Sharm El Sheikh, Egypt, 14 November, 2022 – Access to energy is a catalyst for development anywhere in the world. In Africa, energy poverty has been a major constraint not just to economic development but increasingly to trade.
“These constraints can only be addressed if there is access to energy, and the energy gap is closed. More than 600 million Africans have no access to energy, resulting in diminished industrialization.” Dr. Hippolyte Fofack, Afreximbank’s Chief Economist and Director Research and International Cooperation noted while addressing the media at the 27th UN climate summit (COP27) in Sharm el-Sheikh, Egypt.
While Afreximbank is participating at the Conference of the Parties (COP27) for the first time, Dr. Fofack reminded participants that Africa has been at the front line of the climate crisis for decades, posing a major constraint to the continent’s development.
“African governments are spending between 5-11 percent of their GDPs to adapt to climate impacts. With the increasing rate of famine, drought across regions, and rising conflict borne out of the climate crisis as neighboring communities fight for scarce resources, African development is at risk,” he noted.
Dr. Fofack maintained that a just energy transition for Africa means the continent gets its space to develop. “The transition must be just, fair and equitable. Africa needs the energy to close the gap in terms of income and welfare, between the region and the rest of the world for global convergence.”
Dr. Fofack confirmed that Afreximbank’s position is to ensure African resources are used for developing African economies and African growth, unlike in the past, when the bulk of the resources were taken and used to develop the west.
Due to the differentiated economic power and needs of individual nations, Dr. Fofack said that just energy transitions will not be uniform across the continent owing to the different stages of economic development of each country on the continent.
The African Common Position on Energy Access and Just Transition stipulates that Africa will continue to deploy all forms of its abundant energy resources, including renewable and non-renewable energy, to address energy demand. Natural gas, green and low-carbon hydrogen, will play a crucial role in expanding modern energy access in Africa. Both in the short to medium term, while enhancing the uptake of renewables in the long term for low carbon and climate-resilient trajectory on the continent.
Africa is negotiating for space to exploit its natural gas reserves as base loads. The UN Economic Commission for Africa notes that sub-Saharan Africa’s current emissions will rise by 0.6 percent if the region doubles its electricity production capacity using natural gas only. If North Africa, where most reserves are based, doubles its current production, African emissions would rise by only one percent.
“We believe that the just transition will involve some cleaner form of energy, but Afreximbank will continue to support the development of the continent if it means essentially drilling oil and gas in the oil sector, critical not just for development, but also for macroeconomic stability,” Dr. Fofack added.
Dr. Fofack exemplified countries like Nigeria and Angola whose 90 percent of government revenue and up to 70 percent of foreign exchange come from the oil and gas sector, stressing that the industry cannot be banned suddenly. The energy mix of renewables and non-renewables will help boost Africa’s industrial base, helping achieve a just energy transition, but he noted the transition to clean energy must not be at the expense of Africa’s economic development.
Dr. Fofack explained that with the European Union (EU) imposed carbon tax for all imports effective 2025/26, goods manufactured within the African Continental Free Trade Area (AfCFTA) might not be permitted into the European market, leaving Africa the largest market for its own products.
To address the market challenge, Dr. Fofack urged African nations to leverage trade opportunities the AfCFTA presents, as well as to boost refining capacity with a potential to reduce the continent’s carbon footprint by more than 50 percent.
To this end, Afreximbank deploys a hybrid financing mode of both clean projects like hydro in Tanzania and solar projects in Cameroun and Sudan, as well as conventional sources of energy.
African Export-Import Bank (Afreximbank) is a Pan-African multilateral financial institution mandated to finance and promote intra-and extra-African trade. Afreximbank deploys innovative structures to deliver financing solutions that support the transformation of the structure of Africa’s trade, accelerating industrialization and intra-regional trade, thereby boosting economic expansion in Africa. The Bank has a rich history of intervening in support of African countries in times of crisis. Through the Pandemic Trade Impact Mitigation Facility (PATIMFA) launched in April 2020, Afreximbank has disbursed more than US$6.5 billion in 2020 to help member countries manage the adverse impact of financial, economic, and health shocks caused by the COVID-19 pandemic. A stalwart supporter of the African Continental Free Trade Agreement (AfCFTA), Afreximbank has completed the development of a Pan-African Payment and Settlement System (PAPSS) that was adopted by the African Union (AU) as the payment and settlement platform to underpin the implementation of the AfCFTA. Afreximbank is working with the AU and the AfCFTA Secretariat to develop an Adjustment Facility to support countries in effectively participating in the AfCFTA. At the end of 2020, the Bank’s total assets and guarantees stood at US$21.5 billion, and its shareholder funds amounted to US$3.4 billion. Afreximbank disbursed more than US$42 billion between 2016 and 2020. The Bank has ratings assigned by GCR (international scale) (A-), Moody’s (Baa1) and Fitch (BBB-). The Bank is headquartered in Cairo, Egypt.
For more information, visit: www.afreximbank.com.