Debt, energy transition and domestic revenues in Africa: More transparency needed

Africa stands at a crossroads. Rising debt is constraining the continent’s growth; public debt reached USD 1.8 trillion in 2022, with nine out of the 11 countries globally in debt distress located on the continent. Resource-rich countries like Angola, the Democratic Republic of the Congo, Nigeria and Zambia remain heavily reliant on revenue from raw material exports. With limited access to capital markets, more countries are borrowing against future revenues. The compounding effect of rising debt and low foreign exchange earnings has made it difficult to fund development priorities.

The global demand for transition minerals brings a renewed opportunity to reshape Africa’s economic landscape.

Yet, the global demand for transition minerals brings a renewed opportunity to reshape Africa’s economic landscape. Though Africa does not dominate global transition minerals reserves, production or processing capacity, there are noticeable standouts. The Democratic Republic of the Congo and Zambia possess 6% of the world’s known copper and 73% of global cobalt output comes from DRC. Gabon, Ghana and South Africa account for 58% of manganese, and Guinea has 23% of the world’s bauxite reserves. To avoid the pitfalls of the past, transparency of terms and prudent borrowing are needed to capitalise on the USD 325 billion global transition mineral market.

1. Contracts, loans and ownership: Knowing what and who

Opaque extractives deals contribute to illicit financial flows, which have cost Africa over USD 88.6 billion annually. The urgency to speed up mineral licensing can heighten corruption risks. Undisclosed terms of collateralised debts against future extractive revenues could further compromise debt sustainability and make it more difficult to raise additional funding from institutional lenders. Transparency in licensing processes, contracts and agreements related to resource-backed loans can mitigate these risks. Analyses of published contracts have supported government efforts to monitor project implementation, negotiate balanced contractual terms and enact reforms. For example, DRC EITI’s contract review contributed to renegotiations to secure USD 4 billion.

Opaque energy contracts also exacerbate Africa’s debt distress. Expanding transparency to include power purchase agreements could further public oversight. With over 15 African countries now maintaining beneficial ownership registers, regulators have new tools to enhance due diligence in licensing, contracting and related agreements. In countries like Nigeria, this approach is making it possible to identify financial leakages.

2. Revenue collection: Knowing what should be paid

On average, African countries collect about 40% of potential resource revenues. Based on the latest EITI disclosures, the 28 EITI African countries mobilise around USD 47.8 billion in extractive revenues annually, yet public debt remains high while per capita value remains low.

Effective revenue mobilisation hinges on four key questions: What was paid? Why? Was it the correct amount? What revenues can be expected? Disclosures typically answer the first question and sometimes uncover corruption, as in Mozambique, where EITI reporting revealed embezzlement, leading to criminal charges and recovered revenue.

EITI disclosures provide hard-to-come-by data that can inform revenue forecasts and tax reforms.

Answering the second, third and fourth questions requires deeper analysis and systematic reforms. EITI disclosures provide hard-to-come-by data that can inform revenue forecasts and tax reforms. In the Republic of the Congo, EITI disclosures of contracts, costs and oil sales were used in a financial modelling study which examined past and potential future revenues from major oil projects in order to examine the effectiveness of Congo’s fiscal policies. Ghana EITI’s review of the Agyapa gold deal found that the proposed government stake was significantly undervalued. Zambia’s Mineral Output Statistical Evaluation System (MOSES) addressed issues of trade mis-invoicing and under-declared exports, helping to mobilise an additional USD 1 million.

3. Value addition: Moving beyond raw exports

Africa’s historic reliance on exporting raw minerals has limited its economic gains. Countries are now taking steps to capture more value by refining and processing minerals locally. For example, in 2022, the value of DRC's exports of processed and refined cobalt totalled USD 6 billion in 2022, 36 times higher than the value of its exports of raw cobalt ore.

Beyond the financial investment, achieving these ambitions requires robust governance. Countries need a stable policy environment to attract investors. Reliable energy and transport infrastructure are essential, as is integration of regional corridors to support multi-user logistics and boost intra-African trade under the African Free Trade Area.

Beyond the financial investment, achieving these ambitions requires robust governance. 

Clear and well-governed state participation in extractive projects is needed to balance commercial goals with public commitments. Support for artisanal and small-scale miners through traceability and due diligence measures can also help integrate them into the formal revenue base. Meaningful partnerships that include benefit-sharing, local content and regional value addition policies can help align corporate ambitions with community welfare and environmental stewardship. These aren’t novel ideas; the EITI’s 20 years of implementation show that transparency and multi-stakeholder oversight is critical for practically implementing sustainable value chains.

From transparency to revenue gains

The pathway from transparency to increased domestic revenues needs to be deliberate, concerted and balanced. First, EITI multi-stakeholder groups must be intentional about strengthening disclosures and applying tools to optimise revenue. Second, a concerted effort by EITI stakeholders to broaden and deepen engagement with regulatory authorities would be needed to ensure robust sector oversight. By balancing expanded disclosures with active data use and stakeholder engagement, African governments can position themselves to unlock a USD 325 billion mineral market and mobilise significant extractive revenues to address the continent’s debt and development priorities.

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Note: This blog draws on insights from the EITI’s Anglo-Lusophone Africa Regional Peer Learning Dialogue, which gathered over 60 participants including EITI national coordinators and multi-stakeholder groups, regulatory bodies, companies, civil society and state-owned enterprises to discuss Africa’s debt, energy transition and resource mobilisation. Experts included representatives from the OECD, CONNEX, Energy for Growth Hub, Africa Legal Support Facility and Tax Justice Network Africa (TJNA). The event was supported by the Government of Zambia, USAID and the BHP Foundation, with representation from the British High Commission, EU and US Embassy.