The African Development Bank Group and worldwide accounting organisation KPMG South Africa have launched a report setting out an revolutionary strategy to mitigating the international foreign money dangers that always undermine the supply of vitality infrastructure tasks throughout the continent.
The report was launched throughout this week’s Africa Energy Summit in Dar es Salam, Tanzania, the place African heads of state and authorities, multilateral improvement banks, personal sector, improvement companions, policymakers, and civil society representatives gathered to discover alternatives to leverage Africa’s pure sources to drive sustainable financial development and bridge the continent’s funding hole.
The report, “New Mechanism for Mitigating Currency Risk to Support Africa’s Energy Transition”, argues that African nations can overcome international foreign money volatility and convertibility dangers which threaten the affordability and sustainability of privately financed Independent Power Projects (IPPs), by pooling collectively their mineral sources right into a “non-circulating currency” backed by a diversified basket of Africa’s essential commodities.
Non-circulating foreign money affords an alternative choice to conventional reliance on US greenback and Euro-denominated financing, and assure ranges of trade price stability which can be usually absent with the native currencies of collaborating nations.
The idea for the brand new financing mechanism was developed by the African Development Bank as a way of leveraging Africa’s huge essential minerals’ endowments, which it estimates represent roughly a 3rd of the amount wanted to drive the worldwide vitality transition.
Auguste Claude-Nguetsop, Partner and Head of Financial Services at KPMG Southern Africa, mentioned, “The demand for critical minerals will continue to grow exponentially over the next 30 years, and Africa’s role in the global energy transition cannot be overstated. To unlock this potential, it is essential to implement innovative financing mechanisms that address currency and convertibility risks. By leveraging Africa’s resource wealth, we can create an environment that attracts investment at lower costs and accelerate infrastructure development.”
According to the report, profitable deployment will scale back the price of capital for clear vitality tasks, encourage cross-border monetary cooperation and integration, and strengthen Africa’s bargaining place in world useful resource markets.
These outcomes, the report stresses, will assist to considerably slim the continent’s $400 billion annual funding hole, assist the attainment of the continent’s sustainable improvement objectives, and guarantee long-term vitality safety and financial prosperity.
Wale Shonibare, Director, Energy Financial Solutions, Policy and Regulations, on the African Development Bank, mentioned: “Africa’s green energy future depends on unlocking innovative financial solutions that empower the continent to harness its vast mineral wealth. The proposed currency convertibility mechanism will play a crucial role in stabilising investment flows and accelerating sustainable development.”
The report concludes by emphasizing the advantages of the brand new mechanism for each lenders and debtors, in addition to outlining the required subsequent steps on the journey to full implementation.
“The economic impact of leveraging Africa’s critical mineral wealth is profound,” affirmed Frank Blackmore, Lead Economist at KPMG South Africa. “By addressing financial constraints and mitigating currency risks, we can unlock new economic opportunities, enhance industrialisation, and drive sustainable growth across the continent.”
Source African Development Bank Group
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