AFC addresses climate change
There is a growing sense that African solutions will be best fit for the task of African development. Not only that, but also we have in fact developed the capability and have the team to deliver on its ambitious goals. This growing confidence may have something to do with the presence and growth of African multilateral institutions – which are publicly and enthusiastically owning the task of building the continent we want. One of these is the Africa Finance Corporation (AFC), a development finance body which makes no secret of its all-encompassing mission.
So confident is AFC that ahead of Cop27 it released its own set of proposals for addressing the climate question. It is a set of proposals born out of the conviction that the crisis will have an economic impact and it might have a solution that is founded on economic re-engineering.
Take the global supply chain. For centuries, Africa’s position has been a source of raw materials, shipped to other parts of the world for processing and then shipped around the world again, including back to Africa, where the materials were first sourced. Samaila Zubairu, AFC’s President and Chief Executive Officer, says that bringing production to Africa, where the materials are, will reduce the emissions associated with shipping. This is a compelling case, especially when you consider that shipping is the sixth-largest contributor to global emissions.
It doesn’t stop there. With so many of the minerals needed for new energy sources located in Africa, the continent becomes even more critical to the future of the world. Zubairu says Africa needs to be seen from the perspective of a solutions provider.
Smart policy changes, intuitive leadership from bodies like the AFC and a world that appreciates Africa’s potential contribution could make the difference between winning or losing the climate fight.
But Africa has to be central to all this, if the lessons of the supply chain disruptions are to be a guide. “It makes Africa’s place in the world much more important. It makes the resources in Africa, especially those required for the energy transition, much more important,” says Zubairu.
None of this would be possible without energy, however, and right now Africa doesn’t have much of it. Around 60% of people in Africa do not have access to reliable power. AFC recognises this and is assiduously building partnerships around the continent to meet this challenge. In Cape Verde, Djibouti and Egypt, AFC’s investments in wind have led to the generation of 1.4 GW of power.
Ayaan Zeinab Adam (pictured, below), Senior Director and CEO of AFC Capital Partners, a wholly-owned subsidiary, says these projects are important for building adaptation as the climate situation worsens.
However, AFC and its partners are hampered by a perception of risk, despite the fact that Africa has relatively low default rates. The effect of this is that lots of projects get killed at an early stage, which bodes ill for Africa’s quest for climate-resilient infrastructure by the mid-century. In addition to working to build a $750bn facility for this purpose, AFC also works to help its project partners to reach bankability. “For bankability to happen, we need to see a lot more money going to project preparation and development so that these projects can reach the final line,”
Ayaan Zeinab Adam explains.
Reaching bankability means supporting local partners with the money and capacity that is needed at the early stage of the project, Sameh Shenouda, AFC’s Executive Director and Chief Investment Officer clarifies. When a partner can’t reach the right people, AFC opens those doors for them.
What it means for them is that they can prove that these projects are in fact worth taking the risk. “We are demonstrating that these projects are bankable and they are profitable. It’s a continent of 1.2bn people – it’s a huge market and it can’t be ignored. And it won’t be ignored, if AFC has anything to do with it.”