Executive Summary
Africa is at the heart of the green energy transition, as vast reserves of many of the critical minerals required to power the clean energy transition are located on the continent. This gives Africa a key opportunity to leverage the global demand for those minerals while reducing the funding gap and helping the continent meet its development objectives.
In 1957, Jean Monnet and Robert Schuman dreamt of a Europe linked by coal and steel, protected from war by the benefits of inter-country cooperation. They could not have foreseen how successful the dream would become, and how effective uniting key countries around a common market for those commodities would be to deter war and enable economic prosperity.
The 1960s saw the development of OPEC, an organisation enabling the cooperation of leading oilproducing nations, to influence the global oil market. Member states leveraged their commodity wealth to power economic development, which ultimately enabled a few oil-rich countries to change the trajectory of their economic destiny.
Today, the imperative to reduce Greenhouse Gas (GHG) emissions through reliance on clean energy is driving another massive transformation - the demand for critical minerals needed for the green energy transition. This creates an opportunity for the African continent to leverage its critical mineral wealth and fast-track economic transformation.
Amidst some rapid changes, there are a few facts that are not going to change over the next 30 years:
• Demand for critical minerals will continue to grow.
• Africa is home to approximately 30% of the critical minerals needed to power the energy transition.
• The pressure to reduce GHG emissions and maintain temperature growth below 2°C is not going to abate.
The central questions are: how will the continent leverage its mineral wealth to attract more investment, and which key objectives will it pursue?
This report suggests a mechanism that enables the continent to leverage its mineral wealth and to attract financing at a lower cost. This is achieved through shielding lenders and investors from the dual currency and convertibility risks that currently constrict international investors’ appetite for investments in transformational projects at scale.
This report proposes a mechanism that mitigates these risks, relying on the fact that a basket of critical commodities holds its value better than any African currency. Using a non-circulating currency underpinned by such a basket to finance clean energy projects in Africa could reliably mitigate the currency and convertibility risks embedded in such projects. This significantly reduces the high cost of financing paid by most African countries and creates an opportunity for a substantial rise in foreign direct investment into the continent.
