Partnering for Sustainable Financing: New Approaches to Taxation and Public Administration

Why African Nations Should Look Beyond Traditional Taxation

African economies are at a critical juncture, facing persistent challenges in revenue mobilization and public service delivery. Traditional approaches to taxation—centered on formal businesses and natural resource exports—are proving inadequate in a rapidly changing landscape. To build resilient economies and achieve sustainable development, Africa must embrace innovative and inclusive strategies that move beyond conventional models.

The Limitations of Traditional Taxation

The Informal Economy Is Vast and Hard to Tax

A significant share of Africa’s economic activity occurs informally, encompassing small-scale agriculture, street vendors, and micro-enterprises. These entities often lack formal records, making accurate tax assessment and collection challenging. As a result, governments face substantial funding gaps that hinder development.

Overreliance on Natural Resource Exports

Many African countries depend on taxes from oil, minerals, and gas exports, exposing them to global market volatility and limiting economic diversification. Expanding the tax base to include under-taxed sectors such as services and manufacturing could foster stability and growth.

Digital Economy Is Growing – And Untapped

Africa’s digital transformation offers new revenue opportunities through e-commerce, fintech, and online platforms. However, most countries lack effective frameworks to tax digital services, leaving potential income unrealized.

Global Tax Rules Are Changing

There is a growing movement among African nations to reform international tax rules, aiming to curb profit shifting and illicit financial flows by multinational corporations. Enhanced global tax governance could help recover billions in lost revenue each year.

Technological Innovation Enables Smarter Tax Collection

Digital tools can streamline compliance, reduce corruption, and enhance efficiency. Success stories from Rwanda and Kenya demonstrate the benefits of simplified tax regimes and mobile-based platforms.

Sustainable Development Needs Broader Financing

Achieving goals like Agenda 2063 and the Sustainable Development Goals (SDGs) requires mobilizing domestic resources beyond traditional taxes. Innovative instruments, such as carbon taxes, sugar levies, or windfall profit taxes, can generate revenue while advancing health and environmental priorities. By moving beyond traditional models, the continent can unlock new revenue streams, reduce dependency on external aid, and build more resilient economies.

Actionable Strategies for Public Sector Transformation

Addressing the challenges of revenue generation and governance requires more than policy reforms—it demands practical, actionable changes within public administrations.

• Strengthen Legal and Institutional Frameworks: Reform legal structures to empower oversight bodies like Public Accountability Committees, ensuring autonomy and clear roles.
• Invest in Capacity Building and Training: Focus on continuous professional development, particularly in digital literacy, policy analysis, and ethics for public servants.
• Leverage Technology for Transparency: Adopt digital platforms for budgeting, procurement, and citizen engagement to reduce corruption and improve efficiency.
• Promote Decentralization and Local Governance: Support devolution to enable local authorities to manage resources and deliver services tailored to community needs.
• Engage Citizens in Governance: Build trust by creating inclusive platforms for citizen feedback, participatory budgeting, and community monitoring.
• Focus on Service Delivery Outcomes: Align policy design with measurable service outcomes and use performance metrics to inform improvements.
• Encourage Regional Knowledge Sharing: Facilitate peer learning and benchmarking, drawing on best practices from countries such as Botswana and Mauritius.

These proposals, grounded in real-world reforms and challenges, are applicable across sectors—from health and education to urban planning.

Shared Insights: Collaborative Innovation Between Finland and African Nations

Experiences from Finland and collaborative initiatives such as the African–Finnish Partnerships on Taxation Capacity in Africa (AFP-TCA), implemented jointly by HAUS Finnish Institute of Public Management and the African Capacity Building Foundation (ACBF), offer valuable perspectives on how partnerships can support innovation in public financial management. Rather than prescribing models, these experiences emphasize the potential of joint learning, adaptation, and co-creation. Key takeaways include:

• Capacity Building Through Tailored Development: Co-design training and institutional strengthening programmes that respond to local priorities and contexts, particularly in revenue mobilization and financial innovation.
• Digital Transformation and Adaptive Leadership: Leverage digital tools — such as the Ubora Academy — and agile leadership approaches to modernize public finance management and enhance institutional responsiveness.
• Inclusive and Sustainable Innovation: Ensure that new financing methods, including gender-responsive budgeting and green bonds, are socially equitable and environmentally sustainable.
• Data-Driven Domestic Resource Mobilization: Harness data and analytics to broaden revenue bases, reduce reliance on external funding, and improve fiscal resilience.
• Peer Learning and Institutional Partnerships: Build strong networks to exchange practical experiences, share tested approaches, and scale successful innovations across countries and regions.

These shared experiences demonstrate that human capital, technology, collaboration, and sustainability are central pillars for advancing innovative and equitable financing solutions — and that the most effective approaches emerge when they are developed together.

Conclusion

Reimagining taxation and public administration are central to unlocking Africa’s development potential. Through collaborative partnerships, shared learning, and innovative approaches, governments can strengthen domestic resource mobilization, modernize governance systems, and design financing solutions that are both inclusive and sustainable. By combining local leadership with international cooperation, African countries are well-positioned to accelerate growth, enhance state capacity, and deliver tangible benefits for their citizens.