In the current era of polycrisis, characterised by the COVID-19 pandemic, the Ukraine crisis, debt debacles, and the looming threat of climate change, the African continent has somehow been lost in translation. Rich in natural resources ranging from arable land, critical minerals, natural gas, and wildlife, in a majority of the African countries, natural capital accounts for 30 percent–50 percent of total wealth. Africa’s advantage also lies in its demographic dividend. The 225-million young people aged 15-24 living on the continent today is expected to increase by 42 percent by 2030. As a rapidly developing economy, Africa poses numerous investment opportunities for the development finance institutions (DFIs) in sectoral areas of green energy, agriculture, health systems, etc. Also, the African Union’s vision of transforming Africa into a global powerhouse of the future by 2063 is important to note.
Against this backdrop, the Sustainable Finance in the Indo-Pacific (SUFIP) Development Network, organised its first Roundtable (under the Chatham House rule) on the sidelines of the Kigali Global Dialogue 2023. Focusing on Africa as a part of the larger Indo-Pacific landscape, the discussion centred around the various challenges plaguing the continent. It was pointed out how the increasing instances of climate change were adversely impacting the livelihoods of vulnerable communities resulting in food insecurity. In fact, it was observed that increasing investments towards technology and infrastructure, and encouraging entrepreneurship can boost the sustainability narrative. Another key aspect highlighted during the conversation was the importance of youth and employability. As both, Africa and India, continue to witness the demographic boom, the onus lies on the policymakers to create decent jobs for all to ensure a respectable living.
Despite having policies, systems, and treaties in place, the lack of climate finance is also a reality. This also came out quite strongly during the discussion. Although the African island countries and the littorals carry major significance for the Indo-Pacific construct, the engagements on addressing their challenges remain underdeveloped. Its investment potential has also largely remained untapped. The intersections of shared interests between Africa and the Indo-Pacific from tackling internal political impediments in governance, needing critical infrastructure, dealing with natural disasters, and adapting to climate change to devising sustainable practices in energy and agriculture. This can be attributed to the lack of clarity in terms of defining a ‘green’ project. As it came to the fore, several DFIs are either hesitant or wary to invest in projects with low return on investment (RoI). Therefore, the bankability of projects becomes the deciding factor in financing for climate rather than the urgency to fulfil Agenda 2030. This gap in understanding and defining ‘green’ projects is a major obstacle faced by the environmental sector in a majority of developing economies. The discussion further underscored the necessity of the Global North to move beyond the business-as-usual scenario and devise innovative financing mechanisms for addressing climate change. An observation was also made on the financing behaviour of the traditional West. There is a natural inertia exhibited by the North when it comes to investing in the South—they hesitate to move out of their comfort zones and put in the capital in unknown and unfamiliar territories in the developing world. This is where the private sector can play a vital role in bridging the divide.
When it comes to formulating solutions for building climate resilience in the Indo-Pacific, it was observed that establishing a long-lasting framework of the dialogue and exchanges must be encouraged. One cannot simply impose solutions onto the local communities without understanding their concerns, conditions, and challenges. Evidently, the participants agreed that a more cohesive and coherent North-South approach towards the Indo-Pacific is the need of the hour.
The discussion also touched upon the security aspect and geopolitical risks concerning the region. As observed during the SUFIP launch in March 2023 on the sidelines of the Raisina Dialogue, security and sustainable development are weaved together in the Indo-Pacific matrix. The new power dynamics in the region with the presence of India, France, United States, Japan and now China has opened up new areas of development paradigms. For instance, the roundtable also instilled conversation on the pros and cons of the Fourth Industrial Revolution or 4IR for the economies of the Indo-Pacific, particularly Africa.
The discussants also agreed that development partnerships ranging from North-South and South-South can play a pivotal role in building bridges of trust between the developed and developing regions. Untying aid is crucial to fix the gap in financing for sustainable development. In this respect, some of the participants emphasised on the need to garner political will, cultivate good governance, and encourage diplomacy for development. With the shocking start of the turbulent 2020s, the coming decades are expected to witness the spill-over effects of global economic shocks in the form of chronic food and energy shortage. Undoubtedly, this will impact the African states deeply as they struggle to meet their basic demands of food, fuel, and fertilisers. Indeed, they are a key piece of the Indo-Pacific development finance architecture puzzle. Given its demographic potential, Africa’s growing prominence in the Indo-Pacific dynamics necessitates greater attention to be paid by the development finance actors in the years to come.
This event report is written by Swati Prabhu, Associate Fellow at the Observer Research Foundation
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