African Development Bank group president Dr Akinwumi Adesina warns that a new EU carbon border tax could significantly constrain Africa’s trade and industrialisation progress by penalising value-added exports including steel, cement, iron, aluminium and fertilizers.
“With Africa’s energy deficit and reliance mainly on fossil fuels, especially diesel, the implication is that Africa will be forced to export raw commodities again into Europe, which will further cause de-industrialisation of Africa,” Adesina says.
“Africa could lose up to $25-billion per annum as a direct result of the EU Carbon Border Tax Adjustment Mechanism. Africa has been short-changed by climate change; now it will be short-changed in global trade,” he adds.
“Because of weak integration into global value chains, Africa’s best trade opportunity lies in intra-regional exchanges, with the new Africa Continental Free Trade Area estimated to increase intra-Africa exports over 80% by 2035.”
Adesina stresses that Africa is already being overlooked in the global energy transition, according to data from the International Renewable Energy Agency.
“Africa received just $60-billion or 2% of the $3-trillion of global investments in renewable energy in the past two decades, a trend that will now impact negatively on its ability to export competitively into Europe,” Adesina says, calling for what he terms the Just Trade-for-Energy Transition (JTET) policies, which would enable Africa’s renewable ambitions without restricting its trade prospects.
Africa will need to use natural gas as a transition fuel to reduce the variability of renewable energy and stabilise its energy systems in support of its industrialisation, Adesina says.
He points out that a report by Moody’s Analytics shows that Africa had the least default rate on investment in infrastructure compared to other parts of the world.
According to the report, Africa’s default rate stands at 5,5%, compared to Latin America’s 12,9%, followed by Asia at 8,8%, Eastern Europe 8,6%, North America 7,6%, and Western Europe 5,9%.
Mega projects that have attracted investor interest through the Africa Investment Forum that was created by the African Development Bank and seven other founding partners include Mozambique’s $24-billion liquefied gas project, the $15,2-billion Abidjan to Lagos Highway corridor covering five countries and the $3,6-billion Tanzania to Burundi and DR Congo railway line.