Abuja, Dec. 7, 2023: The President of the African Development Bank (AfDB), Akinwumi Adesina, says Africa is highly vulnerable to commodity price volatility.
Adesina said this in a statement while speaking on sustainable trade and energy mix at the Sustainable Trade Africa Conference at the UAE Trade Center on Wednesday.
“While the total value of global trade is US$ 25.3 trillion, Africa accounts for just 3 per cent of the ptotal trade.
“However, Africa’s trade is dominated by the export of primary commodities, minerals, metals and oils. In spite of its enormous potential, Africa accounts for just 3 per cent of global manufacturing.
“This makes the continent highly vulnerable to commodity price volatility,” he said.
Adesina said due to the weak integration into global value chains, the best opportunity for Africa was to focus on intra-regional trade.
According to him, the Africa Continental Free Trade Area (AfCFTA) is estimated to increase intra-Africa exports by over 81 per cent by 2035.
“The free trade zone should, however, be turned into an industrial manufacturing zone to generate maximum benefits and improve development.
“It should also improve the emergence of competitive industrial value chains for regional and global markets,” he said.
The AfDB boss said Africa faced new challenges in exports even as Africa took advantage of these opportunities to build industrial platforms that could compete more in global value chains.
He said: “this challenge is especially to Europe, Africa’s largest trading partner, with the EU Carbon Border Tax Adjustment Mechanism.
“This carbon tax will cover all goods from third countries not under EU’s Emissions Trading System (ETS).
“This will significantly constrain the exports of value-added products such as cement, iron, steel, aluminium, and fertilisers.
“With Africa’s energy deficit and reliance on fossil fuels, especially diesel, by companies, Africa will be forced to export raw commodities again into Europe, which will further cause de-industrialisation of Africa,” he said.
According to Adesina, Africa can lose up to US$25 billion annually due to the EU Carbon Border Tax Adjustment Mechanism.
He said that while Africa would optimise its vast renewable energy sources, it would need to use natural gas as a transition fuel.
“This is to reduce the variability of renewable energy and stabilise its energy systems to support industrialisation.
“Therefore, Africa, which accounts for just 3 per cent of historical cumulative emissions, should have access to the 400 gigatons of allowable emissions to stay within 1.5 degrees Celsius.
“Africa should also be allowed to industrialise without this newly imposed penalty. Africa has been short-changed by climate change, and now it will be short-changed in global trade.
“I believe that in addition to focusing on Just Energy Transition, we should now focus on what I call Just Trade-for-Energy Transition (JTET),” Adesina said.
The AfDB boss said to spur Africa’s drive towards energy transition, which would support greener industries and trade, the bank and partners are financing the 20 billion-dollar Desert-to-Power programme.
He said the initiative would produce 10,000 megawatts of solar power for 11 countries in the Sahel zone and provide electricity for 250 million people.
“The AfDB, Africa50, and the Africa Union have also inaugurated the Alliance for Green Infrastructure in Africa (AGIA) to mobilise US$500 million for project preparation and development.
“We have also mobilised US$10 billion for private sector investment in green infrastructure.
“Let’s support Africa’s industrialisation, AfCFTA, Integration into global value chains and a pragmatic, fair and just renewable energy transition.
“Let’s support JTET; it is time for an informed dialogue on energy and sustainable trade.
And Africa’s peculiarity should define that dialogue,” Adesina said.