As South Africa assumes the G20 Presidency ahead of the 2025 Summit in Johannesburg, Africa’s development financing debate has reached a pivotal moment.
With just five years remaining to meet the 2030 Sustainable Development Goals (SDGs), the continent faces a staggering $1.7 trillion annual financing gap 40% of the global shortfall. A key solution lies within the Domestic Resource mobilization (DRM).
Despite being one of the most consistent sources of public financing, Africa’s tax-to-GDP ratio remains well below the 15% threshold widely recognized as necessary for sustainable development.
In the actual fact, increasing this ratio by just 1 percentage point could yield an additional $35 billion annually. If this effort is sustained across the next five years, it could unlock up to $135 billion, narrowing the financing gap and enhancing fiscal independence.
Yet, as the African Development Bank and other key stakeholders such as African Tax Administration Forum (ATAF) point out, this will require more than traditional tax collection methods. It demands comprehensive reforms, political will, and coordinated multilateral support.
Raising the tax-to-GDP ratio is more than a technical goal it is a political and developmental imperative. With Official Development Assistance (ODA) in decline and the cost of borrowing rising, DRM offers a path to reduce Africa’s dependency on volatile external financing and reclaim fiscal policy space.
This aligns closely with the vision set out under South Africa’s G20 Presidency, which has rightly centered DRM as a top priority within the G20 Development Working Group (DWG).
The establishment of Revenue Action for Development in Africa (RADA) reflects this shift, through RADA, ATAF and partners aim to create a future where Africa can fund its own development ambitions including in critical areas like food security, health, education, and infrastructure through enhanced domestic revenue.
However, raising tax revenue is only half the battle. Africa loses billions annually through Illicit Financial Flows (IFFs) including transfer mispricing, trade misinvoicing, and tax evasion. ATAF, as part of the G20 DWG, is pushing for the adoption of voluntary, high-level principles to combat IFFs. The recently adopted 2025 G20 Skukuza Development Ministerial Declaration is a milestone in this regard.
And this was praised by Josephilda Nhlapo-Hlope, Chairperson of the G20 DWG and Outcome Facilitator at Department of Planning, Monitoring and Evaluation (DPME) “What we witnessed in Skukuza was more than a meeting, it was a collective recommitment to global solidarity. We are seeing a stronger voice from the Global South that is shaping the future of multilateral development cooperation.”
Stemming IFFs and improving tax transparency through tools like automatic information exchange, unique identifiers, and beneficial ownership registries could recover substantial lost revenue and accelerate efforts to reach the additional $135 billion target.
DRM is not just about numbers; it’s also about people especially women. Africa’s women, who comprise over 50% of the population, face systemic inequalities in pay, care responsibilities, and representation in tax institutions.
ATAF’s Women in Tax Network (AWITN) is working to reverse this, advocating for gender-responsive tax systems that empower women economically and promote leadership in tax administrations.
The connection is clear, when women earn more, participate more, and are better supported by public services such as childcare, healthcare, and education, tax revenues grow, and inclusive development becomes a reality.
Gender-equal taxation and expenditure policies are a key part of raising that tax-to-GDP ratio sustainably and equitably.
Africa’s development financing challenge is daunting but not insurmountable. By raising its average tax-to-GDP ratio just modestly, the continent can unlock up to $135 billion annually.
Combined with efforts to curb IFFs and embed gender equity into DRM strategies, this could mark a transformative shift from dependency to self-determination.
As the G20 prepares for its 2025 Summit under South Africa’s leadership, and as ATAF continues to shape global DRM conversations through RADA and G20 task forces, the message is clear, Africa has the resources to fund its own future it just needs the tools, policies, and cooperation to mobilize them.