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How Africa can pioneer GREEN growth

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African countries’ development strategies must soften the environmental impact of economic growth, and they must also position themselves to benefit from the promotion of green economies. Donald Kaberuka, who heads the African Development Bank, explains how best they can scale-up the climate finance system and embrace green growth.

 

Green growth will be critical to Africa’s future because the fragility of its natural environment coupled with its heavy dependence on agriculture is set to put heavy pressure on the continent’s ecological carrying capacity. African countries’ pressing need for growth to combat poverty at a time of runaway population growth mean that development policies must be fashioned to reduce the environmental impact. And the same African countries also need to position themselves so they benefit from promoting green economic growth.

Africa has already begun to do this, and a case in point is the South Africa Renewables initiative (SARi) whose rationale spans economic development and not just climate change objectives. SARi is focused on developing local industries while also de-carbonising their largely export-oriented products. Another example of this approach comes from Morocco, which is planning to double its energy capacity while increasing its output from renewable sources in the coming decade from 1.5 to 6 gigawatts (GW). Renewables will thus make up 42% of all power generated in Morocco.

Much more needs to be done, though, at national and international policy levels to shift investment flows towards green growth in middle and low-income economies. African countries therefore need to put the right policies in place and also to receive the financial support they need to do so.

Promoting green growth demands a broad mix of policies to encourage investment in green technologies, foster innovation, correctly price scarce resources and address failures of market signals. Each country of course requires its own policy blend but a number of key questions are common to all; what is the best way to support green growth, how should reform measures be sequenced? What are the competitiveness and social concerns that need to be assessed?

It is already clear, however, that clean technology along with the innovation and entrepreneurship associated with green industries, is capable of giving African countries a competitive edge in new global markets. They can attract the foreign direct investment needed to generate economic growth and jobs. At the same time, the transition to a “green economy” can have important consequences on employment and skills with some jobs being created and others destroyed. In order to ensure that most of the lost jobs evolve to meet the needs of the new demands, policies must be put in place to manage such structural changes.

But African countries are going to need a good deal of help if they are to devise green manufacturing strategies and position themselves advantageously in the value chain of clean technology manufacturing. They also need to benefit from technology transfers and North-South partnerships while helping to promote them.

The African Development Bank (AfBD) has already been playing a leading role in the African countries’ strong economic performance over the past ten years, which has meant rising energy demands, and unfortunately demand is now outstripping nationally-generated energy supplies in many of them. So greening the energy sector is potentially a way to reduce these countries’ vulnerability to future energy price shocks while increasing their energy independence. The dauntingly wide energy gap in Africa, taken together with the continent’s huge natural resources, must be seen as a very real opportunity to attract private investment and create jobs while embarking on the path towards green growth.

Africa’s growing demand for personal mobility is going hand in hand with accelerated urbanisation. Providing transport for millions while catering for freight growth is already an enormous infrastructure challenge for developing countries’ planners. Responding to transportation needs in a sustainable way is an essential component of economic growth, with important health and environmental implications.

According to the United Nations Environment Program, environmentally-friendly farming practices, or ‘green agriculture’, hold the key to combating climate change and poverty, and also to addressing population growth. The agricultural sector could be predominantly carbon-neutral by 2030, and able to produce enough food to feed a global population of 9bn by 2050 provided it adopts such methods as agroforestry, reduced soil cultivation and the use of natural nutrients like fertiliser trees.

In most parts of Africa, faster growth in agriculture is a precondition for sustained economic growth and poverty reduction. Governments and international organisations must therefore systematically support farm innovation and ensure that farmers are using new seeds, improved plant varieties and fertilisers. They also need access to modern plant breeding, including biotechnology, and from better transport and storage infrastructures. The right water and soil management techniques for different agro-ecological zones are crucial, as are research and development programmes that can evaluate yield-increasing technologies for both well-watered and semi-arid, rain-fed environments.

If Africa is to embrace green growth as a development policy tool it will need adequate resources and appropriately tailored financing mechanisms. Current resources are not enough to respond to these challenges, for the reality is that Africa has so far been receiving the smallest share of climate change funding. Concerns over Africa’s limited access to these funds and the need to develop Africa-led solutions to tackle the threat of climate change have prompted African leaders to collectively request a ring-fencing of climate change resources for Africa. They have now asked that this be channelled through the African Development Bank and the AfDB’s response is a plan to establish an Africa Green Fund (AGF) to co-ordinate and pursue a low-carbon and climate resilient approach.

The Copenhagen Accord saw an annual $100bn commitment in both new and additional public and private climate finance by 2020. This could make a significant contribution by creating new incentives for low carbon and climate resilient growth, but the sad truth is that Africa and the world as a whole cannot wait until 2020. The climate finance system needs to be scaled up in the coming decade to create much greater confidence in short-term financing (2013-15) and to build up a strong pipeline of programmes and projects in developing nations. Concrete, scaled-up commitments are needed now for 2013-2015, and these commitments should include lending for green growth through multilateral development banks and the AfDB in particular, as well as through dedicated capital increases and financing of new mechanisms it is developing to maximise private financing for low-carbon investments.

More and more African countries are beginning to see the benefits of green growth, and are therefore adopting measures to speed the transition of their economies towards a climate resilient and sustainable future. But action to accelerate this transition is needed in all African countries, and international climate finance is going to be vitally important.

Europe can show both leadership and its commitment to Africa’s green development by facilitating increased market access for Africa’s green products. And Europe can also support African enterprises through the transfer of clean technologies while enhancing agricultural productivity using green methods. Another area where Europe can help is to lower the incremental costs of greening infrastructures through investment grants, concessional finance and even direct investments in countries where it isn’t possible to raise investment capital locally. The EU can support innovative financing instruments such as revolving funds, guarantee schemes and risk sharing facilities just as it is planning to do in its member states. No longer just the concern of national authorities, these are investments that lie the core of the battle against climate change, and that’s now a global challenge.

Donald Kaberuka is President of the African Development Bank Group.

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