I had the pleasure of attending (albeit virtually) the CFANY Asset owners forum this week . There were several heads of African states in attendence as well as Christina Duarte from the United Nations – OSAA and Marc-Andre Blanchard from the CDPQ present. The topic was climate finance and the Energy Transition in an African context.

There was a lot discussed so I wont recap it all. The key points from African leaders was that the work was happening already and that partnership with the private sector was key to scaling progress and not relying on sovereign funding. The linkages between energy availability and the rest of the economic value chain were highlighted. This included agriculture and minerals where there is also export and trade opportunity.

Duarte’s speech was ‘fire’ – 3 Paradoxes of Africa

Christina Duarte’s speech stood out for the ‘fire’ she brought to the discussion. In particular, she highlighted 3 paradoxes or threats restricting progress on this front. I highlight the paradoxes and superimpose some of my own opinion in the points below.

1 – The Finance Paradox: Africa is rich in financial resources. This is something I can attest to, having been involved in Capital markets for over a decade in SA. I was also involved with one of Africa’s largest Pension funds, so the money is there. The paradox is that due to illicit capital flows, which Duarte pegs at over $80bn per year, about $240m per day, Africa is ‘leaking’ its own financial capital and is consigned to begging for debt relief. Superimpose inefficient public spend and it becomes clear that this is a governance issue which needs addressing to empower Africa to re-write its own investment and development narrative.

2- The Energy Paradox – Africa is one of the world’s riches regions from an Energy source standpoint but remains the Dark Continent. When discussion ‘Energy Transition’ in Africa, we should be discussing generalised ACCESS to Energy. With over 1bn of the world’s people, its high time we narrowed the gap on ACCESS as over 600 million people still need access to electricity.

3 – Food Systems – Africa is remarkably rich in agricultural resources but experiences chronic food insecurity. Climate change risks reinforcing a food insecurity. It will also pressure water insecurity risks. These are existentially important.

Duarte’s impassioned address struck a chord. Africa’s disposition puts it in a corner when participating at events like COP26. It is often painted into a corner with pressure to ‘green’ itself even further. For context, Duarte highlighted that France and Germany’s total consumption of energy for 2019 was higher than the African continent as a whole.

She ended with Africa needing to reset its starting point. This is important to contextualise as Africa needs to move from being ‘back of the agenda’ or the recipient of others agendas, to being a cogent and organized partner to global investors. Africa shouldn’t NEED international capital rather than being able to tap international capital on favourable terms. In order to do this, there is a lot of work to be done to help address the paradoxes highlighted.

The Private Sector has a clear role to play – Work is underway

Then, as a representative from the private sector, but one with strong public sector credentials, Marc-Andre Blanchard from Canada’s CDPQ was an interesting panelist with on the ground perspective from the funding side. Blanchard highlighted CDPQ’s role as a global investor in infrastructure and energy and how Africa was part of its expanded global strategy. The role of private capital was highlighted but there is a lot of work needed to bridge the informational asymmetries as well as the ‘trust’ divide between African jurisdictions and private capital. In an attempt to address this, the CDPQ participates in the ILN Network in Canada to help capacitate public sector employees through education and engagement. Another key point that Blanchard made was how private capital may well be served through constructive engagement directly with DFI’s in African countries rather than through multi-lateral funders, given a congruency in thinking. Private capital funders are not entirely risk averse but instead seek adequate risk adjusted returns and/or risk mitigation strategies.

In summary, I enjoyed the session. Thanks to Tom Brigandi and CFA NY for setting this up. There is a lot of work to do but as with many things, this starts with honest and frank dialogue, networking and relationship building. And in this regard, the event was a great step forward.

 

 

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