Geopolitical competition, fiscal pressures across donor nations and growing alignment of development finance are redefining the philanthropy landscapeFor more than three decades, African development policy has been organised around a single economic question: how can the continent mobilise more capital? The answers have varied official development assistance, foreign direct investment, debt relief, blended finance, private investment and, more recently, domestic resource mobilisation, but the underlying diagnosis has remained remarkably consistent.

 

Africa's principal development constraint, it has long been assumed, is insufficient finance.

That assumption is becoming increasingly difficult to defend. Africa is estimated to hold close to $4 trillion in domestic savings, while annual remittances from the African diaspora reached about $90 billion in 2023, making them one of the continent's largest and most resilient sources of external finance.

Domestic philanthropy is becoming more organised, private wealth continues to expand and institutional investors are accumulating larger pools of long-term capital.

Yet the continent still faces an estimated $1.3 trillion annual financing gap to achieve the Sustainable Development Goals, loses approximately $90 billion each year through illicit financial flows, and forgoes a further $55 billion annually through tax incentives and exemptions.

With average tax revenues equivalent to only 16 percent of gross domestic product, governments continue to face severe constraints in financing the public goods upon which long-term development depends.

This contradiction is difficult to ignore. Economies with expanding domestic savings, resilient remittance flows and growing private wealth should not remain chronically unable to finance infrastructure, knowledge systems and other public goods.

The more persuasive explanation is that Africa's principal constraint is no longer the availability of capital alone but the institutions through which capital is retained, organised and deployed. The central question is no longer where capital originates, but how it can be governed in ways that convert private wealth into enduring public value.

Institutional economics provides a useful framework for understanding that challenge. Capital becomes productive not simply because it exists but because institutions are able to aggregate dispersed resources, allocate investment, manage risk and create confidence that today's savings will finance tomorrow's opportunities.

Banks perform this function for household savings. Capital markets channel private investment. Pension funds convert long-term contributions into patient capital, while development finance institutions absorb risks that commercial markets are unwilling to bear.

Economic development follows the same logic. Its trajectory depends not only on the volume of capital available but also on the quality of the institutions that direct it towards productive and enduring public purposes.

The significance of the 10th East Africa Philanthropy Conference lay not in announcing a new financing agenda but in recognising that Africa's development challenge has become increasingly institutional.

Under the theme, Anchoring Systems in an Era of Transition, the conversation extended beyond mobilising additional resources to the governance arrangements required for African capital to finance African priorities.

As Brian Kagoro, Managing Director of Programmes of Open Society Foundations, observed, "The capital was always here; the only thing imported was the blueprint."The observation captures the central argument of this moment. Africa's next development challenge is not simply to accumulate more capital but to build the institutions capable of governing, allocating and compounding that capital in pursuit of public purpose.

The changing role of African philanthropy reflects a broader reorganisation of development finance.

For much of the post-Cold War period, official development assistance occupied a privileged place within the development landscape. It financed humanitarian response, strengthened public institutions, underwrote civil society and absorbed risks that commercial capital had little incentive to assume.

Today, geopolitical competition, fiscal pressures across traditional donor countries and the growing alignment of development finance with strategic national interests are redefining that landscape. Expanding domestic resources is therefore necessary, but it does not resolve the larger question of how societies convert wealth into lasting public value.

That has always been philanthropy's distinctive contribution. Markets invest where commercial returns can be realised, while governments finance activities supported by public revenue. Between them lies a range of public goods whose social value is indisputable but whose financial returns are uncertain, diffuse or realised only over long periods.

Universities, scientific research, independent media, peacebuilding, civic participation and democratic institutions all occupy this space.

Philanthropy has financed them not because they are charitable, but because they are essential to a society's long-term productive capacity.

As Atti Worku of the African Collaborative observed during the conference, "The future of philanthropy must do more than alleviate poverty; it must create wealth."The distinction is fundamental, as poverty alleviation responds to immediate deprivation; wealth creation expands a society's capacity to generate future prosperity.

That capacity depends not simply on higher incomes or larger financial transfers but on assets that continue producing value across generations. Universities generate knowledge. Research institutions produce innovation.

African philanthropy should therefore be judged by more than the volume of grants it distributes. Its lasting contribution lies in whether it leaves behind stronger organisations, deeper knowledge, greater public trust and more resilient mechanisms for financing public goods.

Community foundations mobilise local capital. Trusted civic organisations strengthen accountability. Their contribution lies less in what they own than in the opportunities they create, the risks they reduce and the capabilities they leave behind.

This understanding is increasingly reflected in philanthropic practice across the continent. Endowments preserve organisational capacity beyond individual funding cycles. Community foundations transform fragmented giving into permanent civic resources.

Catalytic philanthropy assumes risks that commercial investors cannot justify, enabling larger pools of private capital to enter underserved sectors. Collaborative funds lower the costs of collective action while allowing organisations to address problems beyond the reach of individual grantmakers.

Although these approaches differ in design, they perform a common economic function: they convert finite financial resources into enduring public capability.

The measure of success is not simply what philanthropy spends but what societies are able to sustain long after philanthropic capital has been exhausted.

The emergence of new sources of African capital does not, by itself, alter the way development is organised. Domestic resource mobilisation, expanding philanthropy and growing private investment may change where capital comes from without changing who exercises authority over its allocation. The more demanding task is therefore not financial, but institutional. It requires redesigning the rules, relationships and governance arrangements through which capital is directed towards public purpose.

The localisation agenda illustrates the challenge. More than a decade after the Grand Bargain (the Grand Bargain is an agreement between major donors and aid organisations to improve the efficiency and effectiveness of humanitarian action) committed signatories to channel 25 per cent of humanitarian funding directly to local and national actors, direct funding stood at just 3.6 percent in 2024.

The shortfall is commonly interpreted as a failure to fulfil financial commitments but also reflects a deeper institutional reality.

Development has become more locally implemented than locally governed. Funding increasingly reaches local organisations, while authority over fiduciary standards, compliance systems, risk management, monitoring, evaluation and strategic priorities often remains elsewhere.

The implication extends beyond humanitarian assistance. Decisions about who defines risk, determines accountability, evaluates performance and authorises investment shape development long before financial resources reach communities. Increasing direct funding, while important, is therefore only one dimension of localisation.

Lasting reform depends upon strengthening local fiduciary systems, reducing unnecessary compliance burdens and relocating decision-making alongside capital.

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