12-Oct-2022
Original story : https://www.devex.com/news/afdb-head-to-tackle-climate-africa-needs-finance-and-more-finance-104164
Akinwumi Adesina, the bowtie-wearing, immaculately suited president of the African Development Bank, was calm but his tone was serious when he meticulously described the "deluge of shocks" that have hit African countries.
He talked about how the war in Ukraine sent energy costs and food prices soaring in Africa. He addressed the issue of how weakening currencies and rising interest rates were exacerbating the debt challenges facing countries on the continent. He also touched on the potential of a fertilizer crisis that could hit the continent going into next year if the war in Ukraine lasts for that long.
All these challenges come amid the lingering effects of the COVID-19-induced economic crisis that countries are still reeling from, he said.
"You take a look at the whole of the COVID-19 recovery. ... Africa will still need about $424 billion by next year, to be able to tackle that particular issue," Adesina said in a conversation with Devex during the 77th United Nations General Assembly gathering in New York.
Adesina would not know it then but in early October, the World Bank released its latest economic forecast that contained a dire projection -- growth is expected to slow to 3.3% this year, down from 4.1% in 2021.
And then there are the calamities the continent is confronting as a result of a changing climate.
"It's like when it rains, it just pours," Adesina said gravely. "It's too much exogenous shocks happening to these countries at the same time."
So, what keeps him up at night?
"How to make sure Africa is not forgotten. How to make sure Africa gets the resources that it needs. How do you make sure that Africa's priorities are constantly on the global stage? That's what I do every single day. That's what keeps me awake," Adesina told Devex.
What, then, will pull African economies from this constellation of crises? His answer to this question was notable, in that it didn't include the word aid.
"Finance, finance, and more finance," Adesina said.
The urgency of climate
A Nigerian economist who once served as his country's agriculture minister, Adesina speaks with a deliberate cadence and articulates out loud fully formed paragraphs.
"It is time for us to change and reform the global financial architecture, to make it more efficient, to make it able to deal with global issues at this scale that we are talking about."
-- Akinwumi Adesina, president, African Development Bank
When we met, he sounded most urgent about the scale of the climate crisis facing countries in Africa. States are faced with the existential threat of unpredictable weather patterns as the world is set to gather for the 27th U.N. Climate Change Conference, or COP 27, in Egypt next month.
The growing frequency and persistence of climate-related disasters is costing countries about $7 billion to $15 billion a year, Adesina said. And if things continue at this pace, the losses will soar to $50 billion annually by 2030.
African countries need to raise an annual average of $124 billion to adapt. As of today, they're getting roughly $28 billion a year, he told Devex.
"The money isn't there for them to be able to adapt to climate change," he said.
Adesina said 9 out of the 10 most vulnerable countries to climate change are in sub-Saharan Africa. These countries need about $600 billion through 2030, which, he said, amounts to about $60 billion annually. Yet, they are only receiving roughly $18 billion a year toward this effort.
"You can see the big gap," Adesina said. "We need to accelerate access to climate adaptation finance for African countries."
AfDB was allocating 67% of its climate financing funding to adaptation, he said. The bank was looking to mobilize $25 billion that will go toward adaptation in addition to its effort to raise up to $13 billion for its Africa Development Fund, the bank's concessional window for climate action during its latest replenishment phase.
Asked where all the needed financing for climate change would come from, Adesina said global action was critical to support African countries that are disproportionately suffering from a problem they played little part in creating.
"When you actually have a house in a forest, and there is a forest fire that you didn't create, you need the whole neighborhood working together to put the fire out," he said.
Just transition
For Africa, he said, the conversation during UNGA revolved around a just energy transition.
There are 600 million Africans without access to electricity. They should be a priority, he said, and the continent needs to optimize all of its resources to lift up those communities; countries need to continue to invest in renewable energy but cannot ignore natural gas as a source to power the growth of African economies.
Adesina suggested that debates that have called for African countries to cease their investments and development of natural gas were offering a false choice. In discussions in New York, Adesina said he was clear about the AfDB's commitment to renewable energy -- 83% of the bank's investments were going into that space. But that was not enough to fulfill Africa's energy needs.
"We have got to be practical. Renewable energy alone cannot power Africa. We have to have an energy mix and gas is fundamental to that," he said.
He had a message to those that say if Africa were to use more of its natural gas, it would lead to more emissions.
If Africa were to deploy all the gas it has to meet its needs, countries would contribute less than 1% of the world's emissions. "It's nothing," he said.
A focus on climate finance
To Adesina, a central question is how Africa would get the financing to deal with climate change.
Adesina lamented the failure by high-income countries to live up to their 2009 commitments of dedicating $100 billion a year to low-income countries by 2020 for climate action.
"It's not there. So, it's like, you have a forest fire, but there's no water," he said. "It's a fire that just keeps raging."
African countries should not be expected to borrow to finance their climate needs, he insisted. At COP 27 in Egypt in November, Adesina said, the time for talk should be over.
"We should move away from megawatts of talk, which is delivering zero financing for climate adaptation, to actually put in the money on the table to support African countries to adapt to climate change," he said.
But Adesina said governments and financial institutions -- both in Africa and in the global north -- needed to be more proactive in leveraging the private sector to unlock financing that will be needed to tackle climate change. Even if high-income countries were to deliver on their $100 billion commitments that will not be enough. African economies need between $1.3 to $1.6 trillion to implement its aspect of the Paris Agreement by 2030. To meet that ambition, governments and large financial institutions will need to help de-risk the private sector to scale up the financing, he said.
"In the case of Africa, you have $2.1 trillion of assets under management by institutional investors. If you look at it globally, you have $145 trillion of assets under management. These are resources that the multilateral development financing institutions should leverage," Adesina said.
Adesina's ambitions were bolder, however. "It is time for us to change and reform the global financial architecture, to make it more efficient, to make it able to deal with global issues at this scale that we are talking about. And to be able to do that, we've got to move from billions of dollars to trillions of dollars," he said.
Start with the capital adequacy of multilateral institutions and reverse the way policymakers approach these challenges. "It's not about how much you have versus the scale of the problem, it is the scale of the problem to determine how much you need to do it," he said.
In addition to that, Adesina reiterated previous calls to reallocate the International Monetary Fund's Special Drawing Rights of $650 billion it issued in 2021, of which only a tiny amount of $33.6 billion had gone to African countries.
Governments on the continents, he said, have implored the IMF to rechannel some of that funding set aside for high-income countries -- about $100 billion -- toward African states.
"They don't need it," Adesina told Devex. He suggested that funding can go through AfDB, which can use its AAA rating as a financial institution and leverage it to raise four times as much capital.
"If we are able to deliver that, that will, of course, provide more liquidity to the countries, that will reduce the pressure that they have from inflation," he said. "It will also help them to deal with some of their balance of payment issues that are becoming very, very difficult."
Original story : https://www.devex.com/news/afdb-head-to-tackle-climate-africa-needs-finance-and-more-finance-104164
