Sub-Saharan Africa, the region most vulnerable to the effects of climate change, needs far more investment in energy and infrastructure, says Standard Bank, Africa’s largest lender by assets.
Standard Bank CEO Sim Tshabalala told the annual meeting of members of the Institute of International Finance (IIF) in Marrakech on October 13 that climate change emerges as one of the most significant risks facing the sub-Saharan region today, even if Africa has contributed the least. .
The IIR Annual Membership Meeting is one of the most important annual meetings of the World Bank Group and the International Monetary Fund. The IIF is the leading trade group for the global banking industry and the meeting brought together central bankers, policymakers and senior financial officials to discuss key issues including the global economic outlook, financing the climate transition and debt emerging markets.
Tshabalala said some of the most pressing constraints were in the region’s most industrialized and diversified economy – South Africa.
“But there is good news. The electricity market was liberalized and many new investments followed. Given the new capacity being installed, Standard Bank experts are confident that the electricity constraint will begin to lift over the next 18 months – and indeed, there are early signs of improvement,” did he declare.
Speaking about the obstacles to external financing of EMEs, particularly under market stress, Tshabalala said research showed that African sovereigns had to pay significantly more for their debt than equivalent (or lower-rated) emerging markets. .
One potential solution lies in the liberalization of exchange rates, where a freely floating currency reduces uncertainty and arbitrariness, attracts more private sector investment and boosts growth and government revenue. It also allows countries to be more competitive in export markets, with the same positive effects on growth and budget revenues.
Budgetary transparency would also be crucial. “This could happen almost as quickly as exchange rate liberalization, because that too requires courage rather than many years of capacity building,” he said.
“At Standard Bank, we certainly also see the benefit of increased use of regional currencies in regional trade – it is potentially cheaper and less risky, and we are early enthusiastic participants in the pan-African payment and settlement system . But the existence of reserve currencies cannot be willed and, at least in the medium term, there is no substitute for the combination of deep liquidity, full convertibility and universal acceptability of the dollar,” he said. he continued.
Tshabalala said: “As we have heard here in Marrakech, the global mood is fragile and worried – a tentative recovery appears to be underway but could easily be derailed. But it is very pleasant to be able to say that Africa is a positive point in an overall rather gray picture. Standard Bank agrees with the IMF that sub-Saharan Africa will grow at around 4% annually, or slightly faster, until 2027, and will become the fastest growing region fastest in the world from the 2030s. Then, for the rest of the century, we expect Africa’s population to continue growing rapidly – in stark contrast to the rest of the world. – and that it will continue to become healthier, wealthier, better educated, more urbanized, more digitally connected and more productive.