The African Development Bank (AfDB) is proposing a novel currency system designed to attract much-needed investment in Africa's green energy transition. The proposed "African Units of Account" (AUA) would be a non-circulating currency pegged to a basket of critical minerals – cobalt, copper, lithium, manganese, and rare earths – abundant in the continent. This system, drawing inspiration from the gold standard, aims to address Africa's volatile currency markets and attract a larger share of global green investment.
Despite possessing roughly 30% of the world's critical mineral reserves, Africa currently receives only 3% of global energy investment, with just $40 billion allocated to green projects in 2022. The AfDB argues that the AUA would stabilize currency fluctuations, making African projects more attractive to international investors. To meet its climate goals, Africa needs to double its clean energy investment to $200 billion annually.
The AfDB's plan involves countries pooling their critical mineral reserves, allowing conversion of local currencies at a fixed rate. Revenue from energy sales would be used to purchase minerals, which would then be sold to generate dollars for loan repayment, creating a self-sustaining system. The bank believes this will reduce the cost of capital, foster regional financial cooperation, and strengthen Africa's negotiating power in global commodity markets. This, in turn, is projected to significantly reduce Africa's $400 billion annual funding gap and accelerate progress towards sustainable development goals. While details remain to be finalized, the AfDB believes this innovative approach will unlock Africa's vast potential and secure its energy future. The story is from Business Insider Africa.