By Abir Ibrahim, Community Lead, Regional Agenda, Africa, and Marushia Gislén, Community Lead, Europe and Eurasia, World Economic Forum
The push to accelerate the green and net-zero transition presents both opportunities and significant challenges. For Africa and Europe, achieving a successful transition brings to light the importance of strengthening existing economic ties between the two continents. However, it is a historically complex relationship, and the question is whether it can be rebuilt on equal terms?
The vulnerabilities exposed in global supply chains during the pandemic emphasized the importance of sourcing critical raw materials closer to home. For Europe, the energy price shock following Russia’s invasion of Ukraine in February 2022 forced it to further rethink its supply chain dependencies, step up its net-zero ambitions and strengthen legislative measures, including through the proposal of a Critical Raw Materials Act (CRMA). In order to achieve its climate neutrality targets, Europe faces a pressing need to increase the availability of critical raw materials while, at the same time, it is imposing stricter sustainability and traceability requirements for business. These may have direct impact on the ability of producers in developing countries to continue exporting to the European Union.
Africa is home to some 90% of global critical minerals needed for renewable energy, such as cobalt, chromium, platinum, aluminium and uranium. This, together with its geographical proximity to Europe, positions it as a key partner for Europe. The benefit of such a partnership is, however, far from one-sided. The International Energy Agency (IEA) estimates that 600 million people across the continent lack access to energy, almost half the continent’s population. Africa’s population will double by 2050 and will put additional upward pressure on energy demand; the need to step up energy efficiency measures and renewable capacity is clear. The green transition is key to unlocking sustainable long-term growth prospects and improving living standards.
While national climate plans in Africa go a long way to greening the economy, Africa is currently not fully benefitting from the opportunity created by the global transition to net zero. According to Climate Policy Initiative, Africa receives only about 2% of global investments in renewable energy and 12% of the finance it needs to successfully mitigate the effects of climate change and transition to net zero. Equitable trading partnerships, comprehensive green skill programmes, and net-zero technologies are essential to spur progress.
Creating tangible benefit for African countries becomes even more important in the context of geopolitics and strong regional voices seeking to detangle the region from European influence, instead looking to strengthen ties with other global players such as China and Russia. This burgeoning movement seeks equitable partnerships transcending historical disparities. Recognizing these goals and fostering collaborative initiatives for shared growth is crucial. Failing to cultivate a successful partnership between Europe and Africa would yield detrimental consequences for both continents: Africa’s growth prospects could suffer as Europe’s long-term competitiveness plummets.
A partnership with mutual benefits
Africa and Europe are progressively forging a path towards a more balanced and equitable collaboration, based on objectives of mutual growth and development. This direction was further underscored by European Commissioner van der Leyen in her State of the Union Address on September 13. A notable initiative in this direction is the Global Gateway; leaders from Africa and EU have committed a €150 billion investment to boost smart, clean and secure links in digital, energy and transport sectors and to strengthen health, education and research systems in Africa.
Africa is also strategically fostering regional value chains facilitated by the African Continental Free Trade Area (AfCFTA). However, the President of the African Development Bank, Dr. Akinwumi Adesina, stated that “to unlock AfCFTA’s potential, we must not just trade. We must turn the zone into an industrial manufacturing zone. Free Trade Zones that launch prosperity around the world have done so not by trading low value commodities, but by industrial manufacturing. Africa’s wealth must no longer depend on exports of raw materials but of finished value-added products.”
To industrialize, Africa must solve its major challenge with very low access to electricity. The future of electric cars in the world depends on Africa, given its extensive resource deposits in rare minerals, especially lithium-ion, cobalt, nickel and copper. The size of the electric vehicles market has been estimated to reach $7 trillion by 2030 and $46 trillion by 2050. Developing a labour market for the production of lithium-ion batteries in Africa will be three times cheaper than in other parts of the world.
This is where the EU can help Africa: “With its institutional knowledge and investment power to support capacity-building,” as noted by Valdis Dombrovskis, the Executive Vice-President of the European Commission. “This can promote better product quality, more innovation and reduce costs. As a result, our partner countries will be in a strong position to move up the value chain themselves.”
The EU’s engagement extends to close collaboration with both public and private stakeholders, underscoring commitment to nurturing economic connections and stimulating employment opportunities in Africa. The European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) play pivotal roles in engaging the private sector, rendering financial support in the form of loans and related services. These financial endeavours are directed towards advancing sustainable progress in critical sectors, such as mining, infrastructure, and energy.
Rebalancing through the private sector
The endeavours undertaken to improve and strengthen the economic collaboration are testament to the evolving nature of their partnership and the genuine aspiration to cultivate a future where historical imbalances are addressed in a diplomatic and constructive manner. While EU companies are the main source of direct investments in Africa, the European private sector could have an enhanced impact by adding higher value roles to their domestic hiring, setting up skills training programmes, and enabling leapfrogging by transferring modern technologies to increase productivity levels. Fostering skilled labour in manufacturing and green industries would propel Africa’s green economy and prepare it for evolving global sustainability standards. From a business perspective, Africa is set to constitute a significant portion of the global consumer market in the future, a fact that should incentivize companies to provide tangible value to the communities where they operate.