The need for Africa economies to transition from fossil fuels to renewable energy has become exigent. At the Babacar Ndiaye Lecture 2024, held at the sidelines of the World Bank/IMF Annual Meetings in Washington D.C., stakeholders called for a just and equitable renewable energy transition in Africa.
Advanced economies demand that Africa continues to make more sacrifices than her very low contribution to the climate change crisis was frowned at. The role of African Continental Free Trade Area (AfCFTA) and dangers posed by high cost of capital in Africa also dominated discussions at the annual event that extols virtues and commitment of Ndiaye in Africa development.
Poverty and climate change crises are two dominant evils confronting Africa. African countries continue to face financing challenges, lingering inflationary pressures, food and nutrition insecurity, limited fiscal space, trade frictions, natural disasters, climate change, pollution, water and energy scarcity, and biodiversity loss.
The situation is particularly acute for small states and countries affected by fragility, conflict, and violence (FCV).
At the Babacar Ndiaye Lecture 2024 held at the sidelines of the just concluded World Bank/International Monetary Fund (IMF) Annual Meetings in Washington D.C, these issues, especially poverty and climate change were fully discussed and the opportunities available for Africa highlighted.
Speaking on the theme: “Saving Lives Today versus Saving the Planet for the Future: Can the AfCFTA Resolve the Climate Change Dilemma?”…Nigeria’s immediate past Vice President, Prof. Yemi Osinbajo, said Africa is warming faster than any other region and practically everywhere in Africa the catastrophic consequences are evident.
Osinbajo said the global North’s position has been consistently shown to be, to put it mildly, a case of double standards. He explained that while aggressively pushing fossil fuel rich African countries to transition to renewable energy, the global North maintains gas projects as an important part of their multi decade decarbonization plans. And many continue to develop new gas projects.
The Horn of Africa has been facing its worst drought in 40 years, with five consecutive failed rainy seasons since 2020, with prolonged droughts in Kenya and Somalia, intense flooding in West Africa especially Nigeria, Niger and Ghana.
In Southern Africa, Cyclone Freddy wreaked havoc in Mozambique, Malawi and Madagascar. Yet, Africa is the least emitter of dangerous gases, barely four per cent of global emissions.
Osinbajo explained that the cause of these catastrophes is the result of historical and cumulative emissions from global north countries. Ironically, Africa experiences relatively greater devastation and is far less capable of mitigating the damage and losses caused by these extreme weather events.
The continent, he said is equally not sitting idly watching these two elements, it has come up with several measures. He asked: “By what means can AFCFTA resolve the dilemma of African nations who desperately need growth, jobs, livelihoods and food security without at the same time worsening the climate crisis?”.
He said that Ndiaye’s place in this generation as the foremost contributor to the ideation and execution of development finance, policy and practice in Africa is firmly secured.
He said the theme of the lecture, deliberately creates a false choice, since Africans really cannot choose to live today as a bargain for dying tomorrow.
“The topic is meant to provoke our response to the crucial point that Africa faces two existential crises… not one. Climate change and Poverty. And then to answer the question, by what means can AFCFTA resolve the dilemma of African nations who desperately need growth, jobs, livelihoods and food security without at the same time worsening the climate crisis?,” he asked.
According to him, Africa’s other existential crisis is poverty, as over a third of Africa’s population lives in extreme poverty, with population growing faster than Gross Domestic Product, unemployment, food security are huge challenges.
He said the major economic sectors such as agriculture, mining and energy are resource-intensive, contributing to environmental degradation. Africa’s leaders face difficult trade-offs between accelerating growth in sectors that exacerbate climate change risks or delaying development for environmental concerns.
Osinbajo explained that the significant contributor to the poverty situation is energy poverty, which essentially means lack of access to energy, electricity, for cooking, heating, cooling, and this of course inhibits any real growth or job opportunities.
“Empirical evidence demonstrates that availability of energy directly correlates with income, wealth and development both at the individual and societal level. And the energy poverty issue in Africa is massive. Over 600 million Africans have no access to electricity and 150 million have irregular access,” he said.
According to him, most African countries depend on fossil fuels for their energy needs and for fossil fuel rich African countries, this is also a major source of export earnings and fiscal revenues. Ostensibly in keeping with their net zero obligations, there has been a growing trend amongst development finance institutions to withdraw from fossil fuel investment.
In his opening remarks, President & Chairman of Board of Directors, Afreximbank, Prof. Benedict Oramah, extolled the virtues of Babacar Ndiaye, a committed Pan-Africanist, who passed away on 13th July 2017 in his native Senegal, but his contributions to Africa’s economic landscape continue to yield positive fruits.
Oramah, said Ndiaye, who founded Afreximbank, was a strong institution builder, who had created most of the institutions that are making a huge difference on the continent including the Afreximbank, Africa Re, Shelter Afrique and the Africa Business Roundtable.
Oramah described Ndiaye as a selfless African who understood the power entrepreneurship and ensured he leveraged on it to grow African businesses. He highlighted Ndiaye’s exceptional leadership, as seen in the structuring of the shareholding of the bank.
“They deliberately did not make it a wholly government-owned institution. You had a class A, class B that was reserved for African financial institutions and private investors. I remember very well at the beginning of the bank, because in some countries, they didn’t really have a private sector, the government took the shares and said that as their private sector emerged, they would then sell the shares to the private sector,” Oramah said in one of his reports on Ndiaye.
“Why I have just given all these examples will tell you that Dr. Babacar Ndiaye recognised that the vision he saw for the continent, using African capital and an African bank to develop the continent would not be possible without also creating the business, the entrepreneurs that will build the business that such a bank would finance,” Oramah stated.
Other highlights of the programme include the fireside by Prof. Osinbajo, which was moderated by Omar Ben Yedder, Publisher and Editor-In-Chief, African Banker. Prof. Osinbajo used the opportunity to explain further on this speech and his takes on other key issues in Africa.
There was also a video message by Ms. Amina Mohammed, the Deputy Secretary-General of the United Nations and Chair of the United Nations Sustainable Development Group. She further extolled Ndiaye’s commitment to Africa’s development and economic transformation through business.
Group Chief Economist and Managing Director, Afreximbank, Yemi Kale acknowledged the support of stakeholders while reaffirming that the vision of Ndiaye on transforming Africa’s business landscape will be sustained by the bank.
Furthermore, Osinbajo disclosed that the World Bank has decided to cease funding upstream oil and gas development in Africa, there are also the restrictions on financing downstream gas development by the European Union, the United Kingdom of Great Britain and Northern Ireland, and the United States.
He said the implications of these actions are dire, where there are no immediate alternative sources of power and the cost of the transition to cleaner fuels may be prohibitive. Some studies show that divesting from fossil fuels could reduce GDP by as much as $30b for Nigeria, $22b for Algeria, $19.3b for Angola and … for Africa.
Suggestions for Africa’s development
Osinbajo suggested that Afreximbank’s collaboration with African Petroleum Producers Organization to promote an African Energy Transition Bank dedicated to supporting the oil and gas industry through the transition process will be very helpful in making the transition as painless as possible.
“So, for Africa, the crucial question in the Energy Transition conversation is how is Africa to develop, provide well paying jobs and decent lives for its growing population, within carbon constraints… Historically, economic growth goes hand in hand with emissions growth,” he said.
On the way out, Osinbajo suggested that intra African trade, as demonstrated through the African Continental Free Trade Area Agreements (the AFCFTA) will substantially reduce this massive cause of global emissions.
Equally, implementing the AfCFTA can boost intra-African trade by 35 per cent in 2045 while increasing GHG emissions by less than one per cent, compared to no AfCFTA or climate policies.
He said the production and export of low-carbon fuels (such as hydrogen and Ammonia) is another great opportunity for African countries and in the past five years, we have seen many green hydrogen projects in Africa reaching Final investment decision (FID).
For instance, Namibia has received over $500 million in investments in Green Hydrogen. Its substantial investments in solar energy and other renewables, the clean energy required for hydrogen production have made it attractive for this type of investment. Some of that hydrogen we are told is being considered to power rail transportation in Africa. Angola is set to become the first exporter of green ammonia to Germany by 2025, its full capacity of its green hydrogen plant is planned for 280,000 tons annually. Other countries such as Egypt, Kenya, Morocco and Mauritania have green hydrogen production goals.
He posited that for Africa to pursue a climate positive growth path in trade and manufacturing, the continent needs to speak with one voice, and show up as shapers, not takers.
The continent also needs to focus its economic growth and development plans on these green opportunities, structure their internal policies and regulation in ways that support Climate positive trade and industry, among other suggestions.
He said Afreximbank has invested $2 billion in the development of special economic zones in several African countries, the Gabon Special Economic Zone (GSEZ) which focuses on the timber industry, and has created 16,000 jobs, attracted 120 investors, and enabled Gabon to move from being an exporter of logs to the world’s second largest sustainable producer and exporter of veneer, as well as the first in Africa.
The Glo-Djigbé Industrial Zone (GDIZ) in the Benin Republic is dedicated to local transformation of agricultural products including cotton, cashews, pineapples, shea nuts and soybeans .There is also the Adétikopé Industrial Platform (PIA) in Togo which concentrates on the local transformation of agricultural products. Other zones are being developed in the Republic of Congo, Ivory Coast, Nigeria, Chad, Democratic Republic of the Congo, Rwanda and Sierra Leone.
Also, Afreximbank has led on the financing of several cross-border infrastructure including the Tanzania Isaka- Mwanza standard gauge railway for the transportation of goods and passengers to neighbouring countries, Kano-Maradi standard gauge rail is an important link between Niger’s major commercial hub and the commercial city of Kano in Northern Nigeria.
The Abidjan-Lagos Corridor Highway Development Project spanning about 1,028km and interconnects the capitals and economic centers of five ECOWAS Member States namely Côte d’Ivoire, Ghana, Togo, Benin, and Nigeria.
For him, addressing this issue of shortage of capital and cost of capital in Africa will require a range of interventions, and all need to be delivered on.
First is for the global north to keep past promises under the Paris treaties, including the activation of the Loss and Damage Fund agreed at COP27 and the commitment to $100 billion a year in climate finance for developing countries agreed nearly 10 years ago.
