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Good afternoon, everyone! I would like to extend my gratitude to Chatham House for inviting me to speak today. It is wonderful to be back at this globally renowned think tank, where contemporary issues are rigorously debated and discussed. The last time I addressed this audience was during my campaign for the presidency of the African Development Bank in 2015. Much has transpired since then: I was elected in 2015 and re-elected for a second term in 2020, receiving unanimous support from all 81 shareholder countries, both African and non-African.

Envisioning Prospect

It is particularly timely that I am speaking to you just days after the Annual Meetings of the African Development Bank Group, held last week in Nairobi, Kenya. There, our shareholders unanimously approved an additional $117 billion increase in the Bank’s capital. This follows a previous general capital increase in 2019, which raised the Bank’s capital from $93 billion to $201 billion. The latest infusion brings the African Development Bank’s total capital to $318 billion. This significant boost in financial capacity underscores the confidence our shareholders have in the Bank’s vision for Africa and our commitment to accelerating the continent’s growth and development. They have endorsed our High 5 priorities (Light Up and Power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the Quality of Life for the People of Africa), which have impacted over 400 million people over the past eight years. With this new capital, we can achieve even more.

It is with the excitement of this momentum that I am delighted to speak to you today on “Envisioning Africa’s Economic Prospects.” Recently, The New York Times headlined that the future is African. I concur. Africa can no longer be overlooked. I firmly believe that Africa will become the pivotal continent in the global economy due to its promising prospects.

Firstly, Africa’s population is projected to reach 2.5 billion by 2050, meaning that one in four people on earth will be African. With a rising middle class and projected consumer and business expenditures set to reach $7 trillion, Africa represents a formidable future market. Secondly, with nearly a billion young people under the age of 35, Africa will have a booming talent pool and will constitute a significant portion of the global workforce. Thirdly, with 65 percent of the world’s remaining uncultivated arable land, Africa’s agricultural productivity will be critical in feeding the projected global population of 9.7 billion by 2050. Fourthly, the future of energy transition towards renewable sources will heavily depend on Africa. The continent has the world’s largest solar potential, essential for developing green hydrogen and green ammonia, which will power global green economies aiming for net-zero emissions. Additionally, Africa holds the largest deposits of green minerals and metals—such as platinum, copper, nickel, manganese, chromium, graphite, and lithium—vital for manufacturing solar panels, battery energy storage systems, and electric vehicles, a market expected to grow to $57 trillion by 2050.

Fifthly, the African Continental Free Trade Area, which unites all 54 African countries with an estimated GDP of $3.4 trillion, is on track to becoming the largest free-trade zone in the world. Therefore, economic trends and growth in Africa are central to the global economy as the continent prepares to play a significant role.

Ladies and gentlemen, despite challenges posed by the Covid-19 pandemic, geopolitical risks, high food and energy prices, and rising global interest rates, African countries are demonstrating economic resilience. Africa’s real GDP growth increased from 3.1 percent in 2022 to 3.7 percent in 2023 and is projected to reach 4.3 percent by 2025, according to the African Economic Outlook Report of the African Development Bank. Africa is the second fastest-growing region in the world, second only to Asia, and boasts 10 of the 20 fastest-growing economies globally.

To unlock Africa’s economic potential, we must focus on structural economic transformation, enhancing agricultural productivity, providing reliable electricity, accelerating infrastructure investments, supporting rapid digitalization, and creating economic and job opportunities for women and youth. Furthermore, driving industrialization through greater private sector mobilization is essential. Ensuring food security in Africa remains a top priority for the African Development Bank.

Over the past eight years, we have provided nearly $10 billion to support agriculture. Our flagship initiative, Technologies for African Agricultural Transformation (TAAT), has delivered climate-smart agricultural technologies to 13 million farmers. For example, our support for heat-tolerant wheat varieties in Ethiopia has transformed the country into a wheat self-sufficient nation in less than four years. The African Development Bank is also developing Special Agro-Industrial Processing Zones in eleven countries to support agro-industrialization and the development of agricultural value chains. This is critical to unlocking the value of Africa’s food and agribusiness, estimated to be worth $1 trillion by 2030.

Unlocking Africa’s vast renewable energy sources and ensuring energy supply, access, and security is central to the continent’s economic prosperity. Currently, nearly 600 million people in Africa lack access to electricity. Since the African Development Bank launched its New Deal on Energy in 2016, significant progress has been made, with the population’s access to electricity expanding from 32 percent to 57 percent. To further expand access, the African Development Bank is implementing a $20 billion initiative called Desert-to-Power, aiming to develop 10,000 megawatts of solar electricity across 11 countries, connecting 250 million people. During the Spring Meetings of the World Bank earlier this year, the President of the World Bank and I launched a bold joint effort to connect 300 million Africans to electricity by 2030.

Ladies and gentlemen, the African Development Bank is heavily investing in human capital to unleash Africa’s growth potential, including tapping into the scientific talents in the diaspora. We are supporting universities of science and technology, expanding training in science, technology, engineering, and mathematics (STEM), centers of excellence in biotechnology and material sciences, as well as technical and vocational training. We have committed $700 million for education and skills development, supporting 4,000 tertiary education and training facilities, and providing 1.7 million African youth with access to STEM education. The African Development Bank is also supporting Coding for Employment Programs, providing critical digital skills in computer coding in partnership with Microsoft Philanthropies. This initiative is essential to continue driving the expansion of the rapidly growing fintech industries in Africa. The continent has witnessed a tripling in the number of startups, reaching 5,200 between 2020 and 2021, with fintech revenues projected to reach over $30 billion annually by 2025. This trend aligns with estimates from Google and the International Finance Corporation, predicting Africa’s internet economy will reach $180 billion by 2025 and $712 billion by 2050.

Unleashing the potential of the digital economy requires large investments in digital infrastructure, including fiber optics, data centers, and the expansion of mobile networks to improve connectivity. To support young entrepreneurs in Africa and drive greater entrepreneurship, the African Development Bank is establishing Youth Entrepreneurship Investment Banks across the continent. These new financial institutions will provide tailored financial instruments to build the businesses of young people and foster youth-based wealth, reducing migration. The first Youth Entrepreneurship Investment Banks have been approved for Liberia ($16 million) and Ethiopia ($32 million), with several more in the pipeline. We are also focusing on women. The African Development Bank’s flagship initiative, Affirmative Finance Action for Women in Africa (AFAWA), is de-risking financial institutions to lend to women. AFAWA is working with 169 financial institutions in 43 countries and has so far approved $1.7 billion in financing for 18,300 women-led businesses, with a goal to mobilize $5 billion for women-led enterprises.

Ladies and gentlemen, to enhance regional integration and support the success of the African Continental Free Trade Area, the African Development Bank has provided nearly $50 billion in infrastructure project support over the past eight years. This includes the construction of roads, transport corridors, railways, ports, water and sanitation facilities, and digital infrastructure.

To support Africa’s transition to net-zero emissions, the African Development Bank has launched the Alliance for Green Infrastructure in Africa (AGIA) to mobilize $10 billion in private financing for green infrastructure. We are mobilizing more private sector investments into Africa, such as supporting the $24 billion LNG project in Mozambique, expected to generate over $66 billion in revenue and position Mozambique as the world’s third-largest LNG exporter. Additionally, we supported the $19.5 billion Dangote Refinery Complex, the largest single-train refinery and the largest ammonia plant globally. We also backed the $13 billion OCP phosphate company in Morocco, the world’s largest phosphate fertilizer plant.

Ladies and gentlemen, a major challenge for private sector investments is risk—particularly market risks, counterparty risks, exchange rate risks, and political risks. To mitigate these, the African Development Bank deploys partial risk guarantees and partial credit guarantees, which have proven effective and have become a significant part of our business. For example, our EUR 195 million partial credit guarantee allowed the Republic of Benin to raise EUR 350 million from international banks and investors, extending maturity from 10 to 12.5 years at a low interest rate, around 290 basis points below the Eurobond yield curve for similar maturities. Our $345 million partial credit guarantee enabled Egypt to access private capital markets by issuing a Panda bond, the first ever Panda bond issued in China by an African sovereign. This bond, with a 100% guarantee from the African Development Bank and the Asian Infrastructure Investment Bank, won the Sovereign, Supra, and Agency bond deal of the year at the 2024 Bonds, Loans, and ESG Capital Markets Awards. Partial Risk Guarantees are being successfully used to attract private investors to projects with governments. For instance, the Bank is utilizing up to $800 million in partial credit guarantees to mobilize a commercial loan of $1.35 billion for financing the 6th lot of the Standard Gauge Railway from Tanzania, DRC, and Burundi, leveraging the Bank’s resources 3.4 times.

Ladies and gentlemen, another significant challenge for the private sector is foreign currency exchange risk, which arises due to the mismatch between foreign currency-denominated loans or equity investments and the local currency earnings of companies or counterparties. The Bank provides loans in eleven local currencies and deploys local currency products. Additionally, the Bank uses various instruments to support local currency lending, including synthetic local currency loans and private sector FX hedging institutions like TCX.

Global institutional investors often shy away from allocations to Africa due to high-risk perceptions. Consequently, African countries suffer from high-risk premiums, with the cost of accessing capital on the continent being at least three times that of other emerging markets and developing regions. This “Africa risk premium” leads to underinvestment by the private sector in Africa. However, perception is not reality. Moody’s Analytics conducted a 14-year survey on cumulative default rates on infrastructure loans in various regions worldwide. The results showed that the default rate in Africa was 1.9%, compared to 6.6% in North America, 10% in Latin America, 12% in Eastern Europe, and 4.3% in Western Asia. To help the African Development Bank transfer risks off its balance sheet to private institutional investors and insurance markets, the UK’s Foreign, Commonwealth & Development Office (FCDO) provided the Bank with a $2 billion guarantee, freeing up $2 billion in new lending to support climate finance. The UK FCDO also provided a $1 billion guarantee to free up the same level of financing for the African Development Bank to finance just energy transitions in South Africa. The Africa Investment Forum offers a transparent platform for investors interested in Africa to meet, assess projects, evaluate risks, seek counter-risk mitigants, and address political risks to investors. Since its establishment in 2018, the Africa Investment Forum has attracted over $180 billion in investor interest in Africa.

Ladies and gentlemen, there is no doubt that Africa’s economic prospects are strong. However, achieving them will require overcoming significant headwinds. Foremost among these is building the continent’s resilience to climate change. Africa loses $7–15 billion annually to climate impacts, a figure expected to rise to $50 billion by 2030. From more frequent and intense floods to droughts, no part of Africa is spared. Yet, Africa receives only 3% of global climate finance, with $30 billion allocated annually for climate adaptation, despite its needs being $277 billion annually. The African Development Bank is supporting African countries in tackling climate change. We have significantly increased the share of climate finance in our annual lending from 9% in 2016 to 55% last year. The Bank is implementing a $25 billion initiative, the African Adaptation Acceleration Program—the largest climate adaptation program in the world—in partnership with the Global Center on Adaptation.

Another headwind is rising debt levels, with 22 countries at risk of high debt distress. This is particularly concerning as concessional financing has declined globally, leading more countries to rely on private commercial creditors and the Eurobond market. With Africa’s debt service payments projected to be $74 billion this year, up from $17 billion in 2010, urgent action is needed on comprehensive debt treatment and resolution for Africa.

Ladies and gentlemen, to address these headwinds, Africa will need significantly more financial resources. Reforming the global financial architecture is critical for this. Action is needed in five areas. First, the G20 Common Framework on debt treatment must deliver faster debt resolution for countries to avoid a “lost decade” similar to the 1990s. Second, the global financial architecture must provide greater concessional financing for Africa, reversing the dependence on commercial debt for development. The African Development Fund, which supports Africa’s 37 low-income countries, will need at least $25 billion for its 17th replenishment to be bolder, bigger, and more effective in providing much-needed concessional financing. Third, the global financing system must do more for Africa to avoid economic divergences that slow down the continent’s recovery in the face of global shocks. This disparity was evident during the Covid-19 pandemic when developed countries provided fiscal stimulus equivalent to 18% of global GDP ($19 trillion), while Africa could only provide 4.5% of its GDP ($85 billion). The African Development Bank is developing an African Financial Stability Mechanism to better shield African economies from liquidity shocks and build economic resilience. Fourth, the global contingent financing system must deliver more for Africa. The $650 billion Special Drawing Rights (SDRs) issued by the IMF allocated only $33 billion to Africa, or 4.5%—despite the continent’s substantial needs. The recent approval by the IMF Board for the use of SDRs for hybrid capital, as per the framework developed by the African Development Bank and the Inter-American Development Bank, is a very positive development. The approved $20 billion SDR rechanneling for hybrid capital can be leveraged four times by the African Development Bank, Inter-American Development Bank, and others to deliver at least $80 billion of additional financing for Africa and other regions. Fifth, African countries need fairer access to global capital markets to reduce liquidity pressures and lower debt service payments. Fairer credit ratings for African countries could save at least $75 billion annually in debt service payments, according to the United Nations Development Program.

Ladies and gentlemen, Africa’s trajectory will be much stronger as we tackle these challenges, improve security, expand concessional financing, and increase private sector investment. Ultimately, what will make the most significant difference is the mobilization of domestic resources. This requires continued strong macroeconomic and fiscal management, expanding tax revenues, reducing corruption and illicit capital flows, improving public financial management, and unlocking Africa’s vast natural capital wealth, estimated at over $6.8 trillion.

Ladies and gentlemen, the Africa we want is within reach. We are making good progress. With strong political will, global partnerships, and regional cooperation, Africa will emerge as the pivotal continent—an Africa that is critical to the world’s future, thriving, peaceful, and prosperous. This is the vision Africa deserves.

It is a vision we must do all to achieve.

Thank you very much.

  • Being a Keynote delivered by Dr. Akinwumi A. Adesina, President and Chairman of the Boards of Directors African Development Bank Group, at Chatham House, London on June 7

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