The year 2020 is the beginning of a promising decade for Africa, as economic growth across the continent is expected to continue to outperform that of other regions, with the continent continuing to be home to seven of the world’s 10 fastest-growing economies through the first half of the decade, according to the Foresight Africa Report.

Foresight Africa is a report released by the Africa Growth Initiative (AGI) at Brookings Institute that conducts independent research which helps establish long term strategies for economic growth and strong policies for development in Africa.

The report said that Africa has all the potential to achieve all the sustainable development goals (SDGs), but it faces number of challenges ahead.

One of the key challenges to achieving Africa's SDGs over the next decade is the ability to mobilise resources to finance them, according the report, as sub-Saharan Africa, for instance, will need $574 billion per year until 2030 to finance the SDGs.

 "While projected spending in a few countries, such as Botswana or Mauritius, will meet their SDG financing needs, for the vast majority of countries in the region, there is a substantial financing gap totalling $256 billion per year. Meanwhile, the future of official development assistance (ODA), which has been an important source of financing for several countries, is increasingly uncertain as discontent with globalisation and changing political environments are causing governments in many advanced economies to revisit their commitments," reads the report.

Tax revenues are the most important component of domestic resources, and raising them has been at the centre of many domestic reforms and regional and international initiatives.

Indeed, these efforts helped boost non-resource tax revenues from 11 percent of GDP in the early 2000s to 15 percent more recently.

Even so, Africa’s tax ratios are still among the lowest in the world, largely due to both low taxation capacities, about 20 percent of GDP on average, and to inefficiencies in revenue collection.

Nevertheless, the report said that there is room to raise tax revenues above current levels over the next decade by further strengthening the tax capacity through decreasing informality or broadening the tax base, and by improving governance in revenue collection.

The report highlighted a study conducted by the Africa Growth Initiative at the Brookings Institution that shows that tax capacity has already been improving, growing by 2.5 percent between 2000 and 2015.

Even so, assuming the same pace is sustained through 2030, it will generate an additional $44 billion in revenues annually.

The report also said that improving governance around tax revenue collection can help close the gap between current taxes and tax capacity on the continent by raising it with $93 billion a year through 2030.

"If governments, with the cooperation of external partners, curb illicit capital flows successfully, the continent can raise up to 5 percent of GDP per year, what equals to an average of $86 billion annually over the next decade," the report estimated.

On the other hand, developing countries lose 1.3 percent of GDP in tax revenues to companies shifting profits to low-tax locations, meaning that the region will lose an average of $23 billion per year over the next 10 years, the report mentioned.

The report pointed to the international cooperation on taxation of multinational companies as an instrument that can help combat this practice and contribute to the mobilisation of domestic resources, adding that all these efforts are expected to mobilise an additional $246 billion and narrow the region’s SDG financing gap substantially to over $10 billion per year.

The report added that strong growth rates will be essential for Africa to achieve the SDGs, expecting that Africa's economic growth will continue to be strong at least through the first half of the decade, with the region’s economy expanding at a faster pace than the global economy.

"Seven of the world’s 10 fastest-growing economies will be in the Africa," the report predicted.

It also touched upon the importance of digital transformation for Africa for a complete SDGs achievement, faster economic growth and job creation.

"The World Bank estimates that reaching the African Union’s goal of universal and affordable internet coverage will increase GDP growth in Africa by 2 percent per year. Also, the probability of employment, regardless of education level, increases by 6.9 to 13.2 percent when fast internet becomes available, as it facilitates firm entry and boosts productivity and exports. As such, digital technologies offer a unique opportunity for African countries to significantly transform various sectors of their economies," the report said.

However, the report asserted that this will not happen unless Africa addresses its sizeable deficits in digital infrastructure, unveiling that African countries spend about 1.1 percent of GDP on digital investment, while advanced economies spend an average of 3.2 percent. Thus, business-as-usual is not an option, as it will continue to widen the digital divide and drive further marginalisation of Africa.

The African Continental Free Trade Agreement (AfCFTA), which came into effect as of January 2020, plays a key role in achieving Africa's SDGs, especially that all Africa has now signed on and 29 countries having ratified it.

"AfCFTA as an investment, economic diversification, and job creation blueprint will shape the future of Africa in the years to come, help meet the SDG targets by 2030, and consolidate progress toward the African Union’s Agenda 2063. Indeed, with a combined GDP of over $2.3 trillion and a population of 1.2 billion, of which most are below the age of 30, African countries stand to gain substantially from intra-regional trade," according the report.

It also said that the implementation of the AfCFTA is expected to boost African welfare, GDP, and intra-African trade.

Progress on the finalisation of AfCFTA Phase I negotiations, namely the establishment of the schedules of concession for trade in goods, rules of origin, and specific commitments for trade in services, is encouraging.

Nevertheless, Africa needs to do more than just increase trade in existing commodities to benefit entirely from the AfCFTA, hence the importance of beginning Phase II of negotiations on investment, competition policy, and intellectual property rights. In particular, with an increasingly digitised economy and a store of innovative youth, working on IP registration and protection will be key to harnessing the full potential of the AfCFTA and securing Africa’s future.