The funding landscape in Eastern African region is changing rapidly. Given the weak economic situation of the region, there has always been a strong rationale for aid and humanitarian programmes. Many grants from bilateral, and multilateral agencies, as well as foundations are reaching the region. Traditionally, they focus on poverty alleviation, agriculture, and health and to some extent on social development, governance, and democracy.
Since 2011, traditional aid flows have been declining. Largely driven by a Pan-African policy shift that recognises that while aid is important in the short to medium term, it is not sustainable in the long run. African countries are now developing policies that reduce their aid dependency while intensifying domestic resource mobilisation, diaspora remittance strategies, and south-south cooperation.
The balancing act in donor funding
With the low grants flow in the region, governments, private sector, and civil society organisations are adopting other instruments such as green bonds and loans, sustainability-linked bonds, and debt-for-climate swaps. Debt is also an emerging new source of funding for Eastern Africa. Countries in the region, especially those with sounder economies, are now either borrowing from major financial institutions or directly on international capital markets. In this context, donors are keener on providing concessional loans – loans at more favorable conditions than on the market - rather than grants. The debt to GDP ratio for East Africa has been increasing steadily from 54% in 2014 to 83.5% in 2020.
With the increasing public debt and uncertainty of aid, the private sector is now playing a significant role in funding. Main private sector actors are corporate foundations, commercial banks, development banks, financial markets, private-public partnerships, angel investments, and equity.
The funding landscape in the region is also changing in terms of priority areas. More grants and concessional loans are now targeting infrastructure and emergencies. Infrastructure development in the last five years took 43% percent of ODA. Lastly, there has also been a shift from the traditional donors of Organisation for Economic Cooperation and Development (OECD) countries to non-OECD donors, particularly China. While in general terms the ODI from OECD countries is still higher, Chinese assistance to Africa has been increasing gradually since 2013, according to World Bank.
How to adopt to the changes in funding in East Africa
All in all, this means that many government institutions, and I/NGOs are now heavily competing for grants or other financial assistance. To stay alive, it is imperative to align your funding strategies and plans to the new realities. Diversifying your resource base is essential. But are you aware of the many new funding modalities? Are you equipped to better connect your organization to the funder’s causes? To tap into private sector funding. It is no longer an option to rely on traditional donor calls and grants. Proactiveness is key!
MDF Training and Consultancy can help. We conduct open entry courses and tailor-made training on resource mobilization and fundraising. Or we can provide direct assistance to co-design your funding strategies. Contact us via mdfesa@mdf.nl
Authors: Dr. James Njagu, Fundraising Expert and Trainer, MDF Training and Consultancy Eastern and Southern Africa, and Susanne van Lieshout, Regional Director and Senior Trainer, MDF Training and Consultancy Eastern and Southern Africa
