In order to appear as protecting the interests of Africa and third world economies, the advanced and industrialised capitalist countries, through the multilateral organisations they control, came with the idea of climate finance support for African countries and other low income countries, who cannot bear the cost of climate change adaptation and mitigation. Therefore, they present Africa as a beggar continent to be helped, while they are benevolent nations. This is not different from existing arrangement in global political economy, where third world, whose economies have been plundered for decades, are presented with token, not as a compensation, but as a gift to ameliorate their backwardness. However, several research works have shown that these so-called supports end up worsening the already bad conditions of African countries.
Climate finance for Africa, which is aimed at providing financial support for Africa for its climate change programmes, is actually aimed at green-washing the developed capitalist countries’ dirty fossil-fuelled economy, which laid the basis for the current tragedy of climate change. Secondly, it is aimed at giving false hope of improvement, a form of hypnotising elixir for development. Thirdly, climate finance is a form of strategic tool for control of Africa’s economy. No financing support, which are basically voluntary, come without attached conditions by donor countries. These conditions are aimed at making the recipient countries to be fashioned in the image that the donor countries want them to be. No developed capitalist country will provide tangible financial support to any third world country whose economic orientation tends toward public ownership, technological development and self-sufficiency. Furthermore, no developed country will allow open transfer of technologies and discoveries to third world countries, unless such is no more economically relevant to it.
Moreover, all major funding supports have been aimed at profit making in the final analysis, while being presented as a form of charity or support. Therefore, current system of climate finance for Africa is a multi-purpose vehicle for furthering interests of the industrialised capitalist economies, under the guise of assisting to fight climate change and its impacts in Africa.
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This reality is better understood through the nature and attitude towards climate finance in Africa. According to various nationally determined contributions (NDC) documents by African countries, it will require $2.77 trillion to implement climate actions in the period from 2020 to 2030; $277 billion annually (CPI, 2022)[1]. Meanwhile Africa’s GDP as at 2022 was $2.93 trillion, which means that averagely, 11 percent of Africa’s GDP will be needed for climate action. Out of the annual climate need of $277 billion, climate adaptation cost, which is the money needed to manage the impacts climate change on Africa, is estimated to be 24% ($600 billion or $60 billion/year). However, this amount is considered to be highly underestimated, due to lack of proper quantitative research. African countries plan to provide $264 billion ($26.4 billion annually; 25% of total NDC cost). Yet, despite the hoax about global climate funding, the total funding support for Africa was $30 billion in 2021. This represents only 12% of the needed annual funding for climate actions in Africa. Of this amount, at least 39 percent is for adaptation, while 49 percent is for mitigation.
Also, out of the measly $30 billion, the private sector contributed only 14%, while the public contributed the rest. This shows that the private businesses cannot be relied upon for development in Africa, especially in terms of climate action. The basic reason for this is that Africa is currently not commercially important for global finance capital. Aside the often cited political instability and poverty, low level of development and longer gestation period for investment makes private climate investment in Africa unattractive. However, they (the big private investors) will be willing to invest if the local capitalist governments can insure their investments and guarantee them adequate profits. These can only be done through committing public resources to guaranteeing private investment, and privatising important sectors such as power, energy, etc., and allowing private multinational corporations to charge international prices. All of these will further impoverish the people. Beside this, the other way is the handover of natural resources, which are important for climate business to big multinational corporations under the guise of attracting investments. It is not therefore surprising that only ten countries, out of 54 African countries, got more than half of all climate investments (public and private) (CFI, 2022).
However, beyond the low private sector contribution is the fact that the public climate funding has been mostly business oriented: loans. Only 45 percent of climate finance committed to adaptation was grant, while the rest 55% being loan and private equity (low cost project debt and project level market rate debt). The trend is even worse for climate mitigation with only 15% of mitigation funding being grant, while the rest 85% is one form of loan or the other: low cost project debt, project level market rate debt, project level equity, balance sheet financing (debt and equity), etc. This shows the raw capitalist attitude towards climate financing in Africa: to extract profits from Africa.
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While the continent actually needs mitigation, especially given the development needs of the continent, the reality however is that the continent needs adaptation more, especially in the immediate. The continent contributes less than 5% of historical global greenhouse gases, but it is being adversely affected by climate change more than any other region, as a result of limited financial, economic, scientific, technological resources and expertise to confront these impacts. Therefore, genuine global regime of climate financing should naturally support more adaptation, with focus on providing not just financial resources but also technological and scientific resources and expertise for the continent. More than this, funding should be more of grants, rather than loans, especially given the economic underdevelopment and limited financial resources of African countries.
On the contrary, global finance capital and capitalist governments of the advanced economies, using the multilateral organizations and various funding instruments they created, prefer to cash in on the current state of African countries to further underdevelop them, extract more profits from them, and hide under aid and assistance to cheaply access the huge natural capital (critical minerals, forest resources, etc.). By defining the terms of debt-driven climate financing, donor countries and the multilateral agencies force African countries to liberalise their economies and make them ‘conducive’ for foreign investors to leverage on the climate financial instruments they are providing. This has been the method of climate funds promoted by western governments.
This market-oriented, debt-driven approach will further undermine the economies of African countries. Currently, most African countries have an unsustainable debt profile, which is weighing down their development and further impoverishing their people. Africa’s external debt at $645 billion (as at 2021) is already a huge burden on its development (ONE, 2022)[2]. Africa’s external debt is 29% of its GDP, while the total public debts stood at $1.83 trillion as at 2021[3] (62.8% of GDP), an increase of 183% since 2010 (UNCTAD, 2023). This has impacted seriously on the continent’s finances and development. For instance, sub-Saharan Africa’s debt service (public and public guaranteed) of $43 billion in 2021, represent 41% of governments’ revenues (World Bank, 2021)[4]. The median debt servicing to government expenditure ratio, at 10.6% is more than that of health and close to that of education.
Yet, this may actually mask the real dire debt crisis in Africa, as total debt (domestic and external) of many countries are clearly unsustainable, and debt servicing are far more than expenditure on social services. Already, 22 African countries are in debt distress including major economies such as Nigeria, South Africa, Kenya, Ghana and Angola. At least, 23 sub-Saharan African countries have government debt-to-GDP ratio more than 60%. The situation is made worse by the fact that private creditors are holding more of African countries’ public debts. Private creditors’ share of public debts increased from 30% in 2010 to 44% in 2021. This is a significant increase given the astronomical increase in Africa’s external public debt to GDP from 20% in 2010 to 29% in 2021 (UNCTAD, 2023)[5]. The implication of the increasing role of private creditors in Africa’s debt is that the interest rates will be higher while opportunity for debt cancellation or restructuring will be slimmer. For instance, the average cost of borrowing by African countries is 11.6%, which is much higher than the US risk-free 3.1%. This makes servicing and repayment of these debts more difficult for African countries. Worse still, attempts to restructure these debts or seek debt relief will be more difficult with private creditors, whose aim is profit making. On the other hand it will reduce the credit rating of such African country that seek restructuring or relief, and make it difficult to borrow in future.
Yet, Africa is getting more enmeshed in debts under the guise of climate financing. Worse still, many of the climate financing debts end up in the creditor countries, as they provide the technologies for the various projects. More than this, most of the grant projects have piecemeal impacts on African countries, while their funding arrangements and governance are opaque (Omukuti, et al, 2022[6]; CERI, 2023[7]; Germanwatch, 2022[8]), Yet African countries are expected to provide some counterpart funding, not only for grant-based projects, but also debt-funded projects. Furthermore the cost of accessing the services provided by these grants and debts by citizens are so high that few could actually afford them. Consequently, most of the climate funds actually generate limited impact (Afful-Koomson, 2015)[9], while adding to Africa’s debt and economic problems. This was confirmed by a shadow report by Oxfam International on global climate financing, which revealed that, out of the $83 billion purportedly committed by developed countries to climate funding in developing countries, only about $23.5 billion could be reported as real funding support, as most of the funding supports are either mostly non-concessional loans or are not climate-specific. Out of the $24.5 billion purportedly committed to adaptation, the shadow report noted that only $10.5 billion could be reported to be climate-specific and adaptation specific (Oxfam International, 2023[10]).
At least, 31 multilateral and bilateral funds and initiatives were identified as playing a role in the climate financing (Climate Fund Update, 2022). The funding structure and architecture are so complicated that to even monitor and track funds is difficult, as many funds go through different routes and organisations. More than this, most of the funds go through many processes that lead to a significant part of the funds ending up as overhead costs. Moreover, some of the programmes for which the projects were committed have limited impact on the real situation on ground, while some of the projects are simply irrelevant (such as undertaking market survey for sale of clean cooking stoves, training of government officials on market approach, etc.)
Kola Ibrahim, an author and scholar-activist, is a public intellectual and climate justice researcher and campaigner. He can be reached at: kmarx4life@gmail.com, or contacted through: +234 *059399178. This essay is an edited excerpt from his latest book on climate imperialism in Africa.
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