Advancing Africa’s Positioning within Global Development and Geopolitical Dynamics
I wish to thank the Vice Chancellor Professor Olufemi Peters and the University Senate for the great honor of receiving an honorary doctorate from the National Open University of Nigeria (NOUN). I am delighted to be here today with my dear wife, Grace.
I have great admiration for NOUN for three reasons. First, NOUN is the largest open university in Africa! Just think of its scale. It offers over 2,000 courses and has over 600,000 students enrolled. Second, NOUN is the second largest open learning university in the world!
That means NOUN gets a gold medal in Africa, and a silver medal in the world for its excellent work on open learning. There is no other institution in Nigeria’s history that has ever achieved such an incredible standing. You make Nigeria exceptionally proud. And you make Africa proud too. Congratulations! With your incredible achievements, NOUN should receive at least three times its current budget from the Federal Government of Nigeria, to continue to expand access to education for all.
Third, NOUN produced your most famous alumni, President Olusegun Obasanjo, former President of the Federal Republic of Nigeria. That is also another claim to fame at home! Of course, I am also proud of NOUN, for family reasons. Well, my wife’s younger sister, is a Professor at NOUN – Professor Yetunde Ofulue. So, you can understand when I say “I love NOUN for life!”
I have delivered convocation lectures all over the world, but this is the first time that I will be addressing a student population of 600,000! That is the equivalent of speaking to 10 packed FIFA world cup stadiums – each with a capacity of 60,000 required to host quarter finals or semifinals. Well, thanks to your digital online platforms, that is possible!
Nothing is more important than education. My late father, Roland F. Adesina sacrificed all to send my siblings and I to school. He used to tell us that education is the greatest leveler in society. Access to good education, he affirmed, will allow the children of the poor to reach and exceed the pinnacles reserved for the children of the rich and the privileged in society. Well, here I am today, the product of his great sacrifice and investment.
I therefore dedicate the honorary doctorate that will be conferred on me tomorrow to my late beloved father, mentor and benefactor, Roland Folorunso Adesina. Without him I would not be here today. That is why the work you do here is so important: expanding access to education for everyone, and the opportunity for lifelong learning; enabling hundreds of thousands to retool, reskill and position themselves for today’s rapidly changing world with technological innovations moving at the speed of thought.
The title of my lecture today is on that rapidly changing world: “Advancing Africa’s Positioning within Global Development and Geopolitical Dynamics”.
From the on-going wars in Ukraine and Russia, to conflicts in the Middle East, geopolitical risks are rising with implications for global peace and stability. New trends of nationalism are challenging multilateralism as we have always known it. Tariff wars between some of the largest economies in the world, the U.S. Canada, China, India and Mexico risk pulling the global economy downwards, with some predicting another possible global recession. The global financial system has been unable to effectively address the challenges facing Africa, especially on matters of debt, climate change and access to greater financing. Restrictive immigration policies pose new challenges for labor mobility and employment, a particular challenge for Africa’s rapidly growing youth population. The recent dismantling of the official development aid agency in the US, and similar anti-aid measures in other parts of Europe, means that the old development models that Africa has always relied on will no longer work. How should Africa navigate these ominous trends?
In this lecture, I will discuss the rapidly changing global landscape for development aid and its implications for Africa; the challenges Africa faced during the Covid-19 pandemic and lessons for development approaches; the inadequacy of the global financial architecture to support Africa to cope with external shocks and how this should be addressed; the challenges of global migration restrictions and how this should influence African countries’ policies and programs to create jobs for the youths and reverse the brain drain; the global rush for Africa’s critical minerals and how the continent should address this so it is not marginalized; the rising insecurity in Africa and the need for Africa-driven solutions to rebuild areas devastated by conflicts; the high and rising cost of accessing capital by Africa in the global financial markets and how to address risks that elevate its borrowing costs and debt service costs; the global dynamics in tackling climate change and its effects on Africa; the need to better value Africa’s vast natural capital to boost its wealth; and the recent tariff wars and implications for Africa.
First, let me start with the issue of aid and its implications for Africa.
Of great concern for many African countries is the rapid decline in development aid. There is no doubt that development aid plays a significant role for many economies in Africa, especially providing much needed support for vulnerable populations as they deal with shocks. However, despite its benefits, aid is not the way to develop. Indeed, no nation has ever developed based on aid. Let’s cast our minds back to the challenge of the Covid-19. I was particularly shocked at the time in 2020 that Africa did not have vaccines, nor basic medical supplies such as gloves, sanitizers, and lifesaving oxygen. While aid was provided by some countries, it came in trickles, way too little, and too late, for millions of people. A stark divergence soon emerged. While developed economies spent $19 trillion in fiscal stimulus programs, approximately 19% of the world’s GDP, Africa spent only $89 billion. While Africa was frantically looking for its population to have access to just one dose of the vaccines, populations in developed countries were having second, third, fourth booster doses and more. I remember saying at the time that: “Africa must not outsource the health security of its 1.4 billion people to the generosity and benevolence of others”. “What if they are not generous”?
But Africa survived Covid-19. We rose to the challenge and found solutions, as doctors and medical staff, from rural to urban areas, put their lives at risk to save others, including the remarkable Dr. Adadevoh right here in Nigeria, during the Ebola virus pandemic. May her sweet soul rest in peace. We were so down, the only way to go was up. Within three weeks of the breakout of Covid-19, as fiscal pressures mounted on African countries, the African Development Bank moved swiftly and launched a $3 billion Covid-19 social bond on the global capital market, the largest ever in world history at the time. The African Development Bank also launched a $10 billion Covid-19 emergency facility to support African countries. To make sure that Africa is never left vulnerable again, and can assure its health security, the African Development Bank launched a $3 billion program to build Africa’s health infrastructure, from primary, secondary to tertiary health infrastructure. To ensure that Africa can produce its own medicines and move away from the current situation where it imports over 80% of its medicines and produces only 1% of its own vaccines, the African Development Bank launched a $3 billion Africa pharmaceutical action plan to build the manufacturing capacity of local African pharmaceutical companies. Our goal is simple: achieve sovereignty for Africa in producing its own medicines and vaccines.
We launched the Africa Pharmaceutical Technology Foundation to help Africa navigate the complex world of intellectual property rights that makes it almost impossible for African pharmaceutical companies to access technologies, active pharmaceutical ingredients and processes for manufacturing vaccines. Today, Africa has emerged with better capacity to manufacture more of its own vaccines, from Egypt to South Africa, Kenya, Senegal, Rwanda, Algeria and Tunisia. Africa navigated the complexity of the global development and geo-political dynamics, survived and thrived. In the process we learnt profound lessons. Africa must wean itself from aid-dependency syndromes. Africa must become 100% self-sufficient in the manufacturing of medicines and vaccines. In a world where it is becoming increasingly difficult to know allies, or where long-term allies suddenly shift their priorities, there is no substitute for self-reliance. Africa must treat health security like national defense. We must ramp up public and private sector financing for research and development. Our universities must be supported to have world-class medical science facilities that will allow our countries to drive cutting edge innovations in medicine and pharmaceutical sciences. We must then connect them to fuel the growth of the medical and pharmaceutical industries. That is the only way we will secure Africa against any future health shocks. That way, Africa will develop with pride.
Second, let me address the issue of how the global contingent financing framework shortchanges Africa.
African countries face limited access to global contingent financing to respond to shocks. To respond to the multiple challenges of the Covid-19 pandemic, the IMF issued $650 billion of Special Drawing Rights or SDRs. The SDRs are simply reserve assets held by countries to address balance of payment deficits when there are fiscal challenges. However, of the $650 Billion of SDRs issued, Africa received only $33 Billion or 4.5%. Yet, African countries have the greatest need and the least resources to meet the costs imposed on the economies that arose by the health pandemic driven economy lockdowns.
The African Development Bank led the global effort and called for a re-channeling of the SDRs from developed countries that have them, but do not need them, towards African countries. Specifically, the African Union called for the rechanneling of the SDRs to Africa through the African Development Bank. This is because of the AAA-global credit rating of the African Development Bank and its leveraging power. To make this possible within the legally acceptable rules for the International Monetary Fund, the African Development Bank and the Inter-American Development Bank developed a framework that would allow the rechanneling while ensuring that the SDRs maintained their status as reserve assets and that countries that do rechanneling can get their SDRs back when they need them. In a major decision, the IMF Board approved this landmark framework for rechanneling the SDRs to multilateral development banks, as per the framework that was developed by the African Development Bank and the Inter-American Development Bank. What is particularly attractive in this framework is how the new financial resources will be leveraged. For example, through the framework, every dollar of SDR rechanneled will be leveraged by between 4-8 times by multilateral development banks such as the African Development Bank. That means a $50 billion rechanneling will deliver between $150-200 billion of new financing for development at zero cost to taxpayers. In today’s global context with declining aid, the rechanneling of the SDRs is the most impactful way to support development for African countries at zero cost to taxpayers in the SDR donor countries.
To further expand the financing resources for African countries, the African Development Fund (the concessional financing window of the African Development Bank) has also innovated and will be raising an additional $27 billion of long-term financing from the global capital markets. This will significantly expand financial resources available to the 37 low-income African countries. As the African Development Fund is currently within the process of its 17th replenishment, the strong support of the donor countries will allow the Fund to have more resources to support the growth of economies and reduce poverty in the low-income and least developed economies of Africa.
Third, let me address the issue of global migration restrictions and implications for African countries.
A hot button issue for political leaders around the world, especially in the U.K., across Europe and the US is immigration, especially illegal immigration. Historically, migration allows the mobility of people, skills and talents, that have spurred the economies of several developed countries. But as economies slow down, and public finances become challenged, it is common to have anti-immigrant sentiment. One only needs to see the rising waves of illegal migrants from African countries on the Mediterranean to imagine how those images influence public debate in the receiving nations. That’s because illegal immigration poses huge fiscal burden and puts pressure on public financing and infrastructure, including schools and hospitals, jobs and social protection systems.
The rising anti-immigration wave has implications for Africa. By 2050, one in four people in the world will be African. As the New York Times put it “the world is becoming more African”. That’s because the population of the continent will rise from 1.4 billion people today to 2.4 billion by 2050, with over 75% of its population aged less than 35 years. Africa will also account for the world’s largest growing youth population, with a working age population expected to reach 450 million or close to 70% by 2025. With appropriate skills they will form the labor force for global industries even as several developed economies face a rapidly ageing population.
But let’s be clear, just because the world is becoming more African does not mean the rest of the world must bear the burden of the explosive population growth from Africa. Africa’s demographic growth must not become a global negative externality. Africa cannot blame others for not taking in its rising migrant population. It must create the right environment for its own youth to thrive, right here on the continent. This must start with providing Africa’s youth with globally competitive quality education. Despite gains made over time, majority of Africa’s youth still fall behind on education. For the sake of comparison let’s look at Japan and Africa. While 98.9% of the youth in Japan have completed secondary education, only 43% of the youth in Africa complete secondary school education. In terms of higher education, the gap is stark. While 60% of the youth in Japan are pursuing higher education, only 10% of Africa’s youth enroll in higher education. Among those pursuing higher education, African youth are less enrolled in the educational fields that are dominating the world. For example, while 30% of Japanese youth in universities pursue science, technology, engineering and mathematics, less than 25% of students in Sub-Saharan Africa are in these fields. This puts Africa behind in terms of its preparedness for the 4th industrial revolution, especially in fields such as artificial intelligence, robotics, automation and cloud computing, which are revolutionizing the world. To change this, the African Development Bank is working with the African Union to establish a $300 million African Education, Science and technology Innovation Fund. The Bank has also supported several Universities of science and technology to address this gap.
A challenge facing many youths, a lot more in Africa, is the mismatch between the education they receive and the skills they need for the labor market. We must prepare our young population for the rapidly changing world of the digital economy through upskilling in digital skills. That is why the African Development Bank’s program on Skills for Employability (SEPA) action plan for 2022-2025 is being implemented, to bridge the skills gap and address skills mismatches, quality and relevance. As of March 2024, the African Development Bank approved close to $682 million for projects to upgrade skills of the youth. The Bank plans to provide additional financing of $809 million in 2024/2025 in support of projects for skills and employability of the youth in Africa.
Across Africa, the upgrading of digital skills and education is being fast-tracked by the youth themselves with access to smart phones. This includes on-line micro-credentials in different fields with platforms such as Coursera. For example, Coursera estimates that over 2/3 of the learners from Africa access their education for skills upgrade using smartphones and tablets, which it says is the highest level in the world.
The African Development Bank is also supporting a Coding for Employment Program, which will establish 130 centers of excellence across Africa. Together with Microsoft Philanthropies, we have so far provided digital skills for over one million youths across the continent.
A big challenge facing the youth in Africa is the lack of employment opportunities. While 15 million youth enter the labor market each year, there are only 3 million jobs available, leaving an annual unemployment gap of 12 million. With increasingly limited employment opportunities in the public sector, the focus needs to shift from the youth becoming job seekers to job creators.
The key to solving unemployment is entrepreneurship. Africa is today experiencing an entrepreneurship boom, with 22% of its working age population starting a business, the highest rate in the world according to the Global Entrepreneurship Monitor, 2020. The leading areas of focus for entrepreneurship are in the sectors of agriculture, retail, services and technology. The future is very bright for innovative young entrepreneurs in Africa. This is driven by the rapid expansion of the digital economy which will add $180 billion to Africa’s GDP by 2025, and $712 billion by 2050. Africa’s startup ecosystem is taking advantage of the digital economy with more than 600 active startup hubs on the continent. Nigeria, Kenya, South Africa, and Egypt have become centers of tech innovations, driven by youth entrepreneurs in health tech, Agri-tech and e-commerce. This rapid growth is being spurred by venture capital funds. For example, according to Disrupt Africa, African tech-startups raised over $5 billion in 2022. This was double the financing raised in 2020. The African fintech industry has become especially attractive to investors. With over 57% of Africa’s population still unbanked, fintech startups are rapidly innovating to provide financial services to the underserved segment and the rapidly growing population. The fintech market in Africa was valued at $13 billion in 2023. Its size is projected to reach $20-23 billion by 2028, $150 billion by 2040, and $200 billion by 2050. This exponential growth is also being driven by faster internet penetration and an equally rapid spread of mobile phones, especially smartphones which are expected to have 67% penetration reach by 2025. The increased connectivity provides a fertile ground for tech startups in areas such as e-commerce, fintech, and digital services. To further boost 11the businesses of young Africans in Africa, the African Development Bank is supporting several initiatives. We are establishing Youth Entrepreneurship Investment Banks, which are new financial institutions fully dedicated to providing technical assistance, business development services, equity, quasi-equity and debt financing for businesses of young people across Africa. The African Development Bank has approved $100 million to establish the Nigerian Youth Entrepreneurship Investment Bank.
In addition, the African Development Bank and its partners approved $614 million for Investment in Digital and Creative Enterprises (I-DICE) program to support access to financing for small and medium sized businesses in the creative and digital industries. It is a strong strategic partnership which includes the African Development Bank, the Agence Française de Développement, the Islamic Development Bank; and the Bank of Industry. The program plans to add $6.4 billion to the Nigerian economy and create over 6 million jobs.
The African Development Bank is also focusing on the businesses of women, through its AFAWA program (Affirmative Finance Action for Women in Africa), which has already approved $2.5 billion for over 24,000 businesses of women, working with over 170 financial institutions across 40 African countries.
Fourth, let me address the challenge of global energy transition and how Africa should better position itself globally.
As the world accelerates its efforts towards energy transition with strategic minerals, Africa will play a critical role. That’s because, Africa is a major source of these minerals, including cobalt, bauxite, graphite, manganese, and vanadium. The Democratic Republic of Congo alone accounts for 70% of the world’s cobalt production and over 51% of reserves. Africa must also carefully negotiate its engagement in the global geopolitical rush for critical minerals and rare earth elements. Africa can be competitive in these global value chains. It must move away from exporting raw minerals and move into processing and value addition to benefit from the high returns at the top of global value chains. Africa should learn from the successful experiences of Chile, China and Indonesia in their integration into global value chains of critical minerals. For example, in the case of Indonesia it banned the exports of raw nickel and mandated domestic processing, which has propelled it into a significant player with downstream industries, including stainless steel and battery materials. China, which today controls over 80% of the global refining capacity of minerals used a combination of policy coordination, infrastructure investment and export controls to develop its global positioning in the processing of critical minerals. Today, China accounts for 75% of the global production of polysilicon and 85% of the manufacturing of wafers for making solar panels. Nigeria for example can become an important player in the production of solar panels, as its cost of production is estimated to be low, compared to China, since several of the minerals needed are found in abundant in the country. This is an important opportunity for the Nigerian government to have a clear critical minerals industrial manufacturing policy.
To benefit from global value chains in critical minerals, Africa must fix five things. First, it needs to invest heavily in energy, as this is key for transformation. That is why Ajay Banga (President of the World Bank) and I, launched a joint effort by the World Bank and the African Development Bank, called the Mission 300, to connect an additional 300 million Africans to electricity by 2030. At the Africa Energy Summit, which was held in Tanzania in January 2025, the World Bank, African Development Bank and other development partners mobilized over $50 billion towards this goal. Second, Africa should promote critical minerals development, including with infrastructure, policies and regulations. Third, Africa must support minerals-based industrialization, especially to establish segments of clean energy industries in Africa. Fourth, Africa must put in place a sound regulatory environment that supports investment, innovation, and sustainable and responsible mining practices. Fifth, countries must embrace strong corporate governance, transparency, environmental protection, and soundminerals stewardship, including
social responsibility and protection of the lands and rights of communities.
The African Development Bank is developing, together with the African Union and the Economic Commission for Africa, the African Green Minerals Strategy, which takes these areas into account. Fifth, let me address the issue of global dynamics on the rising cost of capital for African economies to develop and how this should be addressed.
Africa is an investors’ dream destination, simply because all its challenges are investment opportunities: from roads, railways, digital infrastructure, water and sanitation, energy and health infrastructure. Simply put, Africa is the world’s largest open investment greenfield. However, investors often cite high risks to investments from project, market, exchange rate, and political risks.
However, this has been overgeneralized. While there are investment risks in Africa, they are not higher than in other parts of the world. To be clear, perceived risks are higher than real risks to investments.
Don’t believe me. Believe the data. A 14-year assessment conducted by Moody’s’ Analytics of cumulative losses to investments in infrastructure globally shows that Africa has the lowest default risks, at just 1.9%. The default risks in the other parts of the world are way higher, at 10.1% in Latin America with North Amera at 6.6%, 12,4% in Eastern Europe, 4.6% in Asia and Western Europe at also 4.6%. So, Africa is not as risky as it is perceived. However, the negative perceived risk it faces translates into a higher cost of capital for the continent than in other parts of the world. Investors in Africa face 3-5 times cost of capital than in other parts of the world. This ‘Africa risk premium’ makes it harder for investors to finance projects on the continent. This bias against Africa also weighs heavily on the debt financing costs for African countries. According to the United Nations Development Program (UNDP), if Africa’s risks are properly assessed, it will save the continent at least $75 billion annually in debt financing costs. This is why I am passionate about and pushing for the establishment of an African credit rating agency. I am pleased that the establishment of the African Credit Risk Agency has been approved by the heads of state of the African Union. This will not be a political institution but rather world-class and privately run with fact-based assessment of the real credit risks, based on better understanding of the operating environment and contexts, so that Africa’s risks are properly weighted and priced.
Africa is also the only region of the world without financial safety nets for its countries, to avoid illiquidity problems and regional contagion effects from financial shocks. There does not exist any facility to help African countries refinance their debts on the global capital markets. That is why the African Development Bank, based on request from the African Union, developed the Africa Financing Stability Mechanism. I am delighted that the Mechanism was approved by the heads of state and government at the African Union Summit in February 2025. When implemented, it will support African countries to refinance at least $10 billion annually in debt service payments over the next ten years.
Sixth, let me address the rising challenges of insecurity and how Africa should develop its own ‘Marshall plan” to rebuild its areas devasted by conflicts.
Africa has several challenges with insecurity. While the African Union has espoused the ‘Silencing the Guns’ and the number of inter-state wars has reduced, insecurity nonetheless persists including the on-going civil conflict in Sudan and the conflict in Eastern Congo. The Sahel has not been spared from terrorism which has made several areas in Niger, Mali and Burkina Faso ungoverned as governments battle with terrorists and insurgents. Here at home in Nigeria, vast areas of northern Nigeria have been devastated by terrorists, while in other parts kidnappings are upending the real economies of several States. The causal factors behind the rising insecurity are essentially what I call the “Disaster Triangle” --- high poverty, structurally high unemployment, especially in rural areas, and climate and environmental degradation. Wherever these are found, from northern Nigeria to the Sahel, or the Horn of Africa, we have a rising spate of insecurity and conflicts. Nigeria has not been spared, from terrorism, insurgencies and kidnappings. Aside from the sad loss of many lives, rising insecurities also damage physical and social infrastructure, including schools, health centers, water and sanitation. Some countries now spend several times more of their national budgets on security than they do on education and health, as rising security expenses are displacing development financing. While Europe had a Marshall Plan for rebuilding after World War II, Africa does not have the luxury of such a plan to rebuild vast areas that have been destroyed by conflicts. Rather than rely on others, Africa needs its own solutions to fix these challenges. That is why the African Development Bank has worked with the Africa Union to develop Security-Indexed Investment Bonds. These will be used to raise long-term financing at low interest rates on the global capital markets. The proceeds of the bonds will be used to support the rebuilding of damaged social and physical infrastructure across areas of Africa that have been damaged by conflicts. Seventh, let me address global climate financing and how this underfinances Africa and how we must address this.
Climate change is having devastating effects on African countries. 9 of the 10 most vulnerable countries to climate change in the world are in Africa. The continent loses between $7-15 billion a year due to climate change, and if the current trend continues that will rise to $50 billion by 2050. However, the continent, which accounts for just 3% of historical cumulative carbon emissions suffers disproportionately from the effects of climate change; from extreme droughts to floods and cyclones. The global climate finance architecture is failing in tackling the climate change challenges facing the continent. Africa receives only 3% of global climate finance. That is why the African Development Bank is mobilizing climate finance at scale for Africa. We are implementing the African Adaptation Acceleration Program, a $25 billion program to support countries to adapt to climate change, in collaboration with the Global Centre on Adaptation. It is today the largest climate adaptation program in the world. The African Development Bank is also deploying different instruments to insure countries against climate shocks. This includes the Africa Disaster Risk Insurance Facility, which pays insurance premiums for countries against extreme weather patterns and supports disaster preparedness. 17The facility has deployed over $100 million to co-pay insurance premiums for several countries. The African Development Bank is currently scaling this up to $1 billion with its Africa Climate Risk Insurance Facility for Adaptation to support national insurance companies to better underwrite risks and reinsure them on the global re-insurance markets. With new geopolitical developments with some questioning climate change, let me say that for Africa, climate change is not and will never be an ideological issue. Climate change is real in Africa, every day. Africa does not have the luxury of being distracted from its current trajectory of work to climate proof its economies. It must secure its populations against climate change, enhance its climate preparedness and build more resilient infrastructure. That is why the African Development Bank also launched the Alliance for Green Infrastructure in Africa to mobilize $10 billion in support of greening of Africa’s infrastructure, including transport systems, energy systems with green hydrogen and compressed natural gas, as well as climate resilient water and sanitation systems. Eighth, let me address how to position Africa effectively in the global environment in terms of properly valuing its natural capital in the estimation of its wealth.
Africa has abundant resources which the world needs, including rare earth, minerals and metals, oil, gas, seas and oceans and marine resources. It also includes forests, carbon sinks such as the Congo River Basin which is the second largest carbon lung in the world after the Amazon forest. It stretches 314 million hectares with 1.2 million kilometers of primary forest. The peatlands of the Congo Basin store about 29 billion tons of carbon. That is equivalent to 3 years’ worth of global greenhouse gas emissions. However, while Africa contributes significantly to the global public good of tackling climate change with its vast resources, this natural capital has been undervalued. As a result, Africa is ‘nature rich but cash poor’. For example, while the GDP of Africa was estimated at $2.5 trillion in 2018, this was 2.5 times lower than the estimated value of its natural capital estimated at $6.2 trillion. This partly includes some valuation of the ecosystem services. The African Development Bank’s preliminary estimates, based on very conservative assumptions, indicate that Africa’s nominal GDP in 2022 could have increased by $66.1 billion when adjusted for carbon sequestration only. The proper valuation of Africa’s green GDP is where the trillions of dollars will come from to boost the wealth and financing of the continent. However, a global trend of rich countries moving to Africa to buy vast tracts of land for carbon credits is alarming. Unknown to many, Africa is witnessing the largest ‘carbon grab’ in history as several countries give away their lands and rich carbon sinks in exchange for financing. This is driven by a rush of some rich countries to buy carbon cheap, at a great loss to Africa. While a ton of carbon footprint costs over $200 in Europe, it costs just $3-5 per ton in many parts of Africa. This rush for a ‘carbon grab’ in Africa, which subordinates Africa’s carbon assets, has several consequences for Africa’s growth opportunities. First, African countries are being underpaid for their carbon, due to the undervaluation of Africa’s carbon sinks. Second, the sequestered carbon on the lands can no longer be used as part of the nation’s nationally determined contributions. Third, African countries lose sovereignty over their lands. Fourth, the carbon sequestered over these lands and forests cannot be used to rebase and revalue the green GDP of the countries. Fifth, the ongoing carbon grab in Africa is a lose-lose proposition for African countries. African countries must not sell themselves cheap.
It is therefore critical that Africa does not under-value its vast natural resource assets but use them instead to properly re-value their economies and create more wealth for themselves. That is why the African Development Bank is leading the development of a new framework to re-estimate the GDP of Africa based on proper valuation of its vast natural capital. This will lower Africa’s debt to re-estimated GDP and expand its ability to borrow more resources to finance its development. The proper valuation of Africa’s green wealth will also improve countries’ risk profiles and credit ratings.
At the global COP 29 Summit in Baku, Azerbaijan, the African Development Bank worked with African Heads of State and global leaders to advance this agenda globally. I am pleased the African Union heads of State and government have approved that Africa’s green environmental capital should now be included as part of the “green” GDP for Africa. This will massively tilt financial resources to the continent, spur greater green investments and provide better policies for the greening of African economies for sustainable development. That way, Africa will be green rich and cash rich.
Ninth, let me address the issue of the recent US global tariffs, and its implications for Africa, as well as how to navigate this complexity.
As we meet today, the world is reeling from the effects of US tariffs. The increase in tariffs by the US is understandable from a domestic policy perspective, as it drives to correct long-term trade imbalances, with the US, experiencing the largest trade deficit in the world; a deficit estimated at over $1 trillion. The focus is also to reverse the loss of local manufacturing industries to other parts of the world, create jobs, and raise government revenue. However, the US tariffs have sparked global uncertainty and market volatility. Already, there are tariff retaliations from leading world economies such as China, Canada and the European Union. The global financial markets have been rattled as stock market prices fell across the world, from London to Tokyo, New York, Beijing and others.
I am especially concerned about what this means for African countries, as 47 out of 54 African countries have been placed under higher US tariffs. The immediate direct effects of the tariffs on African countries will be significant reduction in exports and foreign exchange availability. This will send other shock waves through African economies. Local currencies will weaken on the back of reduced foreign exchange earnings. Inflation will increase as costs of imported goods rise, and currencies devalue against the US dollar. The cost of servicing debt as a share of government revenue will rise, as expected revenues decline. US TARIFFS FOR AFRICAN COUNTRIES
(Percentage/Country)
These global tariffs will also have significant indirect effects on Africa, as its export markets in developed countries such as China, those in Europe and Asia will buy less goods from Africa, which will affect Africa’s export revenues. Official Development Assistance (ODA) to African countries will decline further as budgets tighten in developed economies. The African Growth and Opportunity Act (AGOA) which provides duty-free access for 35 African countries to US markets is now effectively over. While AGOA legally expires this year, chances of renewal and extension are now extremely low. This will seriously impact countries such as Lesotho and Madagascar, whose duty free exports to the US of clothing, diamond; and vanilla, respectively, form a large part of their export earnings. There is a need and scope to simultaneously pursue greater flexibilities for expanded and mutually beneficial trade between the US and African countries. Africa’s trade with the US estimated at $34 billion is miniscule compared to the over $3.2 trillion of trade between the US and the rest of the world. Africa represents only 1.2% of total US imports. On the trade surplus side (the balance between exports and imports of countries), Africa does not run any significant trade surplus with the US compared to the rest of the world. For example, Africa’s trade surplus with the US was $7.2 billion in 2022. That means that Africa represents only 0.76% of total trade surplus that the rest of the world has with the US. Africa therefore should not get into a tariff war with the US. What is needed is more trade with Africa from the US. The current dynamics call for a recalibration of the trade and investment opportunities between the US and Africa. We should expand trade opportunities for the US in and with Africa. The US should take advantage of the enormous opportunities for investing in Africa, including in infrastructure, energy, rails, ports, transport corridors, agriculture and processing and adding value to critical minerals and rare earth elements. I am encouraged that there is openness to dialogue on the tariffs. Africa should be prioritized in these global discussions and negotiations, given the vast investment opportunities it offers today and well into the future; including its critical importance in the shifting geopolitically driven economic and investment landscape.
Africa should also tariff-proof itself from future shocks. The continent can do this in several ways. It should move to a growth model that focuses on growing its economies through a rise in domestic consumption. This will create markets domestically and reduce vulnerabilities to tariffs. The continent should also accelerate the implementation of the African Continental Free Trade Area. By trading more between themselves, with a common external tariff, the African countries can boost trade and investments on the continent and expand the share of intra-Africa trade. In addition, Africa should diversify its export markets through more favorable trade agreements.
Africa should rapidly move up the global value chains in knowledge
intensive manufacturing including electronics, machineries and microchips. I would be more worried about the effect of tariffs when Africa is exporting microchips and semi-conductors than when it is exporting potato or cassava chips. Finally, let me draw some general lessons for Africa in the wake of the new global dynamics. First, Africa must overhaul its approach toward achieving fast paced growth and development. The era of aid or free money is gone. African countries must now learn to develop via investment discipline. Countries can no longer rely on aid for growth or count it as part of government revenue, as has been the case for decades. Benevolence is not an asset class. Second, more aggressive measures are needed for countries to expand domestic resource mobilization. This needs to go beyond simply increasing taxes. Countries must have stricter and more transparent management and accountability over the vast natural resources on the continent. This must include fair pricing of assets, the payment of the right values for royalties and taxes by international corporations, as well as reducing leakages via inefficiencies, corruption and illicit capital flows. Third, the mindset must shift from aid reliance to developing through trade and investments. This requires improving overall macroeconomic environments, the business and investment regulatory environments, reducing the cost of doing business, assuring predictability of the business environments, protection of property rights, and the assurance of the rule of law.
Fourth, countries will need to build their capacities to structure investments into their critical assets to unlock value. Fifth, Africa needs to spur its growth by rapidly ensuring the full development of the African Continental Free Trade Area: produce local, buy local, trade more locally. There must be greater value addition to all what Africa produces, from oil to gas, minerals, metals, rare earth and agriculture products. Africa must end the exports of its raw materials. The export of raw materials is the door to poverty. The export of value-added products is the highway to wealth. And Africa is tired of being poor.
As I close, I wish to state that solid foundations have been laid for Africa to be resilient to tackle these challenges and others that will emerge in the future, and to expand opportunities for Africa. For the first time ever, an African country, South Africa, is hosting the G20 Summit. And the African Union has been admitted to the G20. The African Development Bank has continued to advance Africa’s agenda globally, from G7 to G20, United Nations and the Global Convention of Parties on Climate Change. Over my ten years as President of the African Development Bank Group, we have significantly strengthened, transformed and positioned the Bank to play this leadership role for Africa; and to do so on the global stage.
Under my leadership as President of the African Development Bank, we increased the general capital of the Bank from $93 billion in 2015 to $318 billion today. Three years ago, the African Development Bank was ranked as the Best Multilateral Financial Institution in the world. In the past two consecutive years, the African Development Bank was rated as the Most Transparent Financial Institution in the world. And in the global index of aid transparency by Publish What You Fund, the African Development Bank scored 98.8%, the highest ever in the history of the global transparency index. Furthermore, the African Development Fund (the concessionary financing institution of the African Development Bank) was ranked as second best in the world and higher than all 55 bilateral financing organizations in all developed countries of the Organization for Economic Cooperation and Development, OECD. As I complete my two five-year terms as President of the African Development Bank later this year, I am proud of the legacy I am leaving behind for Africa. We have built a world-class financial institution that will continue to advance Africa’s positioning within the rapidly changing global development and geopolitical dynamics.
These dynamics pose new challenges and threats to Africa’s growth trajectory and development. Yet, amid the challenges lie new opportunities if we can see it and harness them. Afterall, it is the irritation of sand in the shell of the oyster that makes it to secrete fluids that create pearls.
I am optimistic that with vision and right policy choices, continued strong voice to ensure that Africa is not marginalized in the global dynamics, strong political will to develop with pride by shifting of mindsets away from aid dependence to investments, and developing local and regional solutions and approaches to build economic resilience, Africa will thrive.
Africa must chart its future, relying not on the benevolence of others, but on its own determination for self-reliance; building reliable alliances, leveraging opportunities in the global dynamics, while putting Africa first.
Only then will Africa be great again!
Let’s make that happen!
Thank you all very much.
