Africa’s green industrialisation: AfDB in the theatre of the green economy, By Ayomide Akinwale

Africa’s green industrialisation: AfDB in the theatre of the green economy, By Ayomide Akinwale

So, how can the AfDB help Africa’s green industrialisation? First, overcoming perceived high-risk barriers that limit private capital requires strategic de-risking, achieved through institutional alchemy and targeted financial structuring. To create an enabling environment, there is a need for tax incentives, streamlined business registration, special economic zones, and guarantees that protect private-sector interests. Failing to provide such assurances carries serious consequences.

Development Finance Institutions (DFIs) are vital to the climate finance landscape, disbursing roughly US$121 billion in 2012, according to the Climate Policy Initiative. Beyond channelling public budgets, DFIs can raise funds in capital markets, reinvest earnings, and leverage co-financing with partners. Their role in green industrialisation is critical: the goal is to keep Africa’s greenhouse gas emissions low, while mitigating the effects of climate change and famine. Despite receiving a disproportionate share of global climate finance, Africa faces a 77 per cent climate investment deficit, and only 23 per cent of its needs are currently met. Moreover, the Baku to Belém Roadmap recognises that developing countries will require US$1.3 trillion annually to tackle climate challenges, highlighting the pathological insolvency of climate finance.

Central to Africa’s trajectory is the African Development Bank (AfDB). The continent must chart its own long-term path for green industrialisation. This is not an isolationist pursuit; rather, it calls for short- to medium-term partnerships with early movers such as China. My perspective is grounded in the need to decouple Africa’s structural dependency on developed economies.

So, how can the AfDB help Africa’s green industrialisation? First, overcoming perceived high-risk barriers that limit private capital requires strategic de-risking, achieved through institutional alchemy and targeted financial structuring. To create an enabling environment, there is a need for tax incentives, streamlined business registration, special economic zones, and guarantees that protect private-sector interests. Failing to provide such assurances carries serious consequences. In Ghana, years of weak financial discipline led to roughly US$2.5 billion in arrears owed to private energy producers, undermining investor confidence and straining power generation.

…the AfDB should not focus solely on reducing risk but also ensure that private sector investors are ready to invest in the green economy. This requires a comprehensive policy framework that details Africa’s approach within a defined timeline and translates it into clear, actionable policymaking.

Owing to this erosion of confidence, the AfDB must reconfigure its role in mobilising investment. Commendably, Dr Sidi Ould Tah, President of the AfDB, hosted Africa’s first Private Capital Mobilisation Day in December 2025, raising US$11 billion for the African Development Fund from private sector members. Similarly, to minimise costs and risks of new debt for green infrastructure, the AfDB, as a prescribed holder, can use Special Drawing Rights (SDRs). By rechanneling SDRs, their value could increase by at least three to four times. Furthermore, the AfDB’s establishment of the Private Sector Innovation Lab to address Africa’s US$402 billion annual development financing gap signals that the Bank now recognises the private sector as the engine for growth. However, the AfDB should not focus solely on reducing risk but also ensure that private sector investors are ready to invest in the green economy. This requires a comprehensive policy framework that details Africa’s approach within a defined timeline and translates it into clear, actionable policymaking.

This can be operationalised through a clear green industrialisation framework, exemplified by the African Green Industrialisation Initiative under the Nairobi Declaration, championed by the AfDB, to drive Africa’s green industrialisation with US$100 billion in investment over five years. Other complementary policies, such as the Alliance for Green Infrastructure in Africa (AGIA), which mobilises blended finance to unlock US$10 billion in bankable green projects, and the African Green Banks Initiative (AGBI), which can mobilise at least US$250 billion, are also pertinent.

As optimistic as these initiatives appear, they will not be sustainable if existing problems are unaddressed. For instance, the African Green Industrialisation Initiative rests on the effectiveness of the AfCFTA. Despite Africa possessing critical minerals to develop a clean energy economy, only 2 per cent of its critical mineral exports are traded within the continent. Moreover, the AfCFTA is criticised for logistical deficiencies in infrastructure networks. While the AfDB pursues climate investment, priority should also be given to transport networks to facilitate intra-African trade. Likewise, the AGBI has been ineffective due to the absence of customised investments tailored to individual country contexts, inadequate capabilities within domestic financial institutions, and a lack of private-sector engagement stemming from insufficient investor confidence.

Similarly, the AfDB should lead the strategic use of Africa’s critical minerals as leverage for green industrialisation, facilitating the transition from extractive to manufacturing economies. Africa holds about 30 per cent of the world’s reserves of minerals that a are essential for low-carbon technologies and digital infrastructure, providing the backbone for manufacturing electric vehicles and batteries.

Since the AfDB’s priority is public-private partnerships, with private investors at the core of industrial strategy, the Bank needs a strategic approach. One option is to offer elite bargains and carefully crafted incentives to fossil fuel actors, making alternatives more viable and competitive. For example, sustainable synthetic fuel is a ‘drop-in’ alternative to fossil fuel, which is compatible with combustion engines, and carbon-neutral, though costly. This barrier could be alleviated with tax credits.