Introduction

1.1 Overview and context

Climate finance is undoubtedly one of Africa’s most significant challenges. The region faces a huge financing gap, particularly in adaptation financing. It is estimated that Africa needs US$250 billion annually in conditional and unconditional financing between 2020 and 2030 to implement its nationally determined contributions (NDCs) under the Paris Climate Agreement.^[13] At COP15 in Copenhagen in 2009, industrialised countries committed to collectively contributing US$100 billion annually until 2020 to support developing countries in their climate change needs. Despite expected increases in adaptation costs, estimated to reach US$140 billion to US$300 billion in 2030,^[14] the support pledged for climate finance by the world’s wealthiest economies has failed to materialise. In 2020, only US$83 billion^[15] of the commitment was met, while an average of US$75 billion was delivered between 2016 and 2019. Only around US$20 billion (27%) of this latter amount was provided to Africa between 2016 and 2019.^[16] It is worth noting that this climate financing gap is separate from Africa’s other infrastructure financing gaps.

Aside from developed countries reneging on their climate finance commitments, the structure of existing climate finance continues to perpetuate greater inequities because climate finance to developing countries has largely been disbursed as loans and not as grants.^[17] In 2019, an OECD study^[18] indicated that loans represented 71% of public climate finance. However, the terms of the loans are prohibitive, and their design excludes the poorest and most vulnerable countries from benefitting. Moreover, the heavy dependence on loans has negative social and economic implications for African countries, including contributing to an increase in debt vulnerability, raising the question of why African countries should be saddled with loan repayments and interest to finance their climate actions.

Regrettably, COP26 ended with no major breakthrough on this issue, and parties continue to negotiate on the New Collective Quantified Goal on Climate Finance while they aim to decide by 2024. Going into COP27, Africa needs to make a strong case that the current global climate finance mechanism and architecture are not aligned with realities in African countries and are not meeting Africa’s needs. To contribute to addressing these challenges and capitalising on the agency of African policymakers and practitioners, it is necessary to explore the systems that underpin public climate finance delivery and implementation.

To this end, this report focuses on the current status, practical experiences and perceptions of state and non-state actors in Africa on the issue of climate finance. The report is structured into two parts: first, we conduct a political economy analysis to understand and critique existing global narratives on climate change and climate finance and its application to Africa. Within this context, we also test how global climate financing categorisations (adaptation versus mitigation, and loss and damage, among others) feed into how stakeholders conceptualise these issues at a country level. These global norms are further tested against country-level developmental objectives such as the twin issues of energy poverty and affordability and the pursuit of low-carbon industrialisation.

We also review the evidence base of the barriers to climate innovation and financing in Africa. The second part of the report provides deep dives into case studies in three countries: Ghana, South Africa and Zambia. These countries allow us to provide a nuanced picture of which factors are driving the climate financing flows into exemplar countries and what useful lessons could be learned to shape climate financing policy on the continent.

Based on the analysis and these case studies, this report builds an evidence base on climate finance needs, perceptions, challenges and pathways to solutions.

We expect the report to contribute to discussions before and during COP27 by providing empirical evidence to support negotiating positions around equity and fairness in accessing finance and effectiveness.

Report approach

1.2.1 Objective and scope of work

This report examines the systems that underpin public climate finance delivery and implementation in Sub-Saharan Africa. It will contribute to discussions before and during COP27 by providing empirical evidence to support negotiating positions around equity and fairness in accessing finance and effectiveness.

The report entails the following:

1. Analysing the needs and challenges of African countries regarding climate finance from the country perspective.
2. Undertaking a stakeholder mapping of organisations engaged in climate finance in selected African countries.
3. Leveraging the research output to commence a series of advocacy engagements with identified stakeholders to influence development planning on climate financing in Africa

1.2.2 Methodology

The methodology used in producing this report encompassed qualitative, quantitative and political economy analyses (Fig 1-1), which are explained in more detail below.

Qualitative analysis

Literature review: We extensively reviewed relevant documents across Africa’s climate financing landscape. The literature review aimed to understand the main stakeholders and their responsibilities or mandate concerning climate finance policy formulation and investment attraction on the continent. We, furthermore, drew case study parallels from African countries that have demonstrated a commitment to and an attracting of climate financing for projects (both adaptation and mitigation). These case studies provide a more nuanced picture of which factors are driving the climate financing flows^[19] into countries and what useful lessons can be learned about shaping climate financing policy on the continent.

• South Africa – the highest recipient^[20] of multilateral climate financing on the continent and sixth highest internationally. However, only about 10% has been directed to adaptation. The largest share of funding went into energy projects, transportation and storage.
• Ghana – mid-tier multilateral climate financing on the continent. The largest share of funding went into agriculture, forestry, fishing and the energy sector.
• Zambia – received relatively high amounts of adaptation financing relative to the country’s assessed climate vulnerabilities.^[21]

Stakeholder mapping and analysis: This research involved a deep dive mapping and analysis of the different stakeholders involved in climate financing in three selected countries (Ghana, Zambia and South Africa) to understand stakeholder interests and needs and how they have evolved, especially in the context of the energy transition and climate financing. This understanding was accumulated through selected stakeholder interviews (interactions/engagements) with persons and organisations engaged in the national policy debates on these issues. This exercise also helped identify possible misalignment in stakeholder interests and motivations vis-à-vis climate financing and the energy transition.

The framing questions asked during the stakeholder consultations are listed in the Table 1.1.

Quantitative analysis

Analysis and reconciliation of climate finance collected from different multilateral, bilateral and national stakeholder institutions.

Spreadsheet-based data triangulation to establish the potential gaps and misalignments in climate funding vis-à-vis the commitments that the three countries have made as per their respective intended NDCs.

Political economy analysis

The findings from the qualitative and quantitative analyses were analysed in more depth using a Problem-Driven Political Economy Analysis (PDPEA) to identify the root causes or bottlenecks to attracting climate financing, allowing us to propose possible intervention areas(recommendations).

Fishbone (Ishikawa) diagrams of sector governance or policy problems were used to identify the root causes of each problem and entry points for each issue in terms of intervention or output areas.

This all-encompassing approach allows the harnessing of the underlying data and the views of multiple stakeholders on leveraging the opportunities within Africa’s climate financing landscape.

Table 1.1 Framing questions for stakeholders

Fig 1.1: Research methodology outline

1.3 Report structure

The remainder of the report is structured as follows:

Section 2 lays the conceptual foundations of climate financing and underlying geopolitics.

Section 3 covers the Ghana country case study.

Section 4 covers the South Africa country case study.

Section 5 covers the Zambia country case study.

Section 6 harnesses the cross-thematic issues from the case studies and a broader continental level review.