AfDB Annual Meetings: How to de-risk green financing in Africa

The 58th Annual Meetings of the African Development Bank in Egypt have brought to light the pressing issues facing the continent - the need for increased private sector involvement and the urgency of addressing climate change. In a conversation with Robert Masumbuko, the Country Manager for Benin at the African Development Bank, CNBC Africa's Kenneth Igbomor delved into the innovative solutions being explored to de-risk green financing in Africa. Masumbuko highlighted the critical role of the private sector in driving development and the significance of leveraging financial instruments to amplify impact. Masumbuko emphasized that the African Development Bank, as a multilateral development bank, is only scratching the surface of the financing needed for Africa's infrastructure and development projects. With an annual investment requirement of over $100 billion, the traditional sources of funding fall far short of meeting the demand. This shortfall underscores the importance of engaging the private sector more actively and diversifying funding sources. A key initiative discussed was the partial credit guarantee provided by the African Development Bank for Benin. Masumbuko explained that this innovative financial instrument allows countries to access four times the amount of financing for every dollar guaranteed, thanks to the bank's AAA rating and credibility in the market. By de-risking investments, the bank is able to catalyze funding for critical projects and accelerate development efforts. The conversation also shed light on the challenges African countries face in accessing capital markets, especially during periods of global economic uncertainty. Masumbuko highlighted how the African Development Bank's intervention in Benin enabled the country to continue accessing capital despite market restrictions. This demonstration of support has not only benefited Benin but has also sparked interest from other African nations looking to leverage similar financial mechanisms. In discussing the impact of the funding, Masumbuko shared a concrete example of how the investment would be deployed in Benin. The funds are earmarked for establishing vocational training centers to equip young people with skills needed to support the country's development agenda. By focusing on key sectors such as agriculture and manufacturing, the project aims to create employment opportunities and address the pressing challenge of youth unemployment in Africa. Looking ahead, Masumbuko expressed optimism about the positive outcomes that could be achieved through strategic partnerships with the private sector and innovative financing solutions. By harnessing the potential of green financing and mobilizing resources effectively, Africa has the opportunity to unlock new avenues of growth and sustainability. As the discussions at the AfDB Annual Meetings continue, the spotlight remains on the need for collaboration, innovation, and bold action to de-risk green financing and drive inclusive development across the continent.