With inclusive green economies the future belongs to Africa
African finance ministers met in March at Victoria Falls, Zimbabwe to discuss financing the transition to inclusive green economies. The United Nations’ Economic Commission for Africa delivered a message of hope.
The transition to green energy -that is necessitated by climate change - presents an opportunity for African countries to pursue a new course of industrialisation, which has eluded many countries since independence. Many of the critical minerals needed to power cars, homes and industries are found on the continent. In addition, Africa also has vast potential in renewable energy that it can rely on to power its own development.
These and other deliberations were at the heart of the United Nations’ Economic
Commission for Africa’s 56th Conference of Ministers of Finance and Economic Planning, held in Victoria Falls, Zimbabwe. The summit was held under the theme “Financing the transition to inclusive green economies in Africa: imperatives, opportunities and policy options”. Speaking at the opening of the ministerial session, which was preceded by 4 days of expert sessions and reports, Dr E. D. Mnangagwa, President of the Republic of Zimbabwe, noted that climate change imposes a disproportionate burden on Africa, despite the continent’s relatively small share in the emissions that have caused it. Africa’s position is further weakened by the unavailability of investment that it requires to tackle the crisis and meet its Nationally Determined Contributions.
The need for innovative finance
This situation, the President said, requires African leaders to consider innovative options to bridge the financing gap. “Ministers of finance, planning and economic development from across Africa are called upon to come up with alternative resource mobilisation initiatives that transform our
economies in line with technological developments to meet our climate goals and emerging demands. We must think outside the box and trust in our home grown initiatives,” the President urged.
Despite this challenge, President Mnangagwa said the energy transition could, on the whole, be a boon to the continent. African states, he charged, must take advantage of the transition and the abundant resources on the continent, to build a new industrial base on which to build sustainable economies. “The need to nurture and grow a broad spectrum of value chains that can generate green industrial development cannot be overemphasised. We must equally promote investment in green sectors, facilitate technology transfer, develop green investment standards and encourage regional cooperation.”
Mnangagwa called for partnerships between states and the private sector, noting that “while governments have the mandate to deal with emerging challenges, businesses have the innovation, technology and drive to deliver on the solutions we need.” Getting the investment needed to drive these solutions, however, remains a challenge for many African countries.
Dr Hanan Morsy, deputy executive secretary and chief economist at the United Nations Economic Commission for Africa (ECA), pointed out that while Africa needs about $2.8 trillion to finance its nationally determined contributions (NDCs) to emissions reduction, the continent has received only about $300bn. “The financing that comes to Africa for clean energy technology is only 2% of the global financing available and this can lead us into a vicious cycle where we have investment shortfalls that actually make us more exposed to climate change,” she said.
The situation, she observed, is compounded by the precarious debts that many African countries have to contend with in the wake of the pandemic and partly as a result of the interest rate hikes that central banks in the west embarked on to address the inflation crisis of 2022. Morsy said “this then further erodes the fiscal space, increases the cost of financing and compounds all the challenges that we are facing.”
For some countries, this means having to choose between investment in social services, climate response and debt servicing. Morsy suggested scaling up concessional finance, boosting the capacity of multilateral financial institutions, strategically re-allocating development funds and implementing robust debt resolution frameworks to enhance African countries’ capacity to respond to the climate crisis and the energy transition.
Tax is essential
African countries can also raise more funds for the green transition by blocking some of the illicit outflows from their economies, mostly through tax avoidance. Mary Baine, deputy executive secretary of the African Tax Administration Forum, called for more political support for African negotiators at the Framework Convention on International Tax Cooperation, which could arrive at uniform rules to prevent tax avoidance, especially that by large multinationals. Among the 27 countries participating in negotiations, only a handful of African countries are actively engaged, while the US and other nations have substantial delegations, indicating an imbalance.
African countries, it was recommended, must embrace a comprehensive stakeholder approach, enhance coordination efforts to cultivate consensus, mobilise support across the Global South and ensure that they have proficient technical expertise during negotiations.
With its wealth of resources, Antonio Pedro, deputy executive secretary of the ECA, said, it is unfortunate that Africa continues to trail other continents on several development fronts. Calling for steps to address what he referred to as the “paradox of plenty,” Pedro said it was time for Africa to transition away from resource extractivism, a practice characterised by the exportation of raw minerals without fostering local economic ties, thereby resulting in minimal or no improvements in resource-rich communities.
Noting the procurement challenges that were highlighted by the Covid-19 pandemic, Pedro advocated for Africa to localise its supply chains and said the ECA was working to promote the concept of “Afro-shoring,” meaning that the continent should produce and consume more of the goods produced within its borders. The success of the African Continental Free Trade Area (AfCFTA) would, he said, enhance the capacity of African producers and establish a market encompassing 1.4bn people. “We need to investigate what we have to do to make it work better and we need to move from potential to action and real development outcomes.”
Tantalising technological prospects
Even as Africa grapples with these challenges, advancements in artificial intelligence (AI), hold tantalising prospects for boosting efficiencies, achieving social development milestones and improving quality of life on the continent. James Manyika, senior vice-president for research, technology, and society at Google and co-chair of the United Nations’ high-level advisory body on artificial intelligence, emphasised this during his delivery of the 2024 Adebayo Adedeji Memorial Lecture on the first day of the ministerial sessions.
Manyika highlighted AI’s potential to profoundly impact various facets of life, envisioning its role in assisting individuals, catalysing economic growth and prosperity, accelerating scientific discoveries, and addressing societal challenges to foster