President of the African Development Bank (AfDB), Dr. Akinwumi Adesina, has disclosed that Africa accounts for just three percent of the total $25.3 trillion global trade with most of the economies highly vulnerable to commodity price volatility.
Adesina, who made remark while speaking on sustainable trade and energy mix at the Sustainable Trade Africa Conference at the UAE Trade Center on Wednesday, rued the current situation in which most of the countries in the continent were exporting primary commodities, metals and unrefined crude oil for development.
The banker said: “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.”
Noting that due to the weak integration of most of the economies in Africa into global value chains, the best opportunity for Africa is 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 development finance banker canvassed the need for the free trade zone to be turned into an industrial manufacturing zone to generate maximum benefits and improve development as well as improve the emergence of competitive industrial value chains for regional and global markets.
Adesina pointed out that Africa now 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, adding this challenge is especially to Europe, Africa’s largest trading partner, with the EU Carbon Border Tax Adjustment Mechanism.
He expatiated: “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”, the AfDB boss added.
According to him, Africa can lose up to US$25 billion annually due to the EU Carbon Border Tax Adjustment Mechanism, stressing that while Africa would optimise its vast renewable energy sources, it would need to use natural gas as a transition fuel to reduce the variability of renewable energy and stabilise its energy systems to support industrialisation.
The banker said: “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 added.
He said that to fast-track Africa’s drive towards energy transition, which would support greener industries and trade, the bank and partners were financing the $20 billion Desert-to-Power programme with a view to generating 10,000 megawatts of solar power for 11 countries in the Sahel zone and provide electricity for 250 million people.
Adesina further clarified: “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”, the banker added.
