At this year’s United Nations General Assembly (UNGA) in New York, world leaders placed the Global South’s race to achieve the 2030 UN Sustainable Development Goals (SDGs) front and centre. As the climax of the High-Level week of events, the SDG Summit highlighted the urgency of accelerating this crucial agenda that has reached its midway point after years of setbacks have left millions at risk of poverty and insecurity.

What’s more, India co-led an event with the UN to unveil a capacity development initiative for the Global South geared towards fueling sustainable development through the sharing of best practices.

Encouragingly, the new, locally-driven models of development cooperation spotlighted at the Assembly offer significant potential to empower developing countries, particularly if driven by technology, governance and finance innovations that help governments tackle both the symptoms and root causes of poverty.

Concerning development backslide

Launched in 2015, the SDG agenda was presented as a milestone in international development efforts, yet a perfect storm of global crises in recent years has shattered this early optimism. Worryingly, only 15% of 2030 targets are currently on track, while the UN’s latest SDG Report indicates that progress on roughly 30% of the goals has either stalled or reversed.

Moreover, the UN has projected that, on the current trajectory, over half a billion people will remain in poverty and nearly 100 million children will lack access to schooling by 2030, driving an ever-greater wedge between the most and least developed countries.

As part of the Assembly’s high-level week, the SDG Media Zone session notably spotlighted the debt crisis at the core of development challenges. In 2022, global debt hit an eye-watering record-high of $92 trillion, with the UN recently revealing that 37 of the world’s 69 poorest countries face either a high risk or an ongoing situation of debt distress.

Moreover, 3.3 billion people live in countries that spend more on debt interest than education, prompting UNCTAD Secretary-General Rebeca Grynspan to lament that many governments “are faced with impossible choices to serve the debit or serve the people.”

Illicit trade adding fuel to fire

In this context, one of the drivers behind this twin debt and development crises is the growth of illicit trade. Nigerian President Bola Tinubu emphasised this plague’s pernicious impact on the Global South’s economic prosperity at the UNGA. According to the Transnational Alliance to Combat Illicit Trade (TRACIT), smuggling, counterfeiting and all other facets of the global illicit trade “is compromising the attainment of the UN SDGs in significant ways.”

By freezing out legitimate businesses, slashing millions of jobs and robbing governments of crucial tax revenues, TRACIT stresses that the “proliferating illicit trade” in developing countries is cultivating “socio-economic instability,” hindering the funding of basic public services and debt repayments while discouraging vital private investment.

Consequently, a vicious circle forms in which “the lack of essential services and a limited state presence” leave “the population feeling abandoned,” as ISS Africa has observed, thus pushing desperate communities – with the help of vulturous criminal groups – towards illicit markets that further undermine development.

TRACIT has flagged tobacco, petroleum and agrochemicals sectors as among the most affected by the illicit trade, with an estimated $40 billion in tobacco excise taxes and over $130 billion worth of fuel products lost illicit markets annually, while illegal fertilisers and pesticides undermine food security, farmers’ profitability and environmental safety.

Right vision, botched delivery by Authentix-Mitas consortium

While TRACIT rightly promotes public-private solutions to illicit trade, the potential of this model is not always realised, as displayed in Pakistan, whose recent IMF bailout agreement cites its flawed illicit trade response as a major hindrance to the budgetary stability needed for sustainable growth. Launched in 2021, the track and trace system commissioned by Islamabad’s Federal Board of Revenue (FBR) and awarded to AJCL – a consortium led by US-based Authentix and South Africa’s Mitas Corporation – to tackle the illicit trade of tobacco, fertiliser, sugar and cement has failed to deliver on all fronts.

A local inquiry committee recently revealed the system’s fundamental flaws, most glaringly being the absence of cutting-edge digital technology in Authentix’s tax stamping solution, exposing Pakistan’s track and trace system to corruption, as evidenced by the committee’s discovery of counterfeit stamps. From relying on physical tax stamps that have frequently fallen off due to the system’s poor adaptability to local environmental conditions to manufacturers’ use of “decades-old technology” prone to regular malfunctions, the system has proven utterly ill-equipped.

Similarly, Authentix’s track and trace system for beverages in Ghana has drawn strong criticism and resistance from local manufacturers for its use of unreliable and costly paper stamps rather than digitally-printed tax codes, while the testing kits Authentix provided for Kenya’s anti-adulteration fuel marking initiative were proven to be defective, causing significant financial losses for local industries.

Root causes key for sustainable future

Leaky track and trace systems such as those implemented in Pakistan, Ghana and Kenya are burning damaging holes in public coffers at a time when these governments must address urgent debt and development challenges. With the tax revenue recovered from an effective track and trace system, governments could fund the education, health and infrastructure services key to curbing the illicit market’s appeal while preparing young local populations for future economic opportunities.

As Antonio Pedro, Executive Secretary of the UN Economic Commission for Africa, recently highlighted, harnessing the continent’s vast natural wealth – including 60% of the world’s uncultivated arable land, 40% of its solar potential and 71% of its cobalt production ­­– could see Africa become a vital actor in food, green and digital technology supply chains over the coming years. By establishing strong business and regulatory environments, countries across the Global South can attract international investment to help fuel sustainable industrialisation using their natural resources, thereby creating high-value local jobs that accelerate growth.

Crucially, this should be a cross-sector effort, with private companies and multilateral institutions helping governments generate the long-term finance to get the SDG agenda back on track. Proposals aired at the UNGA for an annual SDG Stimulus of $500 billion and international financial system reforms to offer innovative debt relief and fairer lending conditions would go a long way in closing growing the socioeconomic gap between the Global North and South, helping the latter deliver on its emerging vision for sustainable development before time runs out.

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