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The African Development Bank (AfDB) has revealed that the size of Africa’s green growth market stands at $2.97 trillion. During a presentation at the South Korean Institute for Economic Policy, Kevin Chika Urama, AfDB’s Chief Economist and Vice President of Economic Governance and Knowledge Management, emphasized the positive correlation between green growth, real gross domestic product (GDP) growth, climate resilience, and readiness.
Urama highlighted that Africa is set to witness half of the top ten fastest-growing economies between 2023 and 2024. However, he acknowledged the lack of green investments, particularly from the private sector, and emphasized the need for Africa to secure cumulative financing of up to $2.7 trillion ($242.4 billion annually) from 2020 to 2030 to implement its updated nationally determined contributions (NDCs).
The presentation also highlighted Africa’s relatively low contribution to global green bonds and voluntary carbon markets. Out of the estimated $2.2 trillion global green bonds issued between 2006 and 2022, Africa accounted for only about 0.2% ($4.7 billion), the lowest among all world regions. Similarly, Africa’s share of the global voluntary carbon market in 2021 amounted to just 6.2% ($123 million), while the continent accounted for 41% of blended finance between 2019 and 2021.
Urama identified several barriers that Africa faces in leveraging natural capital for climate and green development, including weak regulatory structures, inadequate natural capital accounting, tax avoidance, illicit financial flows, organized crime, and resource theft.
The presentation also outlined green investment opportunities in various sectors across Africa, including agriculture with a projected market size of $1 trillion by 2030, energy with $1.03 trillion in investment opportunities through 2030, ICT with a projected market size of $104.2 billion in 2023, and transportation with increasing demand for electric vehicle batteries.
Urama provided recommendations for African countries, urging them to develop long-term strategies, implement coordinated debt treatment, adopt strategic industrial policies, enhance revenue mobilization, improve public finance management, and invest in project preparation at national and regional levels.
He also called on multilateral and development finance institutions to expand concessional financing and grants for capacity building, provide risk-agnostic capital through guarantee instruments, revisit risk appetite and profitability targets, scale the use of innovative financing mechanisms, and support sustainable development transitions to diversify risk.
Furthermore, Urama encouraged the private sector, credit rating agencies, and the international community to exercise market leadership, review methodologies and rating frameworks, honor commitments to global sustainability, and advocate for collective reform of the global financing architecture.
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