2. The establishment of the AAMFI

The AAMFI, or the Africa Club, was launched during the thirty-seventh African Union Assembly of the African Union Heads of State in Addis Ababa in February 2024.Footnote ⁶ Members of the AAMFI include the African Export Import Bank,Footnote ⁷ the Africa Finance Corporation,Footnote ⁸ the Africa Reinsurance Corporation,Footnote ⁹ the Trade and Development Bank,Footnote ¹⁰ the Shelter Afrique Development Bank,Footnote ¹¹ the ZEP-RE (PTA Reinsurance Company),Footnote ¹² and the African Trade and Investment Development Insurance Agency.Footnote ¹³ This category excludes the African Development Bank because its shareholding structure includes a significant portion held by non-Africa shareholders, mainly developed economies.Footnote ¹⁴ Afrexim Bank is the interim Secretariat of the Alliance.Footnote ¹⁵ In July 2024, the Governing Council of the AAMFI met on the margins of the African Union’s sixth Mid-Year Co-ordination Meeting and welcomed two new members: the African Solidarity Fund and the East African Development Bank.Footnote ¹⁶

The AAMFI was established to promote collaboration, cooperation, and coordination among the multilateral financial institutions owned and managed by Africans and established by treaty to support Africa’s economic development and integration objectives. The AAMFI will collaboratively develop tailored solutions and financing tools to meet Africa’s unique developmental needs while amplifying the voices of member states and shareholders on the global stage. The AAMFI aspires to address the peculiar needs of African states and expedite their access to essential financing mechanisms in ways that do not require unfair and asymmetrical conditions. The AAMFI is a response to the inadequacies of the global financial architecture and seeks to promote African finance development needs and advocate for Africa at the international level.Footnote ¹⁷ Seen in its proper context, the AAMFI is not only an alternative source of financing for African states, but it also paves the way for a new era of inclusive and sustainable financial development. But that is not all.

3. The AAMFI as a bulwark for Africa’s voice and representation in the international financial architecture

African financial architecture is an integral part of Africa’s agenda of continental renaissance and long-standing vision of collective self-reliance.Footnote ¹⁸ AMFIs are an important piece of the framework of Africa’s burgeoning international economic and financial law governance. As children of necessity, AMFIs are pivotal to Africa’s socio-economic development agenda and were created to help African states fill gaps that neither the multilateral development banks, bilateral creditors, and private creditors could fill in times of crisis.Footnote ¹⁹ The evolving landscape of international economic and financial governance in Africa, which is characterized by praxis with palpable impacts on the peoples of Africa, must not be treated in isolation. In context, the African financial architecture and AMFIs should be viewed as Africa’s response to the contemporary global financial architecture that has precipitated and responded to the racialized legacies and hierarchies that have historical roots in the post-colonial order of the post-Second World War era. The manifestations of these violent colonial legacies are often weaponized by the present-day post-colonial elite whose interests align with other transnational capitalist elites and interests. AMFIs are, thus, central to changing the patterns of lending and dependence that characterize the financial relations between African states and the Bretton Woods institutions. While the AMFIs navigate their full operational impact on the continent, they hold important roles in financing African states’ socio-economic development projects.

As a multilateral lender, an AMFI provides important alternative financing for African countries. The uniqueness of the AMFIs and their lending practices to African states lies in their core alignment with the economic realities and needs of African states. AMFIs understand the economic vulnerability that dominates the financial landscape of African countries and increasingly offer products that respond to the challenges that African states confront. In contrast to their Bretton Woods counterparts, their lending practices, thus, are not neither entrenched in a history that is checkered by neo-colonial interests and racial hierarchy or laden with fiscal conditionalities.

The AAMFI is a catalyst to addressing the deficit of inequitable and unjust governance in the global financial architecture. Beyond the role of AMFIs as bulwarks against imperialist international financial lending practices, the AAMFI offers an important springboard for African states to re-order their voice, representation, and participation in a global financial architecture that otherwise does not prioritize their socio-economic development interests. Further, the AAMFI shores up Africa’s vulnerability in a fast-increasing unfavourable global economy. The success of the alliance portends the emergence of a potential regionally influential financial institution that does not entrench African states in a path dependency that is dominated by the IMF and the World Bank and entrapment in the cycles of indebtedness. The AAMFI offers an endogenous panacea to African-centred solutions for African challenges.

Deepening the praxis of AAMFIs in Africa is not a substitute for ongoing efforts for “greater voices and representation in the decision-making structure of the key IFIs.”Footnote ²⁰ Instead, they are a call for a recognition of the plurality of multilateral financial institutions, which, while regional in their emergence and operational focus, nevertheless are focal to the true realization of a sustained, effective, and meaningful realization of Africa’s voices and representation in the global financial architecture. There is an important context within which the AAMFI must be situated, studied, and understood. The historical indebtedness of African countries is a systemic, structural, and endemic feature of the global financial order. Given the long-standing nature of sovereign indebtedness, it requires fundamental or structural reform both at the global, regional, and national levels. Accordingly, the AAMFI is an important regional response by African states to the deficit of financial justice in the global economic order.

Yet the AAMFI as a response to the inequities that characterize the contemporary international financial system does not have a hidden agenda. The AAMFI is a unified regional voice for Africa in global financial governance. Operationalizing the AAMFI will not come without its own challenges, which may be external or internal to the continent. For now, while there is internal support within the African Union for the AAMFI, an external challenge is currently unfolding in relation to the preferred credit status of AMFIs and the divergence in understandings between the IMF and the AAMFI. While the alliance can expect a push back by the IMF and the World Bank, it must confront such strategic maneuvers with the boldness of the vision of the alliance and resilience that is founded on the ultimate objective of the generation leading the new financial pathway for African states to pursue their development.

4. On the AMFI’s PCS

In this section, I reflect on the emerging threat to PCS for AMFIs.Footnote ²¹ There is a fundamental divergence of views between the perspectives of the AAMFI and the IMF on the characterization of PCS. Whereas AMFIs conceptualize their PCS as a consequence that flows from their establishing treaties, the IMF and other Bretton Woods institutions have a set of criteria that does not capture the essence of the AMFIs. In the IMF’s view, these include private sector shareholding, global interests, concessional lending and credit rating, and concessionality management. While analyzing the scope and application of these criteria is beyond the scope of this essay, the AMFIs contend that the criteria have limitations and are contradictory. As “the practices of the IMF, the Paris Club and private creditors are opaque, inequitable and insensitive to the needs of borrower countries,”Footnote ²² it is not unreasonable that the AMFIs are confronted with a potential double standard in their treatment vis-à-vis other multilateral funders.

A preferred creditor in the international financial system is a sovereign or organization that is exempt from participating or that has priority in being repaid in debt-restructuring arrangements if a debtor finds themselves in debt distress. PCS is one of the key drivers of multilateral lenders’ financial strength. For international financial institutions with PCS, their loans would not be subject to write-downs during debt restructurings. Accordingly, the loans offered by multilateral development banks (MDBs) would be exempt from restructuring arrangements. It is equally important to note that, while PCS cannot be unilaterally declared by a financial institution, the characterization is also not apolitical.Footnote ²³

Importantly, there is no legal basis for PCS. The phenomenon of PCS is a market convention as opposed to an express assertion or presumptive recognition by an institution endowed with authority to confer such a status. Arguably, PCS is implicit in the foundational architecture of a financial institution that operates as a multilateral lender. As Perraudin William, Powell Andrew, and Yang Peng note,

On the one hand, the AMFI members contend that the treaties that establish the AMFIs conferred on them special rights; privileges such as PCS; and, in most cases, diplomatic immunities to safeguard and protect their assets and operations. Historically, MDBs and AMFIs were viewed within the international financial system as having PCS. On the other hand, the IMF argues that PCS is derived from the recognition of third parties, including the IMF and other creditors. AMFIs argue further that their PCS does not derive from third party recognition. The African Union has reinforced the position of the AMFIs that they have PCS.

The question is, why has the PCS of AMFIs come under such close scrutiny? There are at least two reasons, I argue. First, the spate of debt restructurings in African states pitches the interests of various creditors against each other in the race for seniority. As a handful of African states like Chad, Zambia, Malawi, and Ghana have sought to restructure their loans post-COVID 19, questions have emerged regarding the PCS of AMFIs.Footnote ²⁵ The threat to the PCS of AMFI members, such as Afrexim and the Trade and Development Bank, should be a cause for concern not only for the institutions but also for the African Union and the broader African financial architecture. Debt restructuring, especially for institutions with no PCS, has negative consequences for their financial strength as they may take “haircuts.” Specifically, during debt-restructuring negotiations, attempts are made to classify debt owed by African states to AMFIs as being owed to “plurilateral” or “regional” lenders and not multilateral lenders. Further, the rights conferred on the AMFI by African governments under the treaties establishing them precludes all countries from subjecting their loans to moratoriums and restructuring. Indeed, through its Specialized Technical Committee of Ministers of Finance, Monetary Affairs, Economic Planning and Integration, the African Union adopted a declaration calling for African governments to continue strengthening relations with AMFIs^, Footnote ²⁶ including respecting their PCS in line with their treaties.Footnote ²⁷ As such, a state party that fails to respect the privileges and rights conferred on these institutions by their treaties will be in clear breach of its treaty and domestic law obligations, especially when the treaties have been domesticated and incorporated into national law as part of the ratification process. Accordingly, for AMFIs, PCS is crucial in ensuring access to productive development financing, reduced costs of borrowing, and the deepening of African domestic and continental capital markets.

Second, the concern has been exacerbated because of a recent JP Morgan research note that has been referred to in the media, which questions the PCS status of two AMFIs.Footnote ²⁸ According to reports, the JP Morgan research note suggested that AMFIs, like Afrexim Bank and the Trade and Development Bank, may not benefit from PCS when it comes to recommended restructuring plans for certain countries such as Malawi and Zambia.Footnote ²⁹ However, prior to the JP Morgan research note, in 2022, the IMF published a policy paper entitled “Review of the Fund’s Sovereign ARREARS Policies and Perimeter,” where it raised an alarm over the growing number of regional IFIs.Footnote ³⁰ While the report does not expressly query the PCS of AMFIs, I contend that the intimation of their growing number as a source of concern fuels a narrative that the institutions are now encountering.

Given the impact of PCS on the financial stability of financial institutions, characterizing AMFIs as institutions with no PCS portends dire consequences for the African financial architecture. Likewise, it would negatively affect the critical roles that the AMFIs play, especially when African states are confronted with emergencies. Accordingly, the AMFIs’ financial strength may be undermined without PCS. The implications that arise from such classifications impact three core constituencies: Africa states; AMFIs; and continental development projects, especially as envisaged by the African Union Agenda 2063. To be clear, a potential unequal treatment of AMFIs would widen the gap and capacity of the financial institutions in Africa to offer a meaningful alternative to the Western-dominated international financial architecture. As the Governing Council of the AAMFI notes, “[t]he African Union’s rejection of recent attempts to weaken the preferred creditor status of African-owned and controlled multilateral financial institutions, and the AU’s [African Union] commitment to strengthen AMFIs underscores these institutions’ pivotal role in Africa’s financial architecture. This ensures that AMFIs can continue supporting African sovereigns’ development and drive economic growth.”Footnote ³¹ The leverage that the AMFIs have also built over their short existence risks being undermined rather than consolidated. The risk of reneging from treaty obligations by African states could also lead to a moral hazard with greater costs imposed on other states. Ultimately, the credit rating of the AMFIs concerned may indeed be consequently impacted.Footnote ³² This would only serve to increase the continent’s dependence on external financing.

To nurture the capacity of the AMFIs to meet the financial needs of African states and strengthen their debt negotiation position, it is essential for African states not to undermine their treaty obligations to AMFIs during debt resolution or restructuring and beyond. Equally, it is important for their status as multilateral financial institutions with PCS to be recognized. As the AMFIs continue to push back on the IMF, the 2014 United Nations principles on establishing a multinational legal framework on sovereign debt restructuring — sovereignty, good faith, transparency, equitable treatment of creditors, sovereign immunity, legitimacy, sustainability, and majority restructuring — offer a relevant and important guide.

2. The trajectory of credit rating in Africa

Sovereign credit ratings are important for developing countries as they tend to rely heavily on borrowing for development. In the past decades, the realization that external aid alone is not sufficient to meet the economic needs of the continent has caused African countries to resort to sources of funding such as foreign direct investment (FDI) and borrowing from international capital markets through the issuance of sovereign bonds. A minimum requirement to borrowing from international capital markets, however, is the receipt of a credit rating from the three leading international rating agencies, which serves to inform investors of the creditworthiness of sovereign borrowers.Footnote ¹⁰

The three dominant international rating agencies assess a country’s creditworthiness and estimate the level of risk associated with lending to the countries that they rate. Using a combination of qualitative and quantitative variables, factors such as economic development, political environment, rate of inflation, and external debts are considered in assigning a rating. With all three agencies, a high grade means a low credit risk or a high probability of future payments. Moody’s designates its highest-grade bonds with the letters Aaa, while the other two agencies designate the same as AAA. The next highest is Aa or AA, followed by A (which is used by all three agencies).Footnote ¹¹A high credit rating implies an exceptionally strong capacity for repayment of financial commitments and a low credit rating implies the opposite. The ratings therefore provide potential lenders with full information about the possible risks involved in lending to countries.

The process of receiving a credit rating generally involves a country requesting a rating from a rating agency. The rating agency then appoints a lead analyst and a back-up analyst. Relevant information relating to the country’s ability to repay its debts is gathered, and a visit is arranged to the country being rated. Following engagements with relevant stakeholders, a report is prepared by the lead analyst on the country’s economic and political situation. This report, together with a rating recommendation, is then submitted to the rating committee, which votes to decide on the rating recommendation. The assigned rating is communicated to the sovereign, and the rating agency continues to monitor the credit and prepares periodic reports.Footnote ¹²

As of 1994, only South Africa had received a sovereign credit rating in Africa. Since 2003, however, the United Nations Development Program (UNDP) has partnered with S&P Global Ratings to fund the rating of African sovereign borrowers. In a bid to get African countries to appreciate the importance of credit ratings, the UNDP has also provided countries with technical assistance, explaining the potential benefits of sovereign credit ratings to interested governments.Footnote ¹³ The efforts of the UNDP have created awareness on the continent of the essence and modalities of sovereign credit ratings. The efforts of the UNDP have also led to an increase in the number of African countries that have received credit ratings.Footnote ¹⁴ By 2004, thirteen African countries had received sovereign credit ratings, and, by 2023, thirty-two countries had been rated.Footnote ¹⁵ As of 2024, only Botswana and Mauritius have investment grade ratings, with the other African countries ratings being of a non-investment or speculative grade.Footnote ¹⁶ Africa currently represents the continent with the lowest proportion of investment-grade countries. This situation is clearly worrying as it paints a rather discouraging picture of a continent already burdened with debt.

Critical scholars have argued that the global rating agencies are quick to downgrade African countries but slow to upgrade when upgrades are due. Additionally, a lack of adequate consultation with local stakeholders and a failure to take into consideration the peculiarities of the African context in the rating methodologies employed are all shortfalls of the current system.Footnote ¹⁷ These negative ratings have led to African countries facing interest payments that are eight times higher than European countries and four times greater than the United States.Footnote ¹⁸

African countries have been on the receiving end of downgrades from the dominant Western rating agencies. These downgrades have implications for the socio-economic development and climate action agendas of African states. In addition, they impact the capacity of these countries to attract FDI in critical sectors for their overall development. To put this in context, in September 2020 at the height of the COVID-19 pandemic, S&P Global Ratings downgraded Ghana’s long-term foreign and local currency sovereign credit rating from B to B–.Footnote ¹⁹ The government’s defence was that it was forced to put in place interventions aimed at protecting the population against the negative economic effects of the pandemic, which led to significant unbudgeted expenditures.Footnote ²⁰ Again, Ghana publicly expressed its dissatisfaction with S&P Global Ratings after receiving a downgrade from B–/B to CCC+/C on its local and foreign currency ratings.Footnote ²¹ The downgrade also happened at the peak of an economic crisis in Ghana, and, as a result of this downgrade, Ghana was prevented from accessing the international capital market and consequently experienced a worsening of the economic situation. In April 2023, Fitch Ratings, followed and downgraded Ghana’s long-term local currency issuer default rating (IDR) to restricted default from CCC. According to Fitch Ratings, this downgrade was driven by Ghana’s missed payment on some local currency-denominated bonds that were not tendered or that were held by entities not eligible to participate in the Domestic Debt Exchange Program.Footnote ²² It does appear that the process of rating by these agencies either ignores totally, or lacks an understanding of, the local context of the African countries that are being rated, thus leading to biased perspectives.

In 2023, Fitch Ratings downgraded Kenya over worsening macro-economic conditions and increased external financing constraints amidst huge funding requirements that included a US 42 billion Eurobond.Footnote ²³ This downgrading was met with heavy criticism by Kenyan President William Ruto, who referred to these global rating agencies as “tools of colonialists called credit rating agencies.” Notably, at the 2023 Africa Climate Summit in Nairobi, President Ruto asked how African countries are expected to attract investment if credit rating agencies keep classifying most of the economies as junk.Footnote ²⁴ To him, international investors, including pension funds and insurance companies, desire to do business with Africa, but the rating agencies make it difficult for them to do so.

Again, Moody’s consideration of Kenya’s planned buyback of its Eurobond debt as a default received heavy backlash. The speculative comments were considered by the Africa Peer Review Mechanism as a pre-emptive rating action that equated to a premature release of a credit rating to the public.Footnote ²⁵ Aside from being pre-emptive, such buybacks are not unusual, and, at the time of the comments by Moody’s, the details of the planned action were not yet public. It is important to recognize that these negative ratings deeply affect African economies. In the Africa Sovereign Credit Rating Review: 2023 Year-End Report, published by the Economic Commission for Africa and the Africa Peer Review Mechanism, it was noted that the outlook for the period under review remained negative.Footnote ²⁶ The report analyzes the long-term foreign currency sovereign credit ratings by the three dominant international credit rating agencies during the second half of the year 2023.

In outlining some challenges of rating services, the report noted the lack of integrity of ratings and commentaries. These rating agencies have sometimes been accused of errors in their analysis due to a lack of understanding of the domestic context, and subsequent events in some cases appear to confirm this issue. In 2023, Moody’s outlook of Nigeria was reviewed from stable to positive. In arriving at this outlook, they cited positive economic policy developments such as the government of Nigeria’s cuts to fuel subsidies and measures to unify Nigeria’s various foreign exchange rates. Curiously, these same factors were present when Moody’s downgraded Nigeria’s rating early in 2023. It stands to reason that Nigeria’s criticism of Moody’s erring in its analysis may be accurate after all.Footnote ²⁷ Despite the increase in the number of countries that have received ratings, the account has been of low ratings that have further exacerbated Africa’s economic woes.

3. Shortfalls of credit rating of African countries

Very often, reforms in the global financial architecture following significant economic crisis result in unintended consequences for continents like Africa. Due to the low levels of engagement with African governments on global platforms, Africa ends up being “burdened” with unrealistic obligations with which it struggles to comply. The narrative of credit rating of African countries by the dominant rating agencies is an instance of this scenario. The African context is indeed unique from the context in more developed parts of the world, and any attempt to rate these two extremities using the same standards will only result in inequities. While critical scholars have analyzed the current regime of Western-dominated credit rating agencies and considered them to be skewed against the interests of developing countries, in this section of this essay, I discuss a few of these shortcomings.

A synchronized narrative by critics of the current system is the inability of the Big 3 rating agencies to appreciate the peculiar domestic context of Africa as a continent of mainly developing economies. The peculiarities of the continent include conflicts, numerous forms of instability, economic difficulties, and many deep-rooted causes that cannot be sidelined. Judging a continent plagued with such challenges with more developed economies is clearly an unfair act that further undermines the continent’s efforts to access credit. Again, these rating agencies have limited access to African economies, and they undertake very little consultation with stakeholders on the continent in conducting their ratings. The lack of local offices of these agencies in Africa further worsens the issue of data gathering, with ratings being based on data from external sources like the International Monetary Fund and the World Bank.Footnote ²⁸ Fitch Ratings has no office in Africa; Moody’s has one office and S&P Global Ratings has only two offices in Africa. The minimal presence of international sovereign rating agencies on the continent is a major contributor to the opposition to their conclusions.

Again, what appears to be bias in favour of the home countries of these international rating agencies and more developed economies is a challenge. The rating agencies have been accused of being swift to downgrade African countries but very slow when upgrades are due. The trajectory of sovereign credit rating for Africa leads to one conclusion only — namely, that the Big 3 are biased towards African countries. It is interesting to note the views of Moritz Kramer, who once served as a global chief ratings officer at S&P Global Ratings in the Financial Times. Kramer, with decades of experience in credit rating believes that much of the criticism of the credit rating agencies by African countries is a red herring and that the agencies are nothing but “convenient scapegoats.” To him, and based on the data that he analyzes, the predictions of rating agencies on the risk of default of African countries do indeed come to pass. His advice is simple: African leaders should instead focus on pushing for faster debt-restructuring mechanisms instead of blaming the “innocent” rating agencies.Footnote ²⁹

Of course, the quick reaction to Kraemer by Hannah Ryder and others in the same medium makes the discussion even more intriguing. These writers rejected Kraemer’s views in their entirety. To them, Kraemer’s analyses based on select data is a false equivalent as it ignores underlying differences between the countries selected. Additionally, Kraemer failed to address the oft-held belief that the announcement of downgrades alone, without more, affects the confidence of investors and leads to default. They add that because risk factors cannot be scientifically measured, currents assessments are based on desktop reviews and publicly available information.Footnote ³⁰ This phenomenon, as argued earlier, ends up in the omission of critical data that could have been obtained had the data been sought from the primary source.

I am of the view that the overriding subject that this present discussion hinges on is Africa’s sovereign debt situation. The continent of Africa is crumbling under huge debts, and this debt servicing is fueling under-development in the affected countries. Africa ought to find creative solutions to its debt challenges, and this must happen very quickly before the situation leads to total disintegration of the economies of the countries affected. The argument in this article is not that the calls for change in the international credit rating system for African countries is the ultimate panacea to Africa’s debt problem. Rather, the challenges identified contribute towards eroding confidence in the continent’s quest to be creative in assessing development finance.

4. The Africa Credit Rating Agency: prospects and contribution to development financing in Africa

In July 2023 at the sixth Ordinary Session of the Africa Union’s Specialised Technical Committee on Ministers of Finance, Monetary Affairs, Economic Planning and Integration, which was held in Nairobi, a declaration was adopted that was titled Endorsing the Establishment of a Private Sector Driven Africa Credit Rating Agency Based on Self-Funding and Sustaining. This was in line with the African Union’s Assembly of Heads of State and Government’s decision to develop more permanent solutions towards supporting Africa’s access to affordable capital.Footnote ³¹ The African Union has gone ahead to develop proposals for the legal, financial, and structural aspects of the agency, and the African Peer Review Mechanism has announced that the agency will be launched in January 2025. This agency is expected to develop its own assessment of the possible risks in lending to African countries and provide more context to the factors that investors should consider in deciding whether to buy African bonds.Footnote ³²

In analyzing the challenges that African countries face with ratings by the Big 3 and considering the announcement of the new Africa Credit Rating Agency, I am of the view that the proposed agency holds bright prospects for the continent provided that it is effectively implemented. In the following paragraphs, I argue that the efficacy and legitimacy of this new agency is premised on how well it foregrounds Africa’s interests and is built on relevant core principles. First, there ought to be increased and consistent education on the Africa Credit Rating Agency and what it seeks to achieve for African states. It appears that the benefits of credit ratings are not fully appreciated by all African economies. There are currently thirty-two African countries that have received ratings, and about twenty-one countries that are yet to be rated. The huge number of countries that are yet to receive ratings is proof that the mechanism of credit rating is either not understood by all or, even if well appreciated, some countries have challenges on how to receive ratings. This is the very reason why the Africa Credit Rating Agency has been established — to ensure that all countries are rated to increase their chances of successful financing on the capital market. The agency must have as its immediate objective an understanding of its mandate and capacity-building initiatives.Footnote ³³

Second, the goal of the Africa Credit Rating Agency should not be to do away with the internationally recognized rating agencies. as argued by experts such as Daniel Cash and Maha Khan.Footnote ³⁴ Rather, it should be aimed at providing an alternative in credit rating to promote diversified representation. Rather than attempting to compete with the international rating agencies, the agency should rather engage and cooperate with them and ensure they push the African narrative. Such collaboration and engagement, where possible, would ensure the credibility of the institution and create trust in the work of the agency. The Africa Credit Rating Agency must foreground Africa’s interest and adopt a culturally sensitive approach to its mandate.

Third, the Africa Credit Rating Agency must adopt rating methodologies that consider the peculiar African context. As discussed extensively in other parts of this essay, the rating methodologies used by the international rating agencies appear not to favour African countries as they do not consider the peculiarities of the African context and rely on data that is not sourced directly from the rated countries. The Africa Credit Rating Agency therefore promises to cure this deficiency in sovereign rating for Africa. To ensure this, continuous engagement with the relevant stakeholders in individual countries to obtain reliable first-hand domestic information is imperative. It is submitted that, while the agency adopts a methodology that suits the African context, the chosen methodology should not be totally different from the well-established approaches to ensure consistency with best practice.

Fourth, the importance of the independence of, and political non-interference with, the Africa Credit Rating Agency cannot be over-estimated. Credit rating business is serious business that relies on credibility and trust. The agency must therefore be guaranteed against all forms of political interference by African countries themselves or other institutions. One way of achieving this is to ensure that the agency is indeed private-sector driven as originally envisaged. Additionally, transparency must be a fundamental objective of the agency. The current ‘issuer-pay’ model where countries that are rated pay for the rating services potentially leads to a conflict of interest.

Fifth, as the Africa Union seeks to overhaul the continent’s financial architecture with various interventions, including institutional interventions, it is important that deliberate steps are taken to develop the continent’s capital markets. While Agenda 2063 provides for Africa taking full responsibility for financing its development by developing its capital markets, not much has been achieved yet. The launch of the African Continental Free Trade Area will help in making the African capital market more attractive to investors. Coupled with the Africa Credit Rating Agency, it will aid in expanding Africa’s capital market to complement the work of the agency.

2. Methodology and analytic framework

Using the analytic frame of knowledge controversies and a sentiment analysis model utilizing a BERT-based language model,Footnote ⁹ this essay analyzes the policy trends and messaging prior to and after two 2021 World Bank reports on the role of LNG as a transition fuel in the shipping industry. The sentiment analysis was conducted using a predefined sentiment analysis pipeline, which allowed for efficient processing of the extracted titles. The model assigns sentiment labels based on the emotional tone conveyed in the text. Prior to analysis, the extracted titles were prepared for processing. This involved cleaning the data to remove any irrelevant characters or HTML tags that could interfere with sentiment detection. Additionally, the titles were formatted to ensure uniformity, facilitating accurate sentiment analysis.Footnote ¹⁰ For the purposes of this research, sentiment was categorized into three classes: positive, neutral, and negative. The output from the BERT model, which was originally on a scale of one to five, was mapped out using three categories of sentiments:

1. 1. Positive: 4 stars and 5 stars;

2. 2. Neutral: 3 stars; and

3. 3. Negative: 1 star and 2 stars.

Using a web-scraping technique to implement the sentiment model, we extracted and analyzed headlines of 165 reports on LNG-related topics on the World Bank’s Open Knowledge Repository, published from 1950 to 2024. The 2021 reports on the role of LNG as a transition fuel in the shipping industry were used as a benchmark to measure the difference in sentiments on LNG reporting on either side of these pivotal reports. Given the focus on the shipping industry in the 2021 World Bank reports, we also extracted and analyzed headlines of 1,189 articles on LNG and shipping from the Lloyds Shipping Newsletter, published from 1950 to 2024. We also used 2021 as a benchmark to check for correlations (if any) between World Bank reports and the discourse on the role of LNG in the decarbonization of the global shipping industry. Finally, we extracted and analyzed narratives around the support for LNG projects by the AfDB in Africa prior to and after the 2021 World Bank reports, with a view to identifying any thematic patterns in the narrative around the role of LNG as a transition fuel in the shipping industry.

3. Knowledge controversies in scientific knowledge: an overview

Given the controversial and far-reaching impact of emerging scientific knowledge on LNG’s impact, it is important to understand the dynamics of knowledge controversies, especially as it relates to climate change. The concept of “knowledge controversies” has its roots in science and technology studies.Footnote ¹¹ According to Jacqueline Best, “knowledge controversies are moments when relatively settled scientific ideas, techniques, and measurements become the subject of serious debate — either within the scientific community or more broadly among the public.”Footnote ¹² Explored by scholars such as Bruno Latour,Footnote ¹³ Michel Callon, Pierre Lascoumes, and Yannick Barthe,Footnote ¹⁴ across a range of issues, such as nuclear power and climate change, knowledge controversies are a useful analytic frame for understanding how disputes and contestations around scientific knowledge on climate change and climate finance put the spotlight on IFIs, like the World Bank and other organizations, driving the global discourse on energy transition policy.

It is important to note that these controversies and contestations about knowledge are not just technical disputes but also often deeply political, challenging the legitimacy of scientific expertise on a particular subject matter of great significance nationally and internationally.Footnote ¹⁵ For example, Best, speaking in the context of monetary policy, illustrates how central banks in three major Group of Seven countries faced significant knowledge controversies, particularly in the aftermath of the 2008 financial crisis. Best argues that central banks, once revered for their technical expertise as it relates to monetary policy, were pulled into a terrain of uncertainty raised by questions over the limitations of their models and the attendant intense politicization of their policy decisions. The idea that once-settled knowledge can become controversial is a theme that resonates beyond central banking, particularly in areas like climate change.

4. Knowledge controversies on LNG as a transitional fossil fuel in the World Bank’s 2021 reports

The 2021 World Bank reports — The Potential of Zero-Carbon Bunker Fuels in Developing Countries Footnote ²¹ and The Role of LNG in the Transition Toward Low- and Zero-Carbon Emission Shipping Footnote ²² — are important publications that have stirred significant debate within the context of the global energy transition. These reports critically assess the role of LNG as a transitional fuel, particularly in the shipping industry, and present arguments that challenge the prevailing view of LNG as a viable long-term solution. The findings in these reports build on the previous controversial study by Robert Howarth on the long-term impact of LNG on the environment.Footnote ²³ The report’s critical stance on LNG is based on a combination of life cycle analysis, projections of future fuel demand, and the evolving regulatory landscape shaped by the International Monetary Fund and the Paris Agreement. Footnote ²⁴

However, drawing on the framework of knowledge controversies discussed in the previous section, it is instructive to note that the position in the World Bank reports on LNG, although well researched and presented, does not represent a position of scientific consensus on the potential pitfalls of relying on LNG as a transitional fuel for shipping. Previous studies associated with the methane leakage issues, such as the article written by Howarth, a leading proponent of this theory,Footnote ²⁵ and the argument that LNG poses more danger than coal over the long term, have been questioned by scholars such as Katsumasa Tanaka and colleagues who argue in their study that the coal-to-gas shift is consistent with climate stabilization objectives for the next fifty to one hundred years.Footnote ²⁶

Despite the report’s attempts to present its findings objectively, its far-reaching policy recommendations have the potential to elevate the findings to a pedestal of consensus on the science behind the study. For example, the reports provide recommendations that extend beyond the scope of the initial analysis, suggesting strategic directions for policy-makers. For instance, it calls for further work on cost competitiveness and national datasets, which implies a foundational level of confidence in the initial findings, potentially positioning these results as a basis for a policy without fully comprehensive backing.Footnote ²⁷ Also, the report identifies green ammonia and hydrogen as the most promising zero-carbon fuels using a red-amber-green analysis, presenting this conclusion as a clear, consensus-based decision. This methodological approach and the broad recommendations to shift investments towards these fuels elevate the findings, potentially creating a perception of settled science around these specific fuels despite the inherent complexities and uncertainties in the broader energy transition landscape.Footnote ²⁸ Furthermore, the report emphasizes the strategic importance of transitioning towards zero-carbon bunker fuels and suggests significant policy and industry shifts, including investment strategies and international cooperation. By doing so, it positions these findings as critical and urgent, potentially overshadowing alternative perspectives or uncertainties within the scientific community regarding these recommendations.Footnote ²⁹

These examples highlight how the report’s policy recommendations might inadvertently suggest a broader consensus on the science than what may be fully substantiated by the current data and analysis, thereby influencing the global energy transition process. The next section discusses a few points and observations gleaned from the report to buttress this argument.

5. LNG as a transitional fuel: the controversy

The World Bank’s 2021 reports present a nuanced and critical perspective on the role of LNG as a bunker fuel. Historically, LNG has been considered a cleaner alternative to traditional oil-derived bunker fuels due to its lower emissions of sulphur oxides, nitrogen oxides, and particulate matter. However, the World Bank reports emphasize that the potential benefits of LNG are undermined by significant uncertainties regarding its GHG emissions, particularly methane leakage, which can negate the climate benefits associated with its use.Footnote ³⁰ The reports highlight that, while LNG might offer short-term air quality improvements and marginal GHG reductions, its effectiveness as a transitional fuel is highly questionable.Footnote ³¹ This scepticism is rooted in the life cycle analysis of LNG, which shows that methane, a potent GHG, can leak at various stages of LNG production, transportation, and combustion.Footnote ³² According to the report, such leakages could result in GHG emissions comparable to, or even exceeding, those of traditional fossil fuels, thus diminishing the argument for LNG as a transitional solution.Footnote ³³ The reports suggest that, instead of doubling down on LNG, the focus should shift to developing zero-carbon bunker fuels like hydrogen and ammonia, which are more aligned with long-term decarbonization goals.Footnote ³⁴

In addition to the controversy surrounding the science underpinning the research, there are also controversies surrounding the policy recommendations accompanying the analysis. For example, these reports dissuaded petroleum states from focusing on LNG as a transitional fuel, arguing that such investments could lead to stranded assets and technology lock-in.Footnote ³⁵ It suggests that investments in LNG infrastructure may be under-utilized as LNG demand is expected to peak and then decline sharply from the mid-2030s onwards.Footnote ³⁶ The report also highlights the possibility that LNG will be rapidly replaced by zero-carbon alternatives such as hydrogen and ammonia by 2030. On this premise, the reports advise against substantial long-term investments in LNG infrastructure as these investments could become obsolete relatively quickly.Footnote ³⁷ Connected to this latter point, the logic is that, given the significant capital expenditures required for LNG infrastructure projects, the additional investment costs associated with LNG may not justify the temporary benefits as the infrastructure will likely face financial risks due to the anticipated decline in LNG demand.Footnote ³⁸

6. Impact on energy transition discourse in petroleum states

The knowledge controversies over LNG pose significant challenges for LNG-producing countries worldwide. For example, the United States, the largest producer of LNG, introduced a moratorium on the export of LNG to non-free trade agreement countries in January 2024.Footnote ³⁹ However, this has not doused the United States’ overall policy towards expanding its production capacity for LNG,Footnote ⁴⁰ with the United States still investing heavily in LNG infrastructure despite the emerging narrative that increasingly questions LNG’s long-term viability as a key player in the energy transition.

However, this shift in discourse has profound implications for petroleum states in Africa that remain net importers of capital for investments of this magnitude. Countries like Algeria, Nigeria, Mozambique, Egypt, Libya, and Tanzania, which have substantial LNG reserves, could find their ability to attract investments at risk if global markets located in the global North pivot away from LNG more rapidly than anticipated.Footnote ⁴¹ Moreover, the World Bank reports imply that continued reliance on LNG could lock these countries into a fossil fuel-based infrastructure that might become obsolete as zero-carbon alternatives gain traction. This scenario could exacerbate existing economic vulnerabilities, particularly if the global demand for LNG declines before these African petroleum states can fully capitalize on their resources. While the United States has the flexibility to continue to pursue its investment policy on LNG production, even if it contradicts its climate change commitments, African petroleum states do not have such flexibility. However, by framing LNG as a potentially limited or even a temporary solution, the World Bank report effectively shifts the policy narrative, influencing both global and regional policy directions. The challenge is that this impact will be disproportionately felt by petroleum states in developing countries.

The knowledge production process can be seen as part of a broader strategy by IFIs to steer countries towards energy pathways that align with global decarbonization targets. However, this approach raises important questions about the extent to which AMFIs and national governments can or should rely on externally produced knowledge. The reports’ conclusions suggest a need for a more localized and context-specific approach to energy transition in Africa, one that considers the continent’s unique economic and developmental challenges. The knowledge controversies surrounding LNG, as highlighted in the World Bank’s 2021 reports, underscore the complexities of the global energy transition. These reports present a critical juncture for African LNG-producing countries: they must either adapt to the shifting global discourse by diversifying their energy strategies or risk being left behind as the world moves towards zero-carbon fuels. The World Bank’s influence in shaping these narratives illustrates the power of knowledge production by IFIs and its far-reaching implications for policy and economic development in the global South. As such, there is a pressing need for African nations to engage in indigenous knowledge production that reflects their specific needs and circumstances, ensuring that their energy transition strategies are both sustainable and equitable.

7. Is there a link between knowledge production by the World Bank and the changing narrative on LNG?

Prior to the 2021 World Bank reports, 157 articles related to LNG were published in the Open Knowledge Repository. After the 2021 World Bank reports, this number dropped sharply to just eight. Before 2021, sentiments towards LNG were overwhelmingly positive, with 95.14 percent of the articles expressing favourable views (see Figure 1). However, this shifted dramatically following the 2021 World Bank reports, with 71.43 percent of the post-2021 articles reflecting negative sentiments towards LNG (see Figure 2).

Figure 1.

World Bank LNG Headline Sentiments pre-2021 (courtesy of the authors).

Figure 2.

World Bank LNG Headline Sentiments post-2021 (courtesy of the authors).

Similarly, in the Lloyd’s Shipping Newsletter, before 2021, 65.17 percent of the articles conveyed positive sentiments regarding LNG as a transitional fuel for maritime transport (see Figure 3). After the World Bank reports in 2021, sentiment in the shipping sector turned notably negative, with 71.43 percent of articles expressing negative views on LNG, and the percentage of positive articles dropping to 26.57 percent (see Figure 4).

Figure 3.

Lloyds LNG Headline Sentiments pre-2021 (courtesy of the authors).

Figure 4.

Lloyds LNG Headline Sentiments post-2021 (courtesy of the authors).

8. Correlation between emerging uncertainty in the AfDB’s position on support for projects in Africa

The impact of these World Bank reports is seen in the noticeable change in the direction of travel taken by the AfDB, Africa’s premier regional development bank, on LNG projects in Africa. The focus on the AfDB is instructive because it is a key source of financial support for the energy transition in Africa, and its policies can have a big impact on the pathways open to African countries. The AfDB’s involvement in the Mozambique LNG Area 1 Project illustrates this point. As of 2020, the narrative surrounding investment in this fossil fuel-based energy infrastructure was overwhelmingly positive.Footnote ⁴² The project, valued at over US $24 billion, was celebrated as Africa’s largest FDI, with the AfDB contributing a US $400 million senior loan.Footnote ⁴³ The project aimed to exploit Mozambique’s extensive offshore natural gas reserves, positioning the country as one of the world’s largest LNG exporters.Footnote ⁴⁴

However, by 2022, there was a noticeable shift or uncertainty in the narrative about the AfDB’s stance on continuing its support for fossil fuel projects, including LNG projects. This emerging uncertainty can be closely correlated with the broader global discourse, particularly influenced by changing sentiments about LNG after the 2021 reports from the World Bank questioned the mid- to long-term viability and environmental impact of LNG as a transitional fuel in the shipping industry. To illustrate this point, we monitored a sample of reporting on the AfDB’s policy related to LNG projects in Africa from 2019 to 2024. This coincides with messaging on LNG prior to and in the immediate aftermath of the 2021 World Bank reports. Table 1 presents key articles with annotations capturing key phrases and headlines associated with reports about the AfDB’s approach to LNG funding before and after the World Bank reports in 2021. A recurring and common theme linking the World Bank reports and the selected AfDB reports is the conceptualization of “stranded assets.” In 2019, the AfDB’s report defined “stranded assets” from the perspective of Africa’s vast natural resources that would be stranded in the transition to greener alternatives.

Table 1.

Annotated Timeline of the AfDB’s LNG Funding Approach Pre- and Post-2021 World Bank Reports

Source: courtesy of the authors.

The tone of the AfDB’s 2019 article on the potential for Africa’s large oil and gas reserves to become stranded assets was cautious, indicating that the bank was still unsure of its position on the trade-offs involved in the transition to low-carbon pathways.Footnote ⁵² The 2020 announcement by the AfDB of the investment in Mozambique’s LNG project indicated a strong commitment to LNG projects at that time. However, by 2022, the narrative had shifted, with the AfDB facing mounting pressure to reconsider its investments in LNG fossil fuels.Footnote ⁵³ Uncertainty regarding the long-term demand for LNG and the risks of stranded assets, a major finding from the 2021 World Bank report, has also become more pronounced and a recurring theme in the public narratives directed at the AfDB as of 2024.

It is unsurprising that this change in narrative comes at the same time as the changing global narrative and sentiments towards LNG discussed in section 7 of this essay. This shift in narrative reflects how knowledge production by IFIs can shape the investment strategies of regional multilateral financial institutions like the AfDB. Based on the change in narrative and characterization of LNGs, it is argued that the World Bank’s report likely played a significant role.

9. Charting a way forward: co-production of knowledge

To effectively navigate the complex and often contentious landscape of the global energy transition, IFIs and the AfDB must engage in a robust and collaborative knowledge co-production process. This approach should draw on the principles of co-production, particularly the concepts of “boundary agency” and the deliberate subversion of traditional boundaries between science, policy, and practice advocated by scholars like Howarth and others.Footnote ⁵⁴ To facilitate effective co-production, IFIs and the AfDB should create or designate boundary agencies — entities or individuals tasked with bridging the gaps between different knowledge communities. These boundary agencies would play a crucial role in translating diverse perspectives, ensuring that the scientific knowledge produced by IFIs is contextualized and relevant to the African context. By fostering dialogue between global experts, African policy-makers, and local practitioners, boundary agencies can help tailor energy transition policies that are both scientifically sound and locally applicable.

Knowledge co-production must also be an inclusive and iterative process involving all relevant stakeholders from the outset. This includes IFIs and AfDB officials and representatives from African governments, local communities, non-governmental organizations, and private sector entities involved in the energy sector.Footnote ⁵⁵ By engaging these stakeholders early and consistently, the co-production process can better capture the diverse needs, values, and priorities of those most affected by energy transition policies. Regular feedback loops should be established to ensure the knowledge produced is continuously refined and relevant as the energy transition evolves.Footnote ⁵⁶

A key aspect of successful co-production is shared ownership of both the process and its outcomes. IFIs and the AfDB should work towards a model where all stakeholders have a meaningful say in the decision-making process, ensuring that the resulting policies are co-owned by all parties. This can be achieved through joint workshops, collaborative research projects, and co-authorship of key policy documents. Such an approach enhances the legitimacy and credibility of the knowledge produced and fosters greater buy-in and commitment to the implementation of the agreed-upon strategies.

Finally, it is essential to build capacity for indigenous knowledge production within African institutions to address the power imbalances that often characterize knowledge production in the global South. IFIs should support the AfDB and other African multilateral financial institutions in developing the necessary skills, resources, and networks to generate and disseminate locally relevant knowledge. This could involve funding research initiatives, providing technical assistance, and facilitating knowledge exchange between African researchers and their global counterparts. By empowering African institutions to produce their own knowledge, the co-production process can become more balanced and reflective of Africa’s unique energy challenges and opportunities.

By adopting these recommendations, IFIs and the AfDB can move towards a more equitable and effective co-production model for knowledge on the energy transition. This model recognizes the importance of integrating global scientific insights with local realities and seeks to actively subvert traditional power dynamics that have historically marginalized African perspectives. Through boundary agencies, inclusive engagement, shared ownership, and capacity building, the co-production process can help ensure that Africa’s energy transition is guided by knowledge that is both globally informed and locally relevant.

2. The AfDB: navigating Africa’s developmental abyss

In 1960, a watershed year for African development, seventeen nations across the continent achieved independence from colonial rule.Footnote ¹² During this transformative period, the idea of creating a development bank for Africa was born. This institution would be designed to foster economic growth and development in these newly sovereign states on their own terms.Footnote ¹³ The collapse of the Special United Nations Fund for Economic Development (SUNFED) is credited with the birth of the AfDB.Footnote ¹⁴ The newly independent African nations found the proposal for a SUNFED highly attractive as it promised equal voting power for all members, unlike in the International Bank for Reconstruction and Development, part of the World Bank, where influence was tied to the volume of subscriptions (weighted voting).Footnote ¹⁵ This equality would have allowed African governments to wield significant influence over policy and investment decisions without the patronage of global North states.Footnote ¹⁶ However, the idea was ultimately shelved in favour of creating a soft loan window for the World Bank.Footnote ¹⁷

The AfDB was founded by a signatory agreement between twenty-three African member states on 14 August 1963 in Khartoum, Sudan, which became effective on 10 September 1964.Footnote ¹⁸ As a regional multilateral development finance institution, the AfDB was created to promote African economic growth and social progress by providing financial and technical support to its member countries.Footnote ¹⁹ It was originally composed of regional members consisting only of African countries.Footnote ²⁰ In its early years, the AfDB faced significant challenges due to limited access to capital, particularly in the absence of wealthy non-regional members.Footnote ²¹ The financial constraints of African member states compounded these difficulties, hindering the bank’s ability to effectively pursue its mission of supporting the continent’s development.Footnote ²² In 1982, in response to the need for external resources, the bank made the controversial decision to amend its original Charter, allowing non-regional members to join its board. This shift had profound implications for the AfDB’s governance and decision-making processes. Today, the AfDB Group comprises eighty-one member countries, including fifty-four African countries (regional members) and twenty-seven non-African countries (non-regional members). The bank has maintained majority ownership by African governments.Footnote ²³

In terms of structure, the AfDB consists of three constituent entities: the African Development Bank,Footnote ²⁴ the African Development Fund,Footnote ²⁵ and the Nigeria Trust Fund.Footnote ²⁶ These three organizations are collectively called the AfDB Group. The AfDB Group stands out among other regional development banks (RDBs) with its unique voting system. There is a 60/40 percent vote split between regional and non-regional members, essentially between borrowers (mainly African regional members) and non-borrowers (consisting of non-regional members). In contrast, in other RDBs, non-borrowers typically hold at least 50 percent of the votes.Footnote ²⁷ This structure has a historical anti-colonial and anti-Western domination ideology inspired by the pan-African spirit. However, it does limit the voting power and influence of non-borrowing creditors within the AfDB Group’s decision-making process, potentially undermining their confidence and willingness to contribute resources.Footnote ²⁸

The AfDB’s initial operations were relatively modest, reflecting the limited resources at its disposal and the cautious approach of its leadership.Footnote ²⁹ However, the bank quickly established itself as a key player in African development, funding transportation, energy, water supply, and agriculture projects.Footnote ³⁰ These early efforts laid the groundwork for the Bank’s later expansion and diversification into other sectors, including education, health, and social development.Footnote ³¹

The 1980s marked a significant turning point in the AfDB’s history as the global economic landscape underwent profound changes.Footnote ³² The rise of neo-liberal economic policies, championed by institutions like the Bretton Woods institutions — that is, the International Monetary Fund and the World Bank, had a profound impact on the AfDB’s operations and strategies.Footnote ³³ During this period, the bank increasingly embraced market-oriented reforms, including structural adjustment programs, aimed at liberalizing African economies, reducing the state’s role, and promoting private sector development.Footnote ³⁴ While these policies were intended to spur economic growth and integration into the global economy, they often had deleterious effects on African countries, leading to widespread social dislocation, increased poverty, and weakened state institutions.Footnote ³⁵

In the twenty-first century, the AfDB has sought to redefine its role in response to the changing dynamics of the African continent and the global economy.Footnote ³⁶ The bank has increasingly focused on regional integration, the private sector, and sustainable development. Initiatives like the High 5 priorities — Light Up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa, and Improve the Quality of Life for the People of Africa — reflect a more holistic approach to development, emphasizing the need for inclusive and sustainable growth.Footnote ³⁷ However, the bank’s emphasis on private sector development and market-based solutions, particularly through PPPs and blended finance, greatly limits its polycentric and developmental potential.

The AfDB has promoted using PPPs and blended finance models in advocating for a green Africa.Footnote ³⁸ Many African governments see these as innovative tools for mobilizing the significant private capital needed to address Africa’s infrastructure deficit and achieve the Sustainable Development Goals.Footnote ³⁹ Critical scholarship, on which this essay leans, argues that these models often prioritize the interests of private investors over the developmental needs of African countries.Footnote ⁴⁰ The heavy reliance on private capital then leads to projects that are financially viable — in investment finance lingua, “bankable investments” — but which are consistently associated with dire environmental and social costs, including the human rights of displaced communities (mainly ethnic or racial minorities and Indigenous peoples, low caste groups, the rural poor).Footnote ⁴¹ Balakrishnan Rajagopal has called this destructive phenomenon where development projects displace minority communities “the violence of development or development cleansing.”Footnote ⁴² Essentially, the de-risking development model creates states where development benefits are not equitably distributed.Footnote ⁴³ The following section highlights the tension underlying assumptions about the state’s role in development using the AfDB’s Energy Sector Policy and New Deal on Energy as examples.

3. The AfDB’s use of the blended finance model

The AfDB, an institution conceived initially to drive the continent’s economic development, has increasingly aligned its strategies with neo-liberal frameworks, particularly in the energy sector.Footnote ⁴⁴ While ostensibly aimed at promoting sustainable development, the AfDB’s 2015 Energy Sector PolicyFootnote ⁴⁵ and its New Deal on Energy for AfricaFootnote ⁴⁶ are deeply entrenched in a de-risking developmental model. This model prioritizes attracting private capital through blended finance and PPPs. The AfDB has supported PPP projects such as the Ourzazate Noor I and II Solar Power Plant in Morocco,Footnote ⁴⁷ the Dakar Toll Highway, the Dakar Container Terminal in Senegal, the AES Sonel, the Dibamba and Kribi Power Projects in Cameron, and the Lake Turkana Wind Power Project in Kenya.Footnote ⁴⁸ However, these strategies often reflect a misalignment between the AfDB’s stated developmental goals and the practical realities on the ground, raising concerns about the efficacy of such approaches in addressing Africa’s long-term just and equitable green transition.

Rather than empowering African states to lead their development trajectories, these policies risk reinforcing dependencies and perpetuating structural inequalities, calling into question the true developmental impact of the AfDB’s energy initiatives. Nigeria’s first privately financed power project — the Azura power plant — though not an AfDB-funded project, aptly illustrates this point.Footnote ⁴⁹ The PPP committed Nigeria state-owned Nigeria Bulk Electricity Trading to buy Azura’s output. It later turned out that Nigeria’s energy grid infrastructure could not absorb Azura’s full output. Eventually, after the World Bank threatened to trigger its partial risk guarantee, Nigeria’s central bank had to compensate Azura from a special fund set aside for other private energy producers.Footnote ⁵⁰ In this case, Nigeria had little option, a triggered World Bank guarantee would have become a loan and added to the already distressed status of the country’s sovereign debt.Footnote ⁵¹

4. Possible alternative model: direct public procurement and lesser blended finance

In evaluating the potential of direct public procurement (DPP) and lesser blended finance as alternative models for development, it is crucial to draw on the theoretical insights of scholars such as Thandika Mkandawire and Gabor. Mkandawire’s analysis of the traditional developmental state underscores the state’s role as a central and autonomous actor in directing economic growth and managing social progress.Footnote ⁷⁹ In this model, the state is not merely a facilitator of private investment but, rather, the primary driver of development.Footnote ⁸⁰ It allocates resources, sets strategic priorities, and ensures that developmental goals align with broader societal needs.Footnote ⁸¹ This approach contrasts sharply with the de-risking developmental state model, critiqued by Gabor, which increasingly shifts the state’s role towards mitigating risks for private capital rather than actively managing development.Footnote ⁸²

The growing reliance on de-risking strategies, mainly through mechanisms like PPPs and blended finance, raises several significant concerns. Gabor argues that, while these models are designed to attract private investment by reducing financial risks, they often lead to state dependency on private capital.Footnote ⁸³ This dependency can distort national development agendas, allowing investors’ needs and demands to take precedence over the broader public interest.Footnote ⁸⁴ In sectors critical to sustainable development, such as green energy, this can result in projects prioritizing profitability over long-term environmental and social benefits, thereby undermining sustainable and inclusive development goals.Footnote ⁸⁵

To address criticisms that African states might be inefficient and corrupt, DPP offers a robust alternative by allowing states to finance and manage development projects directly.Footnote ⁸⁶ This model ensures that the state retains control over critical decisions throughout the project life cycle, from planning to execution, aligning development outcomes with national priorities and public interests rather than private profit motives.Footnote ⁸⁷ To counter concerns about inefficiency and corruption, it is crucial to implement stringent governance measures, such as transparent bidding processes, regular audits, and rigorous monitoring systems.Footnote ⁸⁸ Engaging local communities and stakeholders in oversight can further enhance accountability and responsiveness. Additionally, showcasing successful case studies where DPP has effectively achieved developmental goals can provide concrete evidence of its potential to overcome the challenges often associated with PPPs and blended finance.Footnote ⁸⁹

In addition to maintaining state autonomy, DPP can enhance transparency and accountability in the development process. With the state directly responsible for managing and overseeing development projects, there is greater potential for public scrutiny and oversight.Footnote ⁹⁰ This contrasts with the complexity and opacity often associated with PPPs and blended finance arrangements, where multiple stakeholders and intricate financial structures can obscure accountability. DPP’s more straightforward approach ensures that the state remains directly answerable to its citizens for the outcomes of its development policies. The concept of lesser blended finance complements DPP by recognizing the occasional need for private sector involvement, particularly in cases where public resources alone may be insufficient. However, this involvement must be carefully controlled to ensure that it does not compromise the state’s ability to lead and direct development. Lesser blended finance advocates for a limited and strategic use of private capital — such as through concessional financing or targeted subsidies — while keeping the state firmly in charge. This approach allows for private sector participation without ceding control over development priorities to private interests.Footnote ⁹¹

Mkandawire’s advocacy for a strong, autonomous state in the traditional developmental model aligns with this alternative approach, reinforcing the idea that the state must be the primary architect of development. Gabor’s critique of the de-risking model further emphasizes the risks of over-reliance on private capital, which can undermine the state’s capacity to pursue comprehensive and inclusive development strategies.Footnote ⁹² By adopting a model that prioritizes DPP, supported by carefully managed and limited blended finance, African states and institutions like the AfDB can retain control over the development process. This model ensures that development projects are financially viable and socially and environmentally sustainable.Footnote ⁹³

1. Addressing the climate financing gap in Africa

This essay argues that the African Import-Export Bank (Afreximbank), an African multilateral financial institution, plays a critical role in addressing the climate-financing gap in Africa, yet it remains both under recognized and at the periphery of the international financial system. Through the lens of TWAIL, this essay explores the colonial continuities that persist in the international financial system and the role that international law plays in fostering these unequal structures. This essay is possibly a reflection of the infamous argument by Hilary Charlesworth that international law might be viewed as a discipline generated by crises.Footnote ¹ The climate change crisis is a structural crisis, which has acted as a catalyst for change in international law.Footnote ² Global North and global South countries have different historical responsibilities as contributors to climate change.Footnote ³ Despite contributing the least, developing countries remain most vulnerable to the negative impacts of climate change.Footnote ⁴ This situation is exacerbated by the fact that the climate financing gap is wider than ever. Conservative estimates indicate that Africa needs US $2.5 trillion (74 percent of the continent’s US $3.4 trillion gross domestic product in 2021) or US $250 billion annually in conditional and unconditional financing between 2020 and 2030 to implement its nationally determined contributions under the Paris Agreement. Footnote ⁵ Current reported annual climate finance inflows to the continent amount to US $30 billion, which is woefully inadequate to address the continent’s needs. Of the US $30 billion amount, the Climate Policy Initiative recently estimated that public finances mostly from multilateral development finance institutions, comprise 86 percent (US $25 billion), while private sector financing (mostly corporations) contributed 14 percent (US $4.2 billion).Footnote ⁶

The legitimacy and effectiveness of the Bretton Woods institutions — that is, the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Monetary Fund (IMF) — in handling various crises over time has been called into question.Footnote ⁷ An example of this is the World Bank Group’s billions to trillions agenda, whose aim is to use billions in public finance to catalyze trillions from the private sector for developing countries, which remains a pipe dream in meeting the financing gap to implement Africa’s nationally determined contributions.Footnote ⁸ At the global North to global South level, there is an apparent disinterest by the global North in financing climate action in the global South despite the linkage between the climate crisis and the complexities of the global climate finance architecture in past and ongoing commercial environmental abuse, amid rising foreign debt unsustainability, neo-colonialism, labour exploitation, and racism.Footnote ⁹

Without sufficient climate financing, developing countries are being drawn into even further debt distress in their bid to avoid or address the devastating impacts of climate change.Footnote ¹⁰ In climate mitigation, there is pressure on developing countries to prioritize low or zero emission-aligned developmental pathways, which require colossal financial resources that developing countries simply do not have.Footnote ¹¹ This gap in climate financing as well as insistence on rapid decarbonization without taking into account the vulnerabilities of the continent presents negative economic effects for African states.

This essay argues that, to address the climate crisis, African multilateral financial institutions should be recognized as key players in climate financing.Footnote ¹² International financial institutions have come to exist in all areas of international relations — economic, social, political — considerably limiting the autonomy of sovereign states, which has serious consequences for Third World states and peoples.Footnote ¹³ Sovereign economic decision-making has been relocated from states to economic institutions such as the IMF and the World Bank.Footnote ¹⁴ There has been a lot of frustration with the United States and its European allies dominating decision-making at the Bretton Woods institutions, leaving African countries with only a sliver of voting rights,Footnote ¹⁵ which means less representation in governance structures and the inability to participate in decision-making processes that affect the continent directly. African multilateral financial institutions, such as Afreximbank, should be central in shaping the response to the climate crisis in the continent as they are better positioned to respond to the unique African context.

Against this backdrop, it is apparent that international law continues to play a central role in helping to legitimize and sustain unequal structures and processes that manifest themselves in the growing North-South divide.Footnote ¹⁶ The economic and political independence of the Third World is undermined by policies and laws dictated by the First World and the international institutions it controls.Footnote ¹⁷ In this context, the climate crisis unearths a structural crisis that is integrated in international law — that is, the centrality of the Bretton Woods institutions in climate financing and the treatment of African multilateral financial institutions as the ‘other’ in the international financial system to the detriment of the sustainable development of the continent. A TWAIL understanding of this crisis is thus rooted in deep history and deep structures that is indissolubly bound to the history of colonialism.Footnote ¹⁸

2. The need to dismantle colonial continuities

Colonial continuities persist in global economic and financial governance. Colonial structures and modes of racial thinking, foundational to colonialism, have metastasized, metamorphosized, and persisted, as has the manner in which non-European peoples have continued to be dismissed as inferior and savage.Footnote ¹⁹ Colonial structures of thought, which are often represented in new vocabularies, have continued to reinforce hierarchy and inequality.Footnote ²⁰ This is evident in the global financial architecture, which centralizes institutions of the global North such as the Bretton Woods institutions,Footnote ²¹ while critical African multilateral financial institutions remain largely on the periphery. The Third World therefore continues to be perceived as a beneficiary and not as a contributor of ideas, innovations, and investment possibilities.

Makau Mutua, in echoing Julius Nyerere’s words contends that the exploitative and unjust international legal and economic order is essential to conceptualizing the Third World.Footnote ²² He writes that “[t]he Third World consists of the victims and the powerless in the international economy…. Together we constitute a majority of the world’s population, and possess the largest part of certain important raw materials, but we have no control and hardly any influence over the manner in which the nations of the world arrange their economic affairs. In international rule-making, we are recipients not participants.”Footnote ²³ This is evident in the creation of the Bretton Woods institutions. Developing states, the vast majority of which were colonies in 1944 when the Bretton Woods Conference took place, played little part in the creation of the World Bank and the IMF, institutions that were instrumental in creating the post-Second World War global financial and economic systems.Footnote ²⁴ This was in tandem with the notions of sovereignty during the period of empire. The colonial confrontation was perceived as a confrontation not between two sovereign states but, rather, between a sovereign European state and a non-European state, which, according to the positivist jurisprudence of the time, was lacking in sovereignty.Footnote ²⁵ It is therefore unsurprising that the so-called non-sovereign states were not at the table when critical institutions were being created that would be at the core of the global financial system.

Through the sovereignty doctrine, international law gave rise to a “dynamic of difference” — a gap — a difference between European and non-European cultures and peoples, the former being characterized, broadly, as civilized and the latter as uncivilized.Footnote ²⁶ This gap having been established, what follows is the formulation of doctrines that are designed to efface this gap: to bring the uncivilized, aberrant, violent, backward, oppressed into the realm of civilization, the universal order governed by (European) international law.Footnote ²⁷ These perceptions existed at the inception of the creation of the Bretton Woods institutions, which govern the international financial institutions designed to govern the Third World states in the international financial system. Since the Third World states were assumed not to have personality in international law, their interests have from the get-go continued to suffer because they did not have a role to play in shaping the norms of the earlier international legal order.Footnote ²⁸ This has influenced the present international legal order with international law being utilized to construct and reconstruct the meaning of sovereign states by reallocating the hitherto sovereign economic powers of the Third World states to international financial institutions.Footnote ²⁹ This hinders sustainable economic development of the Third World countries and continues to perpetuate legacies of colonial disempowerment.

Further, Third World countries have to contend with international financial institutions that encroach on other areas of economic life through the prescription of conditionalities to be complied with if a state is to receive loans.Footnote ³⁰ This raises questions of the suitability of these international financial systems in controlling the economic affairs of the Third World countries and in infringing on their sovereignty. The Bretton Woods institutions have remained active participants in the governance of the global economy and the international financial system and have played prominent roles in the management of many international economic, financial, and monetary crises.Footnote ³¹ This is despite intense criticisms against them, including that of being instruments of leading Western states, that they are ideological and promote a neo-liberal economic model, that their operations serve elite and large corporate interests, and that they cause significant harm to poor and vulnerable communities.Footnote ³² Further, the Bretton Woods institutions continue to impose conditions on countries that are in debt distress, and these policies result in harmful consequences for human rights.Footnote ³³

Their centrality is rooted in colonial notions of the perceived inability of Third World peoples to govern their own affairs, whether political or economic. The blame game seeks to justify colonialism, on the one hand, as a necessary evil and to also support further intrusiveness in the governance of developing countries, on the other.Footnote ³⁴ Although the IMF and the World Bank advocate for measures that are blatantly adverse, the accountability of these institutions is strongly resisted.Footnote ³⁵ On the other hand, African multilateral financial institutions, such as Afreximbank, remain on the periphery in the recognition of their value in the international financial system as well as their invaluable contribution to the sustainable development of the African continent.

3. The role of Afreximbank in climate financing in Africa

Afreximbank was conceived out of the concern by African ministers of finance of the very low level of intra-African trade, the decline in trade and project flows to Africa, the worsening external debt situation of many African countries, and the sharp reduction in lending to Africa by international commercial banks.Footnote ³⁶ In recent times, Afreximbank has played a critical role in hedging against crisis — specifically, in augmenting the climate financing gap in Africa. In the remaining sections of this essay, I explore three ways in which Afreximbank has played a critical role in climate financing yet it remains under recognized and at the periphery of the international financial system.