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Africa should accelerate industrialization while pursuing low carbon transition

23 November, 2022
Africa should accelerate industrialization while pursuing low carbon transition

Niamey, Niger, 23 November 2022 (ECA) - African countries should articulate effective policies, strategies and programmes and take action to promote trade and exports in order to realize the objectives of the African Continental Free Trade Area (AfCFTA),  Economic Commission for Africa, Acting Executive Secretary, Mr. Antonio Pedro, said.

Mr. Pedro told participants at the opening session on "Harnessing the AfCFTA for Africa’s industrialization: Fostering competitiveness and sustainability in the digital era", at the African Union Summit on Industrialization and Economic Diversification, being held in Niger, that intra-regional trade has potential to facilitate increased economies of scale, diversification and value addition.

“The major objective of AfCFTA is to foster competitiveness at the industry and enterprise levels through opportunities for scale production, improved market access and efficiency in resource allocation,” he said. 

Mr. Pedro said digitalisation was a promising vehicle to sustainable industrialisation with the  launch of the Africa Trade Exchange (ATEX) Platform,  a Business-to-Business (B2B) and Business-to-Government (B2G) digital trade platform that facilitates intra-African trade within the context of the AfCFTA.

"The ATEX is a clear demonstration of how regional trade can help channeling critical commodities where it is needed most in Africa, Mr. Pedro said, explaining that the ECA was gathering and analyzing data on the regulatory regime governing digital trade in Africa.

Ms. Treasure Maphanga, Chief Operating Officer, the AeTrade Group and former trade and industrialization director at the African Union Commission, noted that digitisation has a catalytic effect through the growth of services, especially in the logistics, finance and insurance.

"Leveraging the technology and other aspects of the digital economy to create jobs is the way forward...and informal business does not have to be disadvantaged,” said Ms. Maphanga.

African countries should leverage new opportunities from the agreed package of resolutions at the recent COP 27 summit in Egypt. The package includes financial, technological, and capacity-building assistance developing nations need to reduce their emissions of greenhouse gasses and adapt to the inevitable effects of climate change. Contributions of more than $230 million were made to the Adaptation Fund which African countries should consider to access  financing for structural transformation of their economies, Mr. Pedro urged.

A preliminary assessment of the voluntary carbon market led by Dalberg and ECA based on partial satellite data indicated that carbon credits can generate up to $82 billion at $120 per ton of CO2 equivalent using nature-based sequestration. Mr. Pedro noted that despite the  currently low prices for carbon credits in Africa,  the need for accelerated action on climate change and the implementation of Article 6 of the Paris agreement will drive prices up, to the benefit of African countries to monetise their natural capital.

Mr. Stephen Karingi, ECA Director of Regional Integration and Trade Division,  said financing and mobilizing green finance in particular, was a challenge in Africa.

Most countries still need to significantly expand access to basic power services and invest in the wider transformation and development of their economies. Besides, green financing in Africa was comparatively expensive compared to other regions, given the associated currency and inflation risk attached to investing on the continent.

However Africa has an unprecedented opportunity for a green transition through the AfCFTA, said Mr. Karingi, noting that the AfCFTA facilitates green value chains by using standardization as a tool to build bankable projects.

Calling on Africa to mobilize capital from an array of sources to finance its green development, Mr. Hubert Danso, investment leader and chairman of African investor (Ai) Group, the African Green Infrastructure Investment Bank, said the continent was endowed with natural capital that it can tap into.

Mr. Danso noted with concern that Africa has to mobilize $3 trillion for its National Determined Contributions (NDCs) projects by 2030  against the backdrop of the world mobilizing $2.8 trillion in the last 20 years of which only 2 percent of it came to Africa.

"There is so much endowment that we have from  a natural capital perspective which has been quantified by the African Development Bank  in terms of carbon headroom, to be  in the order of $4,6 trillion between now and 2030 in the continent," said. Mr. Danso, arguing that the AfCFTA's key goals will not be achieved without an exponential increase in institutional investment in logistics and trade-related infrastructure assets.

"There is absolutely no question that we need to co-create initiatives and future business models and platforms to make mobilizing  private capital at scale for African trade and investment opportunities, the expectation and not the exception, " Mr. Danso observed.

Mr. Adeolu Adewuyi, from the University of Ibadan, pinpointed that for the realization of the AfCFTA objectives, African countries would need to articulate effective policies, strategies and programmes as well as concrete action plans for trade promotion. They also need to  identify new opportunities for diversification, industrialization and value chains development.

In her closing remarks, Ms. Hanan Morsy, ECA Deputy Executive Secretary and Chief Economist said developed countries should embrace Africa’s industrialisation potential and support its low carbon transition to ensure the continent is able to develop while acting on climate change.

Ms. Morsy, noted that African countries were in a dilemma in advancing economic development and industrializing while responding to required climate change action. A win-win approach was needed.

“It is essential for African countries to find a realistic and pragmatic balance between following their industrialisation and development paths and their climate goals, with support from high-income countries,” Ms. Morsy said, adding that: “Green industrialisation aims to decouple economic growth from negative environmental externalities by maximizing the application of clean energy, sustainable inputs and green-production technologies.”


Issued by:
Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Tel: +251 11 551 5826


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