The United Nations Under-Secretary-General and Executive Secretary of the Economic Commission for Africa (ECA), Amb Claver Gatete, has said that Africa cannot afford to overlook the challenges posed by climate change and must respond accordingly.

He made the remarks during the 56th Session of the Conference of Ministers of Finance, Planning and Economic Development opening on March 4 in Victoria Falls, Zimbabwe. During the conference held under the theme "Financing the transition to inclusive green economies in Africa,” Gatete and other experts earlier made the case for Africa having supportive policies and robust infrastructure to tap the limitless opportunities of Artificial Intelligence to leapfrog its development.

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In 2020, Africa’s total greenhouse emission (gases in the earth's atmosphere that trap heat) was about 3 per cent of global emissions, but the region has the most burden of impact.

"As such, there is a lot at stake on the options we chose. And getting it right remains a challenge,” said Gatete.

The G20 estimates that additional spending of $1.8 trillion for climate action and $1.2 trillion is needed for development financing by 2030. Gatete said that, however, shrinking fiscal space is now the single most important issue for African ministers of finance, planning and economy, explaining that it represents 2.7 per cent growth in 2023, and a projection of 2.4 per cent in 2024, and with inflation at nearly 20 per cent – the future seems bleak.

"Debt has increased by over 180 per cent since 2010, and twenty-one countries are now at risk of, or in, debt distress,” he continued. "This is notwithstanding the annual loss of at least 5 per cent of GDP because of climate change.”

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Gatete posed a question to the ministers regarding determining where to distribute resources when nearly $100 billion is spent on debt repayments annually. "It is clear that governments can no longer guarantee social safety nets. Yet, that is precisely what we need to do to ensure that no one is left behind. Let’s face it, we are on the brink of failing future generations,” he said.

‘The global financial architecture needs to be fixed’

According to Gatete, the fiscal issues the world is facing today cannot be traced only to Covid-19 or recent conflicts, given that the shocks only exacerbated historic structural issues rooted in a global financial architecture "that is not fit for today’s world.”

"The existing multilateral financial system does not represent the needs of Africa,” he remarked.

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He noted that the international financial architecture was established at a time when many African countries were not yet born. In 1945, when the United Nations was created, the five permanent members of the Security Council, namely China, the United States, the United Kingdom, France, and Russia made up almost 50 per cent of the world’s population. Today, that figure is just 26 per cent.

"And whilst Africa now represents nearly 20 per cent of global population,” said Gatete, "it is not represented at the G7, whose proportion of global population is only 9.7 per cent. So how do you solve today’s problems with outdated eighty-year structures that do not reflect the global shifts that have occurred?”

Given the imbalances, Gatete suggested fundamentals that must be addressed.

"First, the global financial architecture needs to be fixed. It must work for everyone and reflect the new dynamics. In this regard, we welcome the membership of the African Union in the G20,” he said.

"Moreover, the reform should not just be about increasing the amount of concessional financing or extending the period of loan repayment. We must continue to call for changes that remove the investment rigidities and enable countries to mobilise affordable finance at scale. The conversations on governance and conditionalities, no matter how difficult, must be top priority.”

The ambitious $500 billion SDG Stimulus call by the United Nations Secretary-General is a recognition of how far we must go for justice and equity, Gatete added.

Gatete stressed the urgency of addressing unfair risk perceptions and credit ratings that restrict Africa's borrowing options, pointing out that only 2 African countries have investment-grade ratings, leaving 22 countries unrated.

He highlighted the significant economic impact of this disparity, citing a UNDP estimate of up to $74.5 billion in opportunity costs in 2023 and emphasising the need to focus on domestic resource mobilisation, given the high costs and unreliability of external borrowing.

Gatete further underscored the necessity of reforming tax systems and derisking the business environment, stating that the continent cannot afford to neglect the private sector.

He advocated for investing in capital market development to provide long-term resources for private sector investment, citing potential interest savings of $28 billion.

Call for tangible actions with bankable regional projects

A productive green finance system in Africa has the potential to generate $3 trillion by 2030, said Gatete, stating that however, there is a need to move from ‘potential’ to tangible actions with bankable regional projects.

"Innovative instruments like debt-for-nature swaps, regional blue bonds, regional carbon markets and natural capital accounting can provide financing that address debt issues and foster environmental action,” Gatete continued. "Seychelles has already set an example with the issue of its sovereign blue bond in 2016, raising $15 million.”

Leveraging Africa's vast coastline has the potential to generate $576 billion annually and create 127 million jobs by 2063. However, Gatete said that carbon trading must be at a fair price to reap the rewards.

"It does not make sense for African countries to earn less than $10 per ton of carbon whilst countries in Europe earn over $100. We also know that regional cooperation can transform Africa into an industrial hub, to achieve the AfCFTA aspirations,” he explained. "What is stopping us from aggressively pursuing regional value chains in Chad and Botswana’s beef industry, or in the cocoa sector in Ghana and Cote d’Ivoire, or establishing a thriving agro- processing sector in Zambia and Zimbabwe?”

Gatete recognises the role of technology advancement to achieve the goals, highlighting the need to be intentional in investments in science, technology and innovation.

"Digitalisation is an essential ingredient for infrastructure development and for generating economies of scale. It is why the dialogue on the Global Digital Compact is so important for Africa especially as we remain the least digitally inclusive region, with average internet usage at only 40 per cent,” he said.

The 56th Session of the Conference of Ministers of Finance, Planning and Economic Development coincided with the beginning of the second half of the SDG implementation and the start of the Second Ten-Year Implementation Plan of Agenda 2063.

Gatete urged the finance ministers not to underestimate their role as architects of a new global financial system that serves Africa's interests.

He emphasised that their voices are crucial at this moment in history and encouraged them to take centre stage in shaping the new architecture.

"Yes, it is fair to say that we are confronted with some pertinent questions. But, against the odds, we are still standing. This should give us hope because we can do more with what we have. With deliberate intent and a unity of purpose we can be in a much better place. I have never been more hopeful that the future belongs to Africa,” he concluded.