity and innovation.
