Finance Minister Enoch Godongwana says a shifting landscape, including less donor aid and global geopolitical uncertanties, calls for a structural transformation in development finance across the SADC region.
Image: Armand Hough/Independent Newspapers
Southern African Development Community (SADC) countries have entered a new era of declining foreign aid, but unlike other periods, the reductions are large and unpredictable and may represent a lasting shock rather than a temporary disruption to their economies.
This was according to Finance Minister Enoch Godongwana, who spoke Thursday at the opening of the meeting of the Southern African Development Community (SADC) Committee of Ministers of Finance and Investment in Zimbabwe.
He said initial estimates by the IMF (International Monetary Fund) suggested a 16%–28% contraction in bilateral aid starting in 2025. These cuts were donor-driven and broad-based in scope, and not a reflection of individual country performance, he said.
“Unlike previous downturns, the current reductions are large, and highly unpredictable, representing a systemic and potentially lasting shock. The poorest and most fragile countries will be disproportionately affected,” he said.
“This shifting landscape calls for a structural transformation in development finance across the SADC region," he said.
Beyond protecting critical social sectors, there was an urgent need to pivot toward more sustainable and diversified financing models, leveraging blended finance, public–private partnerships (PPPs), and deeper private sector participation to offset declining donor flows, said Godongwana.
He said SADC member states should consider adopting coordinated and forward-looking economic and policy responses to cushion their economies against these exogenous negative shocks.
Key amongst the various policy options available included positioning the SADC as a competitive regional production hub.
“Importantly, this will require leveraging critical minerals to drive industrialisation, promoting food security through cooperation in agricultural production and agro-processing, deepening intra-regional trade integration, and strengthening resilient infrastructure and supply chains,” he said.
These initiatives would require sustained political leadership, stronger institutional coordination, and a shift from commitments to actual implementation.
“We will need to prioritise a select set of high-impact actions. Among these, for example, are the trade facilitation reforms, development of transport and logistics corridors, and seamless transmission of digital payments, including reducing the cost of remittances across the region,” he said.
He said persisting global uncertainties would also continue to raise borrowing costs materially and force adjustments in countries with large refinancing needs.
The overall impact of the Iran-US conflict was already being felt across the SADC region through the direct effects of rising fuel and fertiliser prices.
“This represents a classic negative supply shock, increasing the cost of energy-intensive goods and services, including agricultural output and food inflation,” he said.
Economic growth in sub-Sahara Africa had reached an estimated 4,5% in 2025, largely supported by effective macroeconomic stabilisation policies that also contributed to sovereign upgrades in countries such as South Africa and Zambia respectively.
However, Godongwana said economic growth was now forecast to moderate to 4,3% in 2026, reflecting the impact of the war on oil, gas and fertiliser prices which were critical inputs to the agriculture, mining, transport and tourism sectors.
“Looking ahead, growth is expected to pick up to 4,4% in 2027, driven by anticipated increases in public investment, improved agricultural output, and stronger export performance,” he said.
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