Welcome to zero I am Akshatarti this week, Green Africa, Rich Africa. Think about what climate change will do to the world for just a while, and you will come to a devastating realization. Those who have done the least to contribute to the problem are going to be the worst affected. Africa is home to some of the most climate vulnerable countries. One big reason is that it is also home to some of the poorest countries in the world. But combine those two adversities and you can turn it
into an opportunity. Helping Africa grow economically can also make it more resilient to climate change. Bringing economic growth to developing countries is not a new problem for the past century. One of the ways that has happened is through multilateral
development banks. That work began after the Second World War with the likes of the World Bank and other institutions which were founded by and still sit in rich countries, But very soon developing countries wanted to move away from the shadow of colonial powers, which is how the African Development Bank was founded in nineteen sixty four. It's now headquartered in Abijan.
Quote the war.
Today, the Bank's challenge is not just economic development, but also dealing with the impacts of climate change. At COP twenty eight in December, I sat down with akin Wumi Adishina, the President of the Bank, to talk about how fifty four African countries with enormous differences are dealing with this
big common challenge. His main tool for finding solutions are the somewhat limited financial instruments that he has access to and which he deploys creatively, helping reshape wheat farming in Ethiopia, setting up solar panels across Burkina Faso, and funding cyclone recovery in Malawi. As he told me, Africa has huge potential to be green, but it can't be poor and green.
It needs to be rich and green. What follows is a wonkier than usual conversation about the big puzzle Adishina is trying to solve.
But stay with us.
It is a perspective we rarely hear about or appreciate.
Doctor ADISHENEV. Welcome to the show.
Thank you, nice to be with you now.
The African Development Bank is crucial for ensuring development goals in Africa, but these development goals are now being affected and perhaps sometimes reversed, by climate change.
Across the world.
Development banks have become more sensitive to climate risk. Is it played out for your bank?
Well, you know, if you take a look at it today, Africa nine out of ten most vulnerable countries for climate change in the world in Africa, and therefore Africa, which only contributed no more than three percent of historical emissions, now suffers disproportionately from the negative consequences of that. And what that really means is Africa loses seven billion dollars to fifteen billion dollars a year because of climate change and if that currently continues, that's going to reach fifty
billion dollars by twenty thirty. Obviously, if it didn't cause the problem, you have to find it way. The only solution you have is to.
Adapt to it.
And Africa is not receiving the resources that it needs for adaptation. And Africa gets today eleven billion dollars for climate adaptation when in fact it needs roughly ten times higher than that. But as Africa's premier financial institution, our role as African Development Bank is to respond to that.
What we're doing right now is that we've devoted forty four percent of all of our financing as a bank to climate finance and also the world said we should do climate finance and do climate adaptation.
Well, we passed that three years ago.
Today we ad sixty seven percent of all of our climate finance go to adaptation, which is Africa's main challenge. So as Africa and Development Bank, we're putting our money where our maps are.
And let's just talk through numbers. How much is it that you are able to land on an annual basis. You've talked to the ratio of what you're lending to when it comes to total projects, forty four percent going to climate, of that sixty seven percent going to adaptation. But what is the total quantum and what is the gap that if you had more money you could be filling up.
You know, if you take a look at the total amount of financing that we do roughly every year, it's about ten billion dollars and so we do forty percent of that straight goes to climate finance and then we
split it up. It's quite significant for Africa, but we we need to mobilize more resources at scale, and that's why the African Development Bank launched what was called the Africa Adaptation Acceleration Program, which is to mobilize twenty five billion dollars for climate adaptation in Africa together with the Global Center not Adaptation, and that is the largest climate
adaptation program in the world. Okay, And we've put down twelve point five billion dollars from the African Development Bank. Now we're trying to mobilize the additional twelve point five billion dollars.
This is very crucial.
That adaptation is a forgotten causing of mitigation, so we've got to do a lot more on that. But in addition to that, you know, countries also just like you and I have to buy insurance and ensure ourselves against catastrophe events. Were actually doing the same also for countries. So we were running a program called Africa Disaster Risk
Insurance Facility, which is ensuring countries against catastrophargis events. We did in Madagascar when they had droughts, they were able to get a payout because as we were paid in short for them. They paid six hundred thousand farmers who lost their cross because of that. When Malawi had three years consecutive drafts and then a cyclone, we were able to pay them out to get a payment of fifty two million dollars which they used to pay for several
millions of farmers. So these are the critical things that we are doing to protect Africa and allow you to be able to adapt to climate change.
Now, those are payouts that are you able to recover them because they sound like grants, whereas in your case a lot of the money that you do to give out is through lending. So how do you recover some of this money which is absolutely crucial given out at the time that is needed.
No, actually, we know we it's in our interest to help them to do that because if we don't and they have shocks that they don't recover from, they're going to default on other loans that we actually give them. So yes, they are grants that we have that we give to insure them, and we think that that also
several benefits. First and foremost is that if physical space is so limited they don't have you know, they are responding to climatey and responding to debt, they are responding to pandemics and so on, that's not enough physical space for them to have additional money to ensure themselves.
So we do that.
And secondly, because we ensure them many CONTs at the same time, we pay fifty percent of the insurance. By the way premiums for them, we can crowd others in. We increase the size of the market and the unique price of Actually the premiums eventually will go down and they will be able to do that by themselves.
Going forward, now on the Adaptation Acceleration program, twenty five billion dollars is the target, but I understand there are already projects that have been funded and worked on.
Could you talk through a few examples.
Well, first INFEMOST where we program called Technologies for African Adaptation AG Cultural Transformation. So in Ethiopia, for example, we were able to deploy heat tolerant what varieties to Ethiopian farmers. Heat a wit, as you know, is a it's a temperate crop. It's not a hat florian crop. But we were able to get the right technologies and we gave you to those farmers through the program. What happened They cultivated those hit tolerant wheat varieties on five thousand hectors
in twenty eighteen. This year they grew them on two million hectors. So that made Ethiopy our self sufficient in wheat on that four years. Today they're a net exporter of wheat because of the program that we've done for them.
I'll give you another example.
When drought hit farmers in Malawi, Zambia and also in Zimbabwe, we deployed through our program water efficient maids. You know, the crop there is basically maize, and so we deployed that to them and they were cultivated by five point four million households, right, and that is what saped the entire region from a disaster doing that. So these are programs that are happening at scale. And that's why we as an African Development Bank created a facility that's called
Climate Action Window under the African Development Funding. So we open up a window four hundred and twenty nine million dollars. These added things you're going to get. First, twenty million farmers will get crop insurance and livestock insurance. You have another twenty million farmers that will also be able to get access to the climate resident technologies. Roughly ten million people will have access to water and sanitation and health services.
A million hectors of degraded land will be rejuvenated, and nine point five million people will have access to re eneable energy. And so this is really the key thing and what we are trying to do now is to take that to scale, because to adapt to climate change you don't need loans to do that. You actually need to mobilize cheap grants to allow you to adapt to climate change. And that's what we are trying to do.
So this twenty five billion dollar program is that all grants towards adaptation.
All these are all towards adaptation.
Yes, but it's all grunts, yes, okay.
And the remaining twelve point five billion dollars that you do need to still raise.
Where do you think that can come from?
Well, we are.
Talking to quite a lot of philanthropies right now to help us raise the money for that. We are also talking to other development finance institutions, so join us so that we can syndicate around that.
You know, it.
Doesn't have to be all our money. It's just about how we work together to be able to.
Do that, and the goal is to try and spend that money by twenty thirty. Have twenty five billion dollars worth of adaptation grants being given out between now and twenty thirty.
That is absolutely correct. It's not all of that that's grant. Some of it also our loans that go into helping you to climate proof your infrastructure, for example, what's your water system, what's your energy system or buildings, or to even repair damage infrastructure, whether it's is your road or energy transmission system that's been damaged because of cyclones.
Or plauds now.
We talked a lot about adaptation, but Africa also has a tremendous potential for renewables. There is a goal about tripling global renewable energy capacity. Africa could probably do more than tripling. What is your focus on trying to enable mitigation projects, enable energy access projects through the deployment of renewables.
You know, we are the largest investor right now in in Africa today as a bank, we devote eighty seven percent of all of our financing and energy to reenable energy, so that is wind, hydro, geotomo and of course solar, which we have in our bonders and a good example of that is what we are doing in the sahel Okay.
We are financing right now a twenty billion dollar program that is called Deserto Power that is going to construct ten thousand megaworts of solar power across eleven countries of the sail that will provide electricity for two hundred and fifty million people right and when we're done, it's going to be the largest solar zone in the world. And
it's already started. It's not something we're thinking about. We've already started at in Mali, We've started it in Nije, We've started it also in Bukina, Faso and child and so that is going to be a very major transformitted project that we are doing. But also we are investing heavily in hydro projects in other places. Take for example, we are the mandated Leida Ranger for the one thousand, five hundred mega words in Pandakua project, a hydro in Mozambique.
If you take a look at Zambia, for example, they have what they call Batoka god A link Bozambique and Zimbabwe. We invested in that. And think of what we also invested in in Morocco you have what is called the New Wazata which is the world's largest concentrated solar power plant. It was also finance of the African Development Bank, so we are.
Big on that.
But the issue is how do you use energy to drive in dossualization. And I make the case that Africa needs to use is natural gas to be able to have a stable energy mix. See, the most important thing is access to energy. You have to have security of energy and stability of energy, and without having something like gas, we are not going to be able to do that. And when I say that, I also want to say that that's not going to contribute anything at all to
global emissions. Because the analysis that was done shows that even if today Africa were to use all of its natural gas for energy, you know how much it will contribute to global emissions less than zero point six percent. And so therefore Africa, which has six hundred million people without electricity, will use all of its enable energy will
optimize that. But I don't get carried away. There must be stable reach for which natural gas will play very significant roles without adding anything at all to global emissions.
After the break, how the African Development Bank is enticing developed nations to invest in the continent. And by the way, if you like this episode, please take a moment to rate or review the show on Apple Podcasts and Spotify. Your bank also has a plan to figure out a way to increase your capitalization through rechanneling what are known as the special drawing rights now SDRs. Are a complicated beasts, but basically they are accessible to the largest economies in
the largest amounts. Those economies, such as the UK, could try and give some of those rights that they get through the World Bank and give those two development banks like yours. This has been a conversation that has heated up over the past twelve months or eighteen months. Where do things stand today and do you have any countries that have committed to rechannel their SDRs.
My first and foremost is that we have to start our conversation by recognizing that these are conditional financial instruments that were issued to help the world deal with COVID and all of the problems with climate change and all the others.
But herece we had a challenges.
At six hundred and fifty billion dollars were issued and Africa, a population size or one point four billion people, got only thirty three billion dollars.
What of that?
I applaud everything about especially doing rights. I applaud all the airports be made by IMF. I also applaud the airports of Secretary Yelling the United States who called for it to be used.
But the faculty the matter is that it did not.
Stave Africa well, but we know that we can get more juice out of the same oranges if you actually did things well. And so we came up with a model, the African Development Bank and the Inti American Development Bank to see how those rich countries that got the svs, which we actually don't need it right, can only channel those through banks like ourselves, the African Development Bank, the entire American Development Bank and why not or the most laterally development banks.
Let's pause here to acknowledge that SDRs are very complicated, but here's what you need to know to understand how this financial instrument can unlock more money for Africa's needs. SDR is an international reserve asset which was created in nineteen sixty nine. SDR stands for special Drawing Rights. Special because it's only to be used in special circumstances, such as the economic crisis set off by the COVID nineteen pandemic. Drawing because it's drawing from a pool of money that
sits with the International Monetary Fund. Rights because shareholders of the IMF have the right to draw on the money, but only as a proportion of their shareholding in the IMF. SDRs were created as a safety net for countries facing economic hardship, and what Ardishina is trying to do is find a way for countries that don't need that safety net to reallocate their SDRs to the African Development Bank.
Three things are very critical in this.
First, it's great value for money because for every dollar of seis that's real channels. Let's say to the African Development Bank, we can leverage that by four terms. The second one is that if you take a look at the issue of what this means for taxpayers of those countries because the reserve assets, well actually they cause the taxpayers of those absolutely zero because the African Development Bank we will pay the fees right for using the seers to the IMF.
So that's the second one.
And the third one, which is actually quite important, is that you don't lose your reserve because the motel that we have actually preserves the reserve as a status of the SDRs, and so there's nothing lost. You can always claim your SDRs anytime you want, and just to make sure you can get it back anytime you want it, we created a liquidity support agreement to be attached to
those who make the real location. So let's say they are five countries that make the real location that would be a liquidity support facility that's joined to that that should day for any reason have a balance of payment challenge. And these are no countries that are not only going to have the balance of payment challenge anyway, somebody is going to be able to ensure that you will get
your money back. And so this is phenomenal. If we got ten billion dollars REA channel to the African Development Bank or the each American Development Bank, let's say for us, that will automatically become for Africa forty billion dollars. That is a lot of money to deal with water, education, sanitation, food, energy, and infrastructure, the kin that we also care quite a lot about. But you have also known that they've been
asking us to think big and go from billions to trillions. Well, the fastest way you're going to go to trillions is if you are able. Let's say you issued SDRs what five hundred billion dollars through the Motilateral Development Bank, and they can use their business models triple areata financial institutions preferred creadial status to leverage that four times. That becomes two trillion dollars. Problem done.
You know.
So, I think that motilateral development banks are going to play critical role in how we take latent assets that are sitting there and we turn those into dynamic assets that can actually then begin to really drive development. Are climate and development at scale, And I feel that if we are able to get that done, maybe we might consider even calling that SDR supporting development revitalization. Then you really making it to work for the ordinary person on the street.
Rebranding done right, Well, talk me through the last point you made. It sounds like it's a win win win. You figured out a way in which countries that have large amounts of SDRs available can rea channel those to you.
If we change the world here, we change the world. It will support how we deal with climate issues, de we water issues, de we health issues, prepare the world for the next pandemic. We allow us to be able to support programs that allow young people to be able to have jobs. The impacts are quite significant, you know, so, I think the beauty of this is that we finally have a tool we are asked to have, the matilateral development banks and the globe of financial architecture to change
the architecture. Okay, fine, change the architecture but you got to change the plumbing. You've got to change also the use of your instruments. If the instruments are still the same and the building is different, we haven't done much.
So I'm really.
Excited with how closely the African Development Bank and ENTI American Development Bank are working with the imail from this, because you need a world that is climate resilient, but the bread and butter issues of development.
Cannot wait for that.
People have to eat, people have to drink, kids have to go to school, people have to have good health, you know, so you can't say, look, I'm dealing with the climate and everybody is dying.
Who do you need to convince to make the rechanneling of SDRs happen.
Yeah, we need to convince the countries.
I think politically we have the support of the African Union, the G seven is very supportive of it, Indian statement, so is G twenty. But we just need to have a few countries, no more than five countries to come to the table and help us make it happen. We are talking to a few of them right now and I think that those are the ones that you have to convince that can put the money down and make it happen.
Now, let's talk through the idea of hybrid capital or blended capital.
There is.
A lot of expectation for private capital that is interested in investing in emerging economies, but they remain shy. They say there are too many risks, political risk, currency risks, sovereign risks, all kinds of risks to make it possible for us to invest in those countries. Can you please help de risk some of these projects? And they want to bring that money either from development banks or from philanthropies or directly from develop country governments. Have you seen
any of those blended finance projects working in Africa? Have you participated in any of those? And what have you learned that could be applied to try and scale this idea.
Well, we have the largest blended finance facilities in Africa because that's what we do as African Development Bank. We deploy significant amounts of partial risk guarantees and partial credit guarantees to ensure transactions with governments in which the counterparty is the government and you want to do risk it, we give you a partial.
Risk guarantee instrument.
If your counterparty here is a private sector, then we give you a Pastia credit guarantee instrument. They work at scales significantly. We use a partial credit guarantee facility of about three hundred and fifty million dollars to support Egypt to issue a five hundred million dollar Panda bond on the on the Chinese capitol markets, which it is using
now to support water, sanitation and other clean energy. Were support in Code de Vore to also issue five hundred million euros through a guarantee that we provide as a triple A erated financial institution. We've done that in beIN In they raise four hundred million dollars. We're doing that in Senegal now, and we do it for Tanzania. That's
a big project. That is a three point six billion dollar project railway that links Tanzania to DRC Congo and to Burundi, and they needed to derisk that and so we are putting together a risk guarantee facility for that. Let me also say that sometimes people exaggerate the issue of risk of investment in Africa.
You know, just believe what the fact says. Take a look at.
The Moody's analytics need an assessment looking at the risk of the fault on infrastructure loans globally and guess what they found that the risk of the fall on infrastructure in Africa is probably about two point five percent.
It's much more lower.
Is the lowest in the world compared to Latin America, compared to Europe, and compared to the Caribbean, Pacific and Asia, and so Africa is not as risky as people think.
Just last month, we have what's called.
The Africa Investment Forum, which is a forum that the African Development Band put together that brings bank abook projects to the table that de risk those projects and therefore attract investors.
From around the world.
In less than seventy two hours, we had secured investment interest for projects in Africa what party four point eight billion dollars in less than seventy two hours. So that ranges from infrastructure to transport, to energy, to water, sanitation,
agriculture and also ai a whole range of things. So I think what I'm saying to you is that the instrument exists, the platform exists to reduce your transaction costs, your risks, and we have the facilities to do blended finance at scale for energy today reneable energy in Africa. We have a fund that's caused or s enabled Energy Fund for Africa. It's a blended finance facility that brings down the cost of capital la stage capital for those
that are in the reneabled energy space. And also we just launched what's called Alliance for Grain Infrastructure in Africa, which will mobilize ten billion dollars with a lot of blended finance to bring down the cost of developing grain infrastructure in Africa.
So as you stand at this moment with a number of reason which you can deploy capital for development issues that will we'll also make the continent resilient to a lot of climate impacts that are sadly going to come its way. What are your greatest needs, What is the case that you need to make and to whom to ensure that you can keep doing this work and at a greater scale than ever before.
Well, first, it's I think it's very important for the shareholders to support us very strongly and their do to be able to squeeze more from the lemon that we have. And so the African Development Bank we deploy all types of financial innovations to do that give value for money. We freed up a billion dollars which again gave us
a headroom to lend more. Then we did another one last year which is a two billion dollar syntetis scretization, again the first in the world by a multilateral financial institution, where we took risks of our portfolio of private sovereign portfolio to government and we transfer that to the private sector which support from the UK government a one point six billion dollar guarantee and also insured as on the insurance market for four hundred million dollars and that freed
up two billion dollars for us. So all I'm saying is the African Development Bank we need a lot of support to be able to do more of that, so that we can get a lot more guarantees to be able to leverage more and also to support a lot of support for the hybrid capital through the SDR would be fantastic. And finally, it's callible capital. You know, if you have a lot more calible capital, you can do a lot more.
To pause here, you heard Ardishina say the word capital a lot of times. That's because there are different types of capital that enable the African Development Bank to do its work. The two main types at play here are paid in capital, also known as paid up capital, which is money that the bank's being given by its shareholders, which in this case is many many countries. The other type, callible capital, is money that is not yet in hand but can be made available from these same shareholders in
case the bank really needs it. Having more paid in capital means that the bank can do a lot more, which is why I wanted to know if AFP anticipates getting more paid in capital.
But even in general capture increase of the bank, all of the most laterally development banks, you want us to do more, we will squeeze as much as we want in terms of room to run or in terms of sweating as balance sheet as we say it.
But you know, if you sweat.
So much and you are not drinking water, you're going to get your head with it at one point.
So we need a lot more water.
And that water is actually for us to have paid in capital, which allows us to use that risk capital to leverage the private sector that has one forty five trillion dollars of assets on the management. We need to be able to leverage a lot of that into infrastructure in Africa, energy, into all the things that will enable energy and also food production and all of that in Africa, and.
We didn't talk about paid in capital, but do you see any movement? I know you said your shareholders are very supportive of the work you're doing and clearly or they're squeezing the lemon as hard as they can. But have you made the case for more paident capital and will that come through?
Well, you know, the innovations that we actually have right now that ranges from whether we're using balance sheet optimization models or whether we are doing stetic secretization colible capital or temporary colible capital or general capital increase all the SR hybrid capital. We model that that will allow us to be able to raise about seventy one billion dollars additionally, which is very very significant. But also we have another innovation.
You know, I was telling you Alia in the show about the list developed countries that depend on the African Development Fund.
Those ones the only ones.
That actually need a lot more money because you know, the j Chad Mali all these countries. And so we have a fund that's called the African Development Fund and we have equity in it, what twenty five billion dollars And so now part of the financial innovations we're doing is taking that equity now going to the capitol markets to raise an additional twenty seven billion dollars of low interest rate money, long term money to support their development.
So these are the kind of instruments that we need. But when it comes to the issue of general capital, yes, you know, our shareholders are fantastic African Development Bank. Our shareholders gave it a significant increasing general capital, moving us from ninety three a billion dollar bank to become a two hundred and eight billion dollar capital bank, which is massive for US. But I think they are also mindful
that it challenges are big. We're looking now towards the ten year strategy of the bank and as we talk about bigger, better Boulder Bank, I will expect that our shareholders at the right time will also have to look at the issue of genera capital increase.
There's a lot of conversation about getting more funds to developing countries. Are you finding it any easier to get private capital interested in investing in Africa? Is there action to match the rhetoric that's being made in general from private capital to invest large amounts of money towards African countries.
No, I think there are challenges for those that want to invest. General perception, as I said, the passive risk is much higher than the real risk of investing in Africa. I just told you that in four years of having the Africa Investment Forum, we've been able to mobilize one seventy seven billion dollars of investment interest to various projects in Africa. I don't want to minimize the issue of risk, you know. Our job is to make capital comfortable, you know,
and to make it comfortable. Whether it is market risk, we can actually help with that, whether it is countries that want to invest, but currency exchange risk problem exists. We lend quite a lot also in local currency for that. And also the issue is when you talk about private sector, they ask the question where are the projects? Where are the bank cable projects? And that's why the African Development Bank invests in another vehicle which is called Africa fifty.
It's a private equity type vehicle. That is job is to help to develop bankable projects and also to be able to finance those bankable projects. You know, right now it is capital is about one billion dollars in being able to do that.
And we also at the.
African Development Bank have our own project preparation facility which is called Neper Infrastructure Preparation Facility, where we use roughly twenty six million dollars to prepare projects that are bankable which have been able to mobilize more.
Than fifty billion dollars downstream.
So the point I'm basic basically saying is that the capital is there, but that capital needs to be matched with bankable projects. That capital has to be derisked, and also there has to be supportive more supportive let me say, policy and regulatory environments and political stability that reduces the political risk of private capital moving to those markets. And I think that Africa clearly is the place to be, you know, for anybody wanting to make investment. You know,
the numbers are staggering. You take a look at it. A population of one point four billion people that will grow to two point four billion people by twenty fifty. They actually would consume quite a lot as a big market. You cannot ignore the largest population of youth in the world.
It's in Africa.
If you're looking at how to feed the world, sixty five percent of all the uncultivated ariblel and left in the world is in Africa. So what Africa does with agriculture all the time in the future of food, and everybody is talking about energy transition. Well for that, you actually need electric vehicles, you need battery energy story systems. Well for that, you need platinum, you need copper, you
need cobalt, you need lidium. Africa dominates in access to all of this, and so again the issue is Africa is going to play very critical role in that energy transition drive. But what I don't want to make sure Africa doesn't do. Again's Africa simply exporting it's raw metals, just like it has always been exporting its raw agricultural commodities. Because when you export raw commodities, it's the door to poverty.
But when you actually add value with good value change and you are integrated into global value change, that is the high way to wealth. And Africa cannot be poor green. Africa needs to be rich.
Great, wonderful.
Thank you so much, Thank you very much, Thank you for listening to Zero. If you liked this episode, please take a moment to rate or review the show on Apple Podcasts and Spotify. Share this episode with a friend or with someone who is into financial jargon. You can get in touch at zero pod at Bloomberg dot net zero's producers are mightily Rau, Magnus Hendrickson and Oscar boyd Our theme music is composed by wonderly Special thanks to Kira bindram I am Akshadrati.
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