AFRICA – African Development Bank Group President, Dr. Akinwumi Adesina, has issued a cautionary note regarding the potential impact of a new EU carbon border tax on Africa’s trade and industrialization strides.
This levy could penalize value-added exports like steel, cement, iron, aluminum, and fertilizers.
Adesina expressed concern that due to Africa’s energy shortfall and predominant reliance on fossil fuels, particularly diesel, the consequence might be a regression to exporting raw commodities to Europe. Such a shift could further aggravate Africa’s de-industrialization.
Speaking at the Sustainable Trade Africa Conference held at the UAE Trade Centre in Dubai, the Bank President highlighted the dire prospects, citing potential annual losses of up to US$25 billion from the EU Carbon Border Tax Adjustment Mechanism.
He stressed Africa’s vulnerability, noting its limited integration into global value chains, and emphasized the significance of intra-regional exchanges as a pivotal trade opportunity.
Adesina highlighted the Africa Continental Free Trade Area, predicting an over 80% surge in intra-Africa exports by 2035.
He underscored Africa’s marginalized position in the global energy transition, pointing to International Renewable Energy Agency data that indicated minimal investment in the region – a mere US$60 billion out of US$3 trillion in renewable energy investments globally over the past two decades. This trend could adversely affect Africa’s competitive exports to Europe.
Proposing Just Trade-for-Energy Transition (JTET) policies, Adesina advocated for strategies that would bolster Africa’s renewable ambitions without hampering its trade prospects.
He emphasized the necessity of natural gas as a transitional fuel to stabilize energy systems and support industrialization.
Walid Mohammed Hareb Alfalahi, CEO of the UAE Trade Centre, echoed a contrasting view of Africa, highlighting its potential as an investment frontier.
He dispelled misconceptions about the continent being a challenging investment terrain, sharing his positive experiences investing in various African projects.
Adesina cited a Moody’s Analytics report indicating Africa’s commendably low default rate of 5.5% on infrastructure investment compared to other global regions.
The conference, moderated by Dr. Victor Oladokun, the African Development Bank President’s Senior Adviser for Communication, also featured insights from the President of the African Export-Import Bank, Afreximbank, Professor Benedict Oramah.
Oramah warned about the potential US$150 billion reduction in merchandise exports due to swift decarbonization by fossil fuel-exporting African nations, based on a preliminary study commissioned by Afreximbank.
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