By Erik BERGLÖF
As South Africa prepares to take over the G20’s rotating presidency, its government has vowed to make 2025 the “year of Africa.” At the same time, the United Nations Climate Change Conference in Brazil (COP30) will serve as a litmus test for global climate action, revealing how much progress the world’s largest polluters have made in fulfilling their commitments to reduce greenhouse-gas (GHG) emissions and provide climate finance to developing countries.
Given that Africa accounts for just 4% of global GHG emissions and bears little historical responsibility for climate change, the continent has understandably been reluctant to embrace the net-zero agenda. As the UN Economic Commission for Africa noted in its latest State of the Climate in Africa Report, what African countries truly need is to boost investment in climate adaptation and resilience.
But a shift appears to be underway. As African economies recover from the COVID-19 pandemic, and large amounts of capital flow into climate mitigation, many policymakers are recognizing the pivotal role that investment could play in fueling a massive wave of technological innovation and green growth across the continent
Green tech could be a game-changer for Africa, and recent developments suggest that this emerging sector may hold the key to overcoming the continent’s long-term growth challenges. Rising foreign investment in battery production in Morocco, and ongoing talks between India’s Hinduja Group and Egyptian firm El Nasr Automotive to establish an electric-vehicle plant in Egypt, points to a future where Africa, with its abundant renewable-energy potential and undervalued natural resources, benefits from a green economic boom.
One of Africa’s most valuable assets is its young population. Although the percentage of Sub-Saharan Africans enrolled in higher education has remained shockingly low, at under 10% since the early 2000s, the continent’s rapid population growth means that the absolute number of graduates is growing. Moreover, African higher education has improved markedly over the past two decades, with more institutions offering high-quality programs and research output continuing to increase.
Some of these improvements became particularly evident during the pandemic, as individual researchers and health-care professionals stepped up to inform policymaking. Scientific collaboration across the continent flourished, with the Africa Centers for Disease Control and Prevention facilitating the exchange of knowledge and expertise.
In fact, it could be argued that African epidemiologists and economists collaborated more effectively during the pandemic than their counterparts in Europe did. The annual Africa Economic Symposium, hosted by the Policy Center for the New South (PCNS) in Rabat, underscores the increasing collaboration between academics and policymakers, bringing together leading researchers and thinkers from across the continent.
This year’s Symposium, held in July, focused on the decline in official development aid and private-sector investment in Africa, driven largely by high debt levels that have deterred investors and limited the ability of multilateral development banks and bilateral lenders to provide support. While Africa’s overall debt burden has not increased dramatically since COVID-19, debt-servicing costs have soared, forcing many countries to spend more on loan repayment than on health and social services.
Against this backdrop, the PCNS Symposium offered a glimmer of hope. While African countries urgently need financing for climate adaptation, the funds already allocated for mitigation can be leveraged to access new green technologies. These investments could, in turn, enable African governments to gain a foothold in global value chains, as Morocco’s burgeoning battery industry has shown.
Africa’s enormous natural capital is another important asset. Properly valuing these resources could boost many African countries’ wealth and lower their borrowing costs. Meanwhile, monetizing these valuations could help governments reduce their debt burdens through mechanisms like debt-for-nature swaps, whereby countries pledge to protect globally significant natural assets in exchange for debt relief.
Fortunately, multilateral development banks are scaling up their investments across the continent. The African Development Bank has led several innovative initiatives, such as the Africa Go Green Fund, and introduced new tools to increase its lending capacity. The World Bank has also ramped up lending, while the European Bank for Reconstruction and Development – after a decade of success in North Africa – is finally moving into Sub-Saharan markets. And the Asian Infrastructure Investment Bank is steadily expanding its presence, with a focus on climate-related projects and forging closer ties with African countries.
South Africa’s G20 presidency represents a unique opportunity to rally the international community behind the continent’s green transformation. With the African Union as a permanent member of the G20, the stage is set for a discussion that highlights Africa’s potential to tackle global challenges and revitalize the world economy.
Amid regional turmoil and rising geopolitical tensions, Africa represents the ultimate test of whether the international development-finance system can still operate effectively. Though significant challenges remain, the African century remains within reach.
Erik Berglöf is Chief Economist at the Asian Infrastructure Investment Bank.
Copyright: Project Syndicate, 2024.
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