Building inclusive green economies for Africa’s sustainable development

Shedding light on why green economy is crucial to achieving sustainable growth in Africa, this blog post draws on lessons learnt from the UNEP report "Building Inclusive Green Economies in Africa: From Inspiration to Actions" and the discussions which took place at  a recent UNEP regional workshop on "Inclusive Green Economies for poverty reduction and sustainable development in Africa".

Since the Rio+20 summit which clearly recognized green economy as an important tools for achieving sustainable development and poverty eradication in its outcome document ‘the Future We Want’, an increasing number of countries have taken initiatives for their green economy transformation. Many impressive examples could be found around the world, but nowhere more so than in Africa. 

African economies are dynamic and fast growing: between 2002 and 2011, they grew an average of 5.1% and this trend is expected to continue in many sub-regions. Despite such rapid growth, Africa is still facing serious challenges. According to the World Bank, 48.5 per cent of people in sub-Saharan Africa still live in extreme poverty. While African population is expected to increase to 2 billion people by 2050, the average youth unemployment rate stands at over 12 per cent, according to the ILO.

Recognizing that green economy could play a pivotal role in achieving sustainable growth in Africa, leaders from the continent have made a strong commitment to set the national development paths towards long-term sustainable development: As of today, thirteen countries have or are in the process of developing green economy strategies or action plan at the national level (this includes Burkina Faso, Egypt, Ethiopia, Ghana, Kenya, Mauritius, Mozambique, Rwanda, Senegal, Sierra Leone, South Africa, Tunisia, Uganda and Zambia).   Several countries have also succeeded in making green economy an integral part of national development planning. In Kenya, for instance, the Green Economy Strategy and Implementation Plan has now become part of the medium-Term Plan for 2013-2017. This is based on the understanding that for a successful green economy transition, national development planning processes should be reframed in the context of green economy.  

African leaders’ determination to move towards a more inclusive and greener economy has also been demonstrated at the African Ministerial Conference on the Environment (AMCEN). During the 14th AMCEN session, a decision on Africa’s Post Rio+20 Strategy for Sustainable Development established mechanisms that provide coordinated support to Member States for the promotion of the green economy in Africa, including the development of partnerships and national strategies, the promotion of regional and international cooperation and the transfer of resource-efficient and green  technologies and know-how. This includes an African Green Economy Partnership (AGEP) to facilitate coordinated support for Member States and contribute to the implementation of the global Partnership for Action on Green Economy (PAGE); review the African 10-Year Framework on Sustainable Consumption and Production (10YFP on SCP); and strengthen and consolidate commitments to promote sustainable development.

What played a catalytic role for action on national green economy initiatives in the region is a series of green economy assessments.  Undertaken by UNEP across ten African countries (Burkina Faso, Egypt, Ghana, Kenya, Mauritius, Morocco, Mozambique, Rwanda, South Africa and Senegal) over the past five years, the green economy assessments clearly demonstrate how green economy through investment could accelerate wealth creation in Africa by increasing growth, generating jobs, reducing poverty and improving the overall well-being of the population. The assessments analyze comparative economic, environmental and social implications of green economy investment scenarios to business-as-usual (BAU) scenarios. For example, gross domestic product (GDP) growth in Kenya is projected to be 12 per cent higher by 2030 under a green economy scenario compared to a BAU scenario. The studies from Burkina Faso, Kenya, Senegal and South Africa demonstrate that green economy policies will be an important source of new jobs. Investments in the expansion of solar and wind capacity in Senegal are projected to create between 7,600 and 30,000 additional jobs by 2035. In Burkina Faso, 160,000 million more jobs are expected to be created under a green economy scenario than the corresponding BAU scenarios, reaching 27.6 to 27.7 million jobs by 2050. In Kenya, a shift in investment to green sectors lead to an additional 3.1 million people being lifted out of poverty by 2030. Such wealth creation includes natural wealth as well. Africa is a continent rich in natural wealth. By investing and stewarding the continent’s natural wealth, the region could move far ahead of other regions in terms of inclusive wealth. In South Africa, investments in natural resource management and particularly in land restoration, are projected to save up to 250 billion tons of water by 2030, thereby reducing the water stress index by 1.1 per cent compared to BAU. 

In order for the identified green economy opportunities to be realized, an appropriate policy environment should be put in place. With sound regulatory frameworks coupled with appropriate pricing and incentives, green investments could accord sustainable benefits with more inclusivity. Effective regulations however are contingent upon rigorous monitoring and enforcement mechanisms. Kenya, for instance, has instituted several effective policies for monitoring and compliance including tax exemption on renewable energy, environmental regulations for biodiversity conservation, water quality and waste management. 

A wide range of green economy policies are already being implemented across countries in the region. In particular, fiscal policy reform can mobilize new resources for growth, investment and social protection – hallmarks of an inclusive green economy, while providing necessary incentives to induce green investment and consumers’ behaviour changes. South Africa, for example has already announced an introduction of carbon tax in 2016, at the rate of R120 per tonne of CO2 equivalent. If managed with careful consideration of potential side effects, the introduction of the carbon tax can help South Africa’s ambitions to reduce CO2 emissions, providing appropriate market signals to curb unnecessary or wasteful consumption, while generating substantial resources that can be used to finance social protection and investments in education, health as well as green sectors’ research and development to stimulate innovation. The design of incentives, however, is crucial given that green incentives may have an impact on trade competition.  

The removal of harmful subsidies can also create fiscal space for new investments in green sectors and the provision of essential services. According to the IMF, reforming fossil fuel subsidies in Africa would free public resources amounting to 1.4 per cent of the region’s GDP. The Government of Ghana, for example, removed fossil fuel subsidies in June 2013, freeing up public resources (about US$1 billion per year) that will be used to implement inclusive green economy policies. 

Any economic transition requires adjustment and planning at all scales. Actors with fewer resources, however, may be disproportionately affected if they have less access to information about future conditions, less access to supportive networks or innovation hubs, or if they are subject to high up-front costs. Thus, in the short run, green economy investments need to be associated with adjustment costs for certain segments of the population that are most affected. Specific and direct support may be required where up-front costs, such as energy investment, are high. The Ghana Renewable Energy Fund is a successful example of resource mobilisation for the promotion of renewable energy sources. This initiative encourages private investments in the renewable energy sector by lowering upfront capital investment costs. 

In order for on-going green economy initiatives in Africa to prosper, however, all development planning processes should be reframed in the context of green economy. Green economy should be a backbone of not only national, but also, sub-regional and regional strategies. Once green economy becomes an integral part of the development planning, budget needs to be relocated for green investment and this requires sensitization of the parliament on green economy. Institutional readiness is essential to mainstream green economy in all development planning. At the national level, an inter-ministerial approach to implementing green economy is crucial as green economy cuts across all the ministries. In particular, leadership by the Ministries of Finance, Economy and Planning is crucial in implementing green economy policies and monitoring and evaluating the progress with the support of the Ministry of Environment. A wide range of stakeholder consultations including with civil society and the private sector is also pivotal for successful transformation of green economy.

To integrate green economy in development planning, technical support from regional organizations may be required. Regional organizations could also support countries by fostering cooperation for common vision and knowledge sharing on good practices and success stories.

Innovative solutions for financing green economy – both internal and external-is the key next step to a successful transformation to sustainable growth. Significant domestic resources could be mobilized through fiscal reforms to finance green economy. According to the AfDB, with good tax administration, domestic resources are estimated to be three times more than external resources such as Overseas Development Aid (ODA). Several options could be considered. For instance, national green funds with environmental tax revenues as well as other resources (e.g. import and export taxes) could be created to finance various green economy initiatives and projects. Countries such as South Africa and Rwanda have already pioneered in developing such funds. In the case of South Africa, a Green Fund was established to support green initiatives to assist South Africa’s transition to a low carbon, resource efficient and climate resilient development path. The R 800 million fund is managed by the Development Bank of South Africa. The Government of Rwanda has also developed a national climate change and environment fund to finance its Green Growth and Climate Resilience Strategy.  

International cooperation also plays a key role in financing green economy. Countries should explore a strategic way to access to the liquidity of regional banks and existing global financial mechanisms such as REDD+, CDM and Green Climate Fund. This requires countries’ readiness by building national capacity (both human as well as institutional) with the support of regional and international communities. 

Political commitments around regional mechanisms are also crucial. In particular, AMCEN could provide a clear road map for financing the green economy, an overall framework through AGEP and assistance through PAGE. 

Building on a strong endowment of natural resources and skills, Africa has become an example of green transformation to the world, demonstrating that growth without the erosion of the underlying stock of natural wealth is possible.