African Development Bank Group President Dr Akinwumi Adesina has cautioned that Africa is in danger of losing up to $25 billion per year as a direct result of the EU Carbon Border Tax Adjustment Mechanism.
Speaking at the Sustainable Trade Africa Conference held at the UAE Trade Centre in Dubai, the Bank President cautioned that a new EU carbon border tax could significantly confine Africa’s trade and industrialization procession by penalizing value-added exports such as steel, cement, iron, aluminium and fertilizers.
He mentioned that as Africa currently lacks sufficient energy and heavily depends on fossil fuels, especially diesel, the consequence is that Africa will have no choice but to export raw commodities again into Europe, hence causing further de-industrialisation of Africa.
New EU Carbon Tax: More African Perspective
Due to weak integration into global value chains, the best trade opportunity that Africa has lies in intra-regional exchanges, with the new Africa Continental Free Trade Area projected to raise intra-Africa exports over 80% by 2035.
According to Adeshina, in the past twenty years, Africa got only $60 billion of the $3 trillion of global investments in renewable energy, a trend that will now have adverse effects on its ability to export competitively into Europe.
He then called for what he titled the Just Trade-for-Energy Transition (JTET) policies, which would facilitate Africa’s renewable ambitions without confining its trade prospects.
Speaking on the issue, the Chief Executive Officer of the UAE Trade Centre, Walid Mohammed Hareb Alfalahi said that contrary to the general belief that Africa is not a safe place to conduct business, the continent is actually the new frontier for investment.
According to Adesina, a report by Moody’s Analytics showed that compared to other parts of the world, Africa had the lowest default rate on investment in infrastructure.
Its default rate is currently 5.5%, compared to Latin America’s 12.9%, followed by Asia at 8.8%, Eastern Europe 8.6%, North America 7.6%, and Western Europe 5.9%.
He also mentioned several mega projects that had pulled investor interest through the Africa Investment Forum which was created by the African Development Bank and seven other founding partners.
Projects such as Mozambique’s $24 billion liquefied gas project, the $15.2 billion Abidjan to Lagos Highway corridor covering 5 countries and the $3.6 billion Tanzania to Burundi and DR Congo railway line.