Africa is blessed with enormous natural capital. The continent holds 8% and 12% of the world’s natural gas and oil as well as 40% of the world’s gold; it is estimated to have 30% of the world’s critical minerals and has potential to produce green hydrogen with 60% of the world’s best solar resources.
Still, the continent is the world’s most impoverished region and poor headcount continues to rise. In 2014, just 14% of the world’s poor lived in Africa; in 2019, the number rose to 57% in 2019. Population growth, wars and conflicts, climate change, diseases, inadequate agriculture infrastructure and unjust trade structure with America and Europe heavily subsidizing their agriculture sectors have caused poverty crises across the continent to aggravate.
Other factors such as gold smuggling worth $30 billion every year, global economic conditions, geopolitical rivalries and debt service payments have contributed to poverty too, leaving African governments with limited financial resources to channel funds to fight poverty and climate change.
Slower economic growth, after it averaged 5% between 1999 and 2014 and brought poverty down from 57% to 38%, is also a major reason behind rising poverty. According to Africa’s Pulse most recent report, economic growth in the region is likely to bounce back and reach 3.4% in 2024 and 3.6% in 2025; this expansion it warns will be “insufficient to have a significant effect on poverty reduction.”
With $6.5 trillion of natural resources and 65% of the world’s uncultivated arable land, resource-rich countries have no excuse to remain poor, said African Development Bank Group President Dr Akinwumi Adesina last year, noting the Bank and its partners had provided $4.6 billion to develop dozens of Special Agro-Industrial Processing Zones in 26 countries.
As demand for some of key substances such as lithium, between 2017 and 2022 tripled while that of cobalt and nickel jumped 70% and 40%, critical raw materials such as cobalt, copper, magnesium and lithium – critical to global energy transition and are found in abundance in the continent – urges regional countries develop a joint plan to capitalize on the opportunity to promote green industrialization in Africa.
“Imagine the potential if African minerals are processed into African batteries, installed into African cars that are driven across the continent and the world,”
said UN Economic Commission for Africa’s deputy executive secretary, Antonio Pedro at a recent event in Addis Ababa, stressing this would accelerate the deployment of renewable energy and electrification of transport systems, generate jobs and transform Africa into a competitive hub for green industrialization.
The European Union (EU) lacks most of these resources and needs them to sustain their strong industrial base. Critical raw materials indeed were also one of six themes of the EU Global Gateway Forum 2023 for their crucial role in achieving the Union’s climate ambitions. Given the bloc has financial strength and technical expertise in developing key industries, it could be a valuable African partner for the continental industrialization.
In the G-20 Compact with Africa conference in Berlin, German Chancellor Olaf Scholz announced to invest €4 billion in Africa’s green energy through 2030 on top of the EU €3.4 billion. But the package omitted industrialization, an area where the continent’s interests really lie over its potential to create jobs and accelerate inclusive and sustained growth, diversify the economy and reduce poverty.
Africa also seeks to leverage green hydrogen for its industrialization and decarbonization. It is ideally positioned to produce three-fifths of the world’s green hydrogen but accounts for just 1% of the global solar generation capacity. Africa’s geographic proximity to Europe and unique position to flip the script on fossil fuel could pave the way for a robust Africa-EU partnership.
Since continent has a potential to produce $1.06 trillion of green hydrogen yet needs massive upfront investments, the EU investments can help foster green industrialization in Africa where foreign direct investment (FDI), after nearly halving in 2022 against a record $80 billion in 2021, was almost flat at $48 billion in 2023.
Under the Global Gateway, Brussels has announced a €150 billion of investment package for Africa including scaling up African hydrogen production and exporting it to Europe. The initiative aims to accelerate Africa’s green and digital transition, sustainable growth including regional economic integration and industrialization and decent job creation; more focus should be given to industrialization for it will increase productivity, raise living standards and lift people out of poverty in Africa.
Africa is slated to play a pivotal role in the achievement of the EU goal of becoming climate-neutral by 2050. While Brussels should address Africa’s concerns such as its “protectionist” carbon border tax on goods such as steel and cement – which could hamper the continental GDP, developing countries’ exports to Europe and efforts to raise investments – the bloc must actively support Africa’s industrialization to make this partnership a win-win cooperation.
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