Africa is losing nearly 200 billion dollars every year to climate-related destruction, from damaged infrastructure and flooded roads to declining agricultural production. As climate shocks intensify across the continent, attention is turning to the Loss and Damage Fund, created at COP27, to see whether it can deliver meaningful financial support to vulnerable countries.
The fund was designed to help developing nations recover from the devastating impacts of climate change—impacts that many African economies are already struggling to absorb.
Speaking on Business Africa, Ibrahima Cheikh Diong, the Executive Director of the Fund for Responding to Loss and Damage, said progress is being made in building the institution, but key questions remain about financing and implementation.
Africa is among the regions most exposed to climate shocks—from droughts in the Horn of Africa to flooding in West and Central Africa. These disasters often destroy roads, bridges, and crops, weakening economic growth and threatening food security.
A major development in the operationalisation of the fund has been the adoption of the Barbados Implementation Modalities, which outline how the financing mechanism will function and how affected countries can access support.
For many African economies already facing debt pressures and development challenges, the success of the fund could determine how effectively governments respond to climate disasters in the coming years.
Global tensions ripple into African markets
Beyond climate risks, global geopolitical tensions are also affecting African economies.
Tensions around the Strait of Hormuz, one of the world’s most critical oil transit corridors, have periodically driven up global crude prices.
For import-dependent economies such as Ghana and Zambia, higher oil prices can quickly translate into rising fuel costs, increased transport fares, and higher food prices in local markets.
Because fuel prices influence the cost of transportation and logistics, spikes in global oil markets often ripple through supply chains, ultimately affecting the cost of everyday goods across the continent.
Namibia prepares to formalise its informal sector
Meanwhile, Namibia is preparing a major shift in its economic policy.
The country’s informal sector employs more than half of the national workforce and contributes significantly to economic activity. Yet millions of workers remain outside the formal tax system and lack social protection.
The government now plans to begin formalising the sector in 2026, a move aimed at expanding tax revenues while improving access to financial services and social safety nets.
However, the transition may not be straightforward. For many small traders and entrepreneurs, moving into the formal economy could mean new regulatory requirements, taxes, and compliance costs—raising concerns about how the reform will affect livelihoods.
As African economies navigate climate pressures, global market volatility, and structural reforms at home, policymakers face growing pressure to balance resilience, growth, and social protection.
