Accelerating Africa’s green economy transition

Africa's green economy transition is gaining momentum as the continent acknowledges its role in combating climate change. In a recent interview with CNBC Africa, Frank Adjagba, Group Director of Business Development for African Guarantee Fund, emphasized the importance of Africa's participation in the global green transition. Adjagba highlighted Africa's abundance of natural resources such as forests, wind, and solar energy, noting that the continent's contribution to carbon dioxide emissions is less than 4%. He stressed that Africa is a critical part of the solution to drive the green transition not only within the continent but also on a global scale. One of the key initiatives driving the green transition in Africa is the African Guarantee Fund, a Pan-African Guarantee Scheme. Adjagba revealed that the fund's primary role is to leverage Development Finance Institution (DFI) funds to unlock private sector financing, particularly for Small and Medium Enterprises (SMEs). SMEs play a crucial role in Africa's economy, accounting for over 90% of businesses and job creation. However, these businesses often struggle to access financial resources, hindering their ability to contribute to the green transition. Addressing the funding gap required for the green transition, Adjagba estimated it to be around $250 billion annually. He emphasized the need for a Public-Private Partnership (PPP) approach to bridge this financial divide. African Guarantee Fund is working towards de-risking investments in green projects to encourage banks to increase lending to SMEs. By sharing the risk with financial institutions, the fund aims to facilitate greater access to finance for green initiatives within the continent. Furthermore, Adjagba highlighted the importance of mobilizing domestic resources in African countries to support the green transition. He called for collaboration between governments, international financial institutions, and Development Finance Institutions to provide adequate support and funding for green projects in Africa. With only 4% of carbon dioxide emissions originating from Africa, Adjagba stressed the need for global partners to invest in the continent's green future. In efforts to prepare African countries to tap into available climate finance opportunities, African Guarantee Fund has launched a green finance series. This initiative includes conferences held annually across various countries to raise awareness among stakeholders such as governments, regulators, and the private sector. The fund also offers capacity development and technical assistance to banks to enhance their risk assessment capabilities for green transactions. As African Guarantee Fund continues to drive the green economy transition in Africa, Adjagba expressed gratitude to investors and donors who have supported the fund's efforts. He highlighted the leverage effect of the fund's guarantee mechanism, citing that with one dollar, they can catalyze up to 10 financings. To date, the fund has collaborated with over 50 banks, catalyzing approximately a billion dollars in funding to support green initiatives. In conclusion, African Guarantee Fund's dedication to accelerating Africa's green economy transition through innovative financial solutions and partnerships demonstrates the continent's commitment to sustainable development and combating climate change.