AfDB Estimates That Africa’s Green Growth Sector Is Worth $2.97 Trillion

According to the African Development Bank (AfDB), Africa's green growth market is worth $2.97 trillion. Kevin Chika Urama, AfDB's Chief Economist and Vice President of Economic Governance and Knowledge Management emphasized the strong relationship between green growth, real GDP growth, and readiness during a presentation at the South Korean Institute for Economic Policy.

Between 2023 and 2024, Africa is projected to have half of the top 10 fastest-growing economies, according to Urama. He did, however, highlight the lack of green investments, particularly from the business sector, and highlighted the need for Africa to acquire cumulative finance of up to $2.7 trillion ($242.4 billion annually) from 2020 to 2030 in order to achieve its revised NDCs.

Africa accounted for just around 0.2% ($4.7 billion) of the expected $2.2 trillion in worldwide green bond issuance between 2006 and 2022, which is the smallest among every continent. Similarly, Africa's contribution to the global voluntary carbon market in 2021 was only 6.2% ($123 million), accounting for 41% of blended funding from 2019 to 2021.

Urama found various challenges to utilizing natural capital for climate and green development in Africa, including poor regulatory institutions, insufficient natural capital accounting, tax evasion, illicit financial flows, organized crime, and resource theft.

The speech further explained green investment opportunities in various sectors across Africa, including agriculture, which has a projected market size of $1 trillion by 2030, energy, which has a projected market size of $1.03 trillion through 2030, ICT, which has a projected market size of $104.2 billion in 2023, and transportation, which has an increasing demand for electric vehicle batteries.

Urama made suggestions to African countries, encouraging them to create long-term strategies, apply coordinated debt management, implement strategic industrial policies, increase revenue mobilization, improve public finance management, and invest in infrastructure preparation at the national and regional levels.

He also urged multilateral and development finance institutions to increase affordable loans and funding for capacity building, provide risk-agnostic capital through guarantee instruments, reconsider their risk tolerance and revenue targets, scale the use of innovative financing mechanisms, and support risk diversification through sustainable development transitions.

Urama also urged private companies, credit rating organizations, and the international community to maintain market leadership, evaluate methods and rating frameworks, honour global sustainability obligations, and fight for the joint transformation of the global financial infrastructure.