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Six Steps to Meet Africa’s High Costs of Fighting Climate Change

Perspective
Author Masha Hamilton
Published DateApril 12, 2023
Read Time 7 Minutes

Restructuring and modernizing the global financial system is critical to helping Africa – and the world – meet the climate change crisis, say The Rockefeller Foundation partners and experts who have worked on these issues for decades.

Climate change could cost the continent $50 billion annually by 2050, according to the World Meteorological Organization. And it is expected to cause some 250,000 deaths per year between 2030 and 2050 due to malnutrition, malaria, diarrhea and heat stress, the World Health Organization Africa Region predicts.

Climate adaptation, such as resilient infrastructure, could help meet the challenges of extreme weather. But it costs more in the short term.

“How does a country afford that higher price tag? Especially if it is already in debt distress?” asked Amath Pathe Sene, Managing Director for Africa’s Food System Forum, as we spoke in central Kigali, Rwanda.

  • It’s like sitting on a bridge while you cut it. How are you going to get down without falling? At the same time, the climate clock is ticking.
    Amath Pathe Sene
    Managing Director for Africa’s Food System Forum

The Rockefeller Foundation’s Global Economic Recovery team is working with a broad alliance of governments, international organizations, NGOs, and individuals to strengthen and expand global development finance systems by gathering thought leaders and decisionmakers to develop policy solutions and spur action.

If we take half a dozen steps together, the impact and dividends for the world will be enormous, Sene and other experts said.

  • Central Bank of Kenya in Nairobi. (Photo credit Todd Cross)

1. Eliminate Debt Distress

Eliminate loan interest payments for African countries in debt distress so they are freed up to invest in green development.

“Two-thirds of all African countries are either in debt distress or at a high risk of falling into debt distress,” said Faten Aggad, Senior Advisor on Climate Diplomacy and Geopolitics for The African Climate Foundation, who has worked for two decades on financing issues. “Unless we unlock the debt question, we are in survival mode.”

Quick agreement comes from Dr. Eliya Zulu, Executive Director at the African Institute for Development Policy, an African-led nonprofit research policy institute established in 2010.

“Debt burden is debilitating and undermining efforts to become climate smart. It’s like firefighting. So, we definitely need debt relief, but it has to be conditional,” said Zulu, who participated in the recent African Health Agenda International Conference that The Rockefeller Foundation helped sponsor.

“Debt must not define our narrative,” added The Rockefeller Foundation’s William Asiko, Vice President of the Africa Regional Office.

2. Unlock More Financing

Create greater efficiency and flexibility in the World Bank, while advancing negotiations on Special Drawing Rights (SDRs).

An SDR is an interest-bearing international reserve asset that plays a role in providing liquidity to the global economic system. Adding SDRs to a country’s international reserves makes it more resilient financially. In times of crisis, a country can dip into its savings for urgent needs and turn it into “hard” capital.

graphic of the SDR map.
Multinational Development Banks distribute SDRs to countries in various amounts.
National Bank branch in Nairobi, Kenya. (Photo credit Masha Hamilton)

In 2021, the G20 agreed to recycle $100 billion worth of that allocation from high-income countries to low- and medium-income countries, but thus far the pledges are approximately $35 billion short of that total. Reaching and operationalizing these pledges are crucial to addressing global inequality and the growing financing gaps between countries.

In February, the International Monetary Fund approved the applications of several development banks, including the African Development Bank, to become prescribed holders of SDRs. The next step is for governments to commit their SDRs to those development banks.

The African Development Bank has proposed using SDRs to boost its lending to back green development on the Continent. Specifically, it would use the SDRs to fund projects that support climate mitigation and adaptation, green growth, and food security, which would also allow them to combat poverty through the creation of jobs and expand regional integration.

3. Define Green Financing

Align on how to identify climate-friendly investments.

While some definitions of green financing are used by multiple stakeholders, such as the list of eligible categories provided in the Green Bond Principles, many financial institutions or companies define “green” in their own terms, with varying degrees of detail and transparency.

  • Family Bank branch in Nairobi, Kenya. (Photo credit Masha Hamilton)

Both Aggad and Sene said reaching agreement on the defining requirements for green finance would be a real win for COP28, the United Nations Climate Change Conference held in Dubai from November 30 to December 12, 2023.

Even when these steps are implemented, capacity-building for country-level banks around sustainability funding will also still be needed, Aggad noted.

4. Funding Climate-Resilient Projects

Offer best financing terms to climate-resilient projects from central and development banks, with commercial banks and institutional investors following suit.

This way, key lending policies would begin with support for “green” infrastructure projects and ripple through the system until they extend even to car loans for hybrid cars.

“To get the entire system green, you start from inside with green financing on loans, and it trickles down,” said Sene, who has worked on climate financing for the last 16 years in Africa, South America, Central Asia, and Europe, and has attended more than a decade worth of COPs, the annual U.N. conference on climate change.

“The green infrastructure investment case for Africa is strong, but the pipeline of projects needs to be built in a more proactive and aggressive way,” concurred The Rockefeller Foundation’s Eric Pelofsky, Vice President and Senior Advisor in the President’s Office. “Key multilateral development banks will need to drive more focus on project development.”

a row of solar panels on a field of wetland
Solar power generation in a field.

5. Africa as an Opportunity

Recognize that Africa’s high potential for renewable energy, be it solar, wind, or water, can help the continent power itself—and the world.

In fact, in many countries, individuals are already finding ways to access renewable energy sources, Aggad noted.

In a survey across 34 African countries, almost one in four respondents (23 percent) say their household uses electric power from a source other than the national grid, according to Afrobarometer, a pan-African research network.

Among those who use electricity sources other than the grid, by far the most popular source is solar panels (62 percent). In 87 percent of the cases, the non-grid sources of power are owned by the individual household that is using them, the report said.

“On the ground, people are looking at how to scale up access to renewable energy,” Aggad said.

  • We need to figure out how we can enable and stimulate this interest to use solar, but provide them with the kind of financing that does not put them in situations of greater poverty.
    Faten Aggad
    Senior Advisor on Climate Diplomacy and Geopolitics for The African Climate Foundation

Given its natural resources, Africa also has the potential to be a green industrial base. “This can move us away from waiting for the goodwill of the Global North to give us money for climate change,” she said. “That’s in the interest of Africa, and in the interest of the world.”

6. Include the Young

Give young people a prominent seat at the table as climate action agents of change, entrepreneurs, and innovators.

“The young  need to be at the center of the discussion,” Sene said. “They also require climate-resilient jobs as an alternative, and those jobs need to be sexy and cool because they are young. We need to be developing projects for them.”

  • Group of young African students sitting in a classroom.

Human capital, in fact, could be Africa’s biggest asset, Zulu said.

More than 60 percent of Africa’s population is under the age of 25, and by 2030, young Africans are expected to constitute 42 percent of the global youth, according to the World Economic Forum. They must be part of the solution. To accomplish this, business climates must be made more favorable to start-ups and other dynamic new business ventures.

It’s Time to Act

As consensus is reached about potential solutions, “we need political courage to follow through on these decisions,” Aggad said. “We can’t just keep going around and around. The whole world must move in an equal and just way, with everyone making a sacrifice, for this to work.”

Despite some setbacks over the last decade, the experts remain largely optimistic. “At the end of the day, we as human beings can fix everything,” Sene said. “As human beings, we can make the turn. It is a matter of political will, but if we want to, we can. And we will want to, because there will be a moment when we have to.”

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