While the prevailing focus appears to be on reining-in sky-high inflation and the generally elevated cost of living, Ghana and other African nations must prioritise climate action, Bogolo J. Kenewendo, a board member of the African Centre for Economic Transformation (ACET), has said – stressing the significance of climate action on their economic development.
The UN Climate Change High-Level Champions’ Special Advisor argued that climate issues can no longer be treated as distant problems, as they are current and increasingly posing an urgent threat to the lives and livelihoods of millions.
This, she said, is evident even in regions that once believed they were insulated from its effects, since they are witnessing an increase in existing social tensions and food security concerns.
In an interview with B&FT ahead of the Centre’s 2023 Board meeting in Accra, Ms. Kenewendo stated: “Why should we be concerned about climate issues as we approach our elections? The real question is ‘Why is the cost of living rising, and what is driving inflation’? Climate shocks, such as disruptions in food supply chains, directly impact the cost of living. Our response to these shocks, including emergency measures and after-shock care, is pivotal for the cost of living and the global economy”.
In a similar vein, she called on developed and highly industrialised nations to fulfil their pledges to Africa, emphasising that the adverse effects of a slow transition on the continent will have repercussions worldwide.
“Climate change impacts everyone, whether we take action or not. We are already witnessing an increase in illnesses due to changing weather patterns, as viruses adapt and become more transferable. Tropical diseases are spreading beyond their traditional regions as temperatures rise. We’ve learned that we’re all interconnected when it comes to safety,” explained the former Cabinet Minister of Investment, Trade and Industry-Botswana.
Breaking barriers
This perspective aligns with a paper titled ‘Breaking Financing Barriers for a Just Climate Transition in Africa’, jointly authored by Ms. Kenewendo, Dr. Mahmoud Mohieldin and Reuben Wambui. The paper highlights that climate finance is inefficient, insufficient and unfair, creating a significant challenge for African countries striving to address climate issues.
The authors advocate “bold interventions” and improved cooperation among governments, the private sector, multilateral institutions and other organisations.
They call on G20 creditors to expedite debt relief and cancellation for low- and middle-income countries (LMICs), and encourage major development banks to adopt climate resilient debt clauses. They also suggest using special drawing rights (SDRs) to assist LMICs with sustainable debt management.
Africa, despite contributing only four percent of global carbon emissions, faces a substantial climate funding gap of US$2.8trillion. Three-quarters of the Paris Agreement climate finance pledge of US$100billion per year to developing countries has not been deployed, or has been misallocated. The competition with health and education spending further complicates climate action in the region.
The paper recommends low-cost, long-term loans for climate projects in emerging markets and developing economies (EMDEs). These loans should carry favourable terms to facilitate financing projects enhancing climate resilience.
In 2022, the UN Climate Change High-Level Champions organised regional forums showcasing over 100 shovel-ready projects. However, the paper highlights that many investors perceive climate projects in Africa as too risky and costly.
To mitigate this issue, the paper suggests introducing credit enhancement and guarantee schemes. These schemes would offer credit assurances and de-risk projects to attract more private investment.
The paper also underscored a need for mechanisms to mitigate foreign exchange risk, which continues to pose a challenge to investing in many developing countries – including African nations.
It suggests the establishment of foreign exchange guarantee mechanisms to offer cheap currency hedges for climate investments in Africa, reducing the risk of currency volatility for significant climate projects.
Currently, less than 30 cents of private capital are unlocked for every US$1 of public climate finance – in part, due to the nationally determined contributions from the Paris Agreement being skewed toward state actors.
Ms. Kenewendo and her co-authors noted that barriers such as high requirements, low awareness and lack of support further hinder private sector involvement.
The proposed intervention is the creation of a ‘turbocharger facility’ dedicated to African climate action projects and entrepreneurs, focusing on nature regeneration and adaptation. This facility will bridge the gap, making it easier for projects and entrepreneurs to access funding and risk reduction.
Ms. Kenewendo expressed conviction that these interventions, coupled with enhanced accountability, should see accelerated development in the continent’s climate action push.
“We will require stability of policies, not just for foreign investors but also domestic ones, so they can begin to develop things that are more Africa-focused rather than things which are helicoptered; and to top it off, we will need to see more accountability for each other – we should be able to hold ourselves and others accountable for our fiscal management,” she remarked.
