Is Africa’s growth sustainable in the face of climate change?
The “Africa rising” cliché has generated a lot of views across the world. In the face of climate change, however, can Africa continue to grow?
Africa’s steady GDP growth sustained for over the last 10 years has generated significant positive reviews. African GDP has grown at about six percent per year and, over the past decade, six of the world’s ten fastest growing countries were African. The continent’s middle class is growing and 20 percent of the African population make a daily income of over US$10. Going forward, GDP growth in Sub Saharan Africa (SSA) is expected to rise to 5.5 percent in 2015, reversing a multi-decade pattern of low growth and instability.
Seen from a different angle, however, the picture is not as rosy. Aggregate poverty levels have hardly shifted and the World Bank reports that almost one in every two African lives in extreme poverty. As of 2014 Africa's growth was intangible for nearly half a billion women and men trapped in rural poverty. Looking ahead, it is estimated that under any plausible scenario, most of the world’s poor will be living in Africa by 2030.
On food security, the UN Food and Agriculture Organization (FAO) in 2010 found that nearly 240 million people, or one in every four persons in SSA lacks adequate food. On population, the World Bank also estimates that another half a billion people will be added to the continent by 2030, culminating in a total estimated population of two billion people by 2050. Youth make up 60 percent of the unemployed on the continent. Moreover, these millions of unemployed young people constitute an impending threat to stability in Africa, a possibility acknowledged by the African Union.
So while GDP growth is laudable, its conversion to poverty reduction for the Base of Pyramid (BoP) has not always occurred. Consequently, African growth has not always been inclusive, and its long-run sustainability is therefore brought into question.
Two critical concerns about Africa’s growth and future outlook are addressed in this article. Can the agriculture sector contribute toward enhancing inclusive growth and job creation on the continent? Considering the overriding threat of climate change to Africa’s growth, what is the continent’s likely position at the UN climate meeting this December in Paris, France?
African agriculture and inclusive growth
Africa needs to invest in economic sectors that are accessible to a majority of the population. The agriculture sector, which currently employs up to 60 percent of the labour force on the continent, holds significant value in this regard. Moreover, Africa holds 65 percent of the world’s arable land, and 10 percent of internal renewable fresh water sources. If harnessed properly, investment and trade in Africa’s agriculture sector has the potential to create incomes and jobs for many across the continent.
African food and beverage markets could be worth up to US$1 trillion by 2030. An agribusiness private sector working alongside governments could link farmers with consumers and create many jobs. Foreign direct investment (FDI) in African agriculture is projected to grow from less than US$10 billion in 2010 to more than US$45 billion in 2020.
In addition, growth in this sector could reduce poverty twice as fast as growth in other sectors. To realise this potential, the African Development Bank highlights the need to build the capacity of youth through entrepreneurship training, which will enable them to take advantage of agribusiness value-chains and create livelihoods.
Rwanda and Ethiopia provide classic, replicable, and scalable examples of non-resource rich countries that are achieving inclusive growth trends fuelled by agriculture. In Ethiopia, agriculture contributes nearly half of the country’s GDP and 50 percent of all employment in the country’s US$ 118.2 billion economy.
Rwanda has attracted a total of US$512 million in private investment in agriculture, covering 184 projects across the country between 2000-2013. A total of US$1.4 million worth of capital investment was made in 2013. This resulted in the creation of 296 direct agriculture jobs and over 1000 smallholders reached with vital agri-based value addition services.
Dismantling trade barriers
While Africa currently produces staple food worth US$50 billion annually, analyses shows that it could gain an extra US$20 billion if the region dismantles trade barriers in agriculture. Africa has the lowest share of intra-regional trade in total goods exports relative to other regions of the world, a mere 12 percent, compared to 65 percent in Western Europe, 45 percent in North America, and 25 percent in Southeast Asia.
Among the drags to intra-regional trade in Africa are production practices, where Africa produces what it does not consume, and consumes what it does not produce. In addition, policy measures and investments are focused on improving access to developed-country markets because of the high demand in those countries, while regional integration efforts on the continent are not fully implemented. As a result, many barriers between regional markets remain in place, yet another cause of low intra-Africa trade.
Another key barrier that needs to be addressed relates to the cost of trading across borders. Currently, costs associated with trading in sub-Saharan Africa are twice as high as those in East Asia and Organisation for Economic Cooperation and Development (OECD) countries.
By removing a range of non-tariff barriers to trade, including restrictive rules of origin, import and export bans, time consuming procedures and burdensome licensing, costs could be significantly reduced. For example, it currently takes an average of 38 days to import and 32 days to export goods across borders in SSA, two of the longest trade waiting times in the world.
Improving road and communications infrastructure in addition to eliminating non-tariff barriers will go a long way in reducing the time and inefficiency associated with intra-African trade. This will help ensure the region can benefit from its huge trade potential of trading in agricultural goods and, subsequently, incomes from agriculture, opportunity creation, and poverty reduction for the BoP.
Climate change reversing development
Climate change threatens to reverse all development gains made by Africa not least because its major economic sectors, particularly agriculture and food security, forestry, water resources, and social development, are highly climate sensitive.
The Intergovernmental Panel on Climate Change (IPCC)’s Fourth Assessment report (AR4) observed that Africa was among the most vulnerable regions, yet its emissions are small, with last year’s update confirming a similar picture. Under a below two degree Celsius global warming scenario from pre-industrial levels, the Africa Adaptation Gap Report 2 documents that Africa’s annual adaptation costs could hit US$50 billion by 2050 and rise to US$100 billion for a four degree Celsius or temperature rise by 2100.
Africa’s adaptation challenge coupled with its negligible emissions formed the basis of its position at the UN climate meet last December in Lima, Peru and will build towards this year’s conference in Paris, France. At the Twentieth Conference of the Parties (COP20) to the UN Framework Convention on Climate Change (UNFCCC), Africa’s position was that adaptation, climate finance, technology, and assistance needed to be given equal and balanced treatment in any universal deal designed to limit emissions.
Specific outcomes from COP 20 critical to Africa’s adaptation needs have been articulated by some commentators. These include finance, where additional pledges to the Green Climate Fund took its capitalisation beyond the initial target of USD10 billion; loss and damage, where in alignment to the polluter pays principle, developing countries vulnerable to extreme weather successfully won a mention of loss and damage in the meeting’s outcome text; and the National Adaptation Plans (NAPs), whererecognition that NAPs offer an important way of delivering climate resilience means they will now be made more visible via the UNFCCC website, which should improve the opportunities for receiving backing.
Heading to Paris, Africa’s position is expected to focus on the region’s particular climate needs, primarily adaptation financing.
Heading to Paris, Africa’s position is expected to focus on the region’s particular climate needs, primarily adaptation financing. Additionally, technology transfer and capacity development needs to catalyse a low emissions development pathway for the continent, are also likely to be pushed.
Findings from the Africa Adaptation Gap 2 report are expected to contribute to Africa’s position. The report observes that with soaring adaptation costs, and official development assistance (ODA) to the continent on the decline, Africa should also pursue a series of recommended strategies for domestic financing as a complement to upscaling international actions on financing and mitigation. From these the report concludes that the region can mobilise up to US$3 billion annually. Enhancing additional incomes from the agriculture sector – with an eye on climate resilience – through increased investment and trade will ensure economic growth and provide additional financing to buttress domestic climate financing.
Africa is also expected to support appropriate mitigation policy to limit emissions from its developed country partners in the negotiations. Indeed the imperative for mitigation is strong. Studies indicate that if current emissions trajectory is sustained, the limits for human and environmental adaptation are likely to be exceeded in many parts of the world by the end of the century. All this will reverse development gains, particularly in vulnerable regions like Africa. Ecosystem services upon which human livelihoods depend and which underpin key economic sectors in Africa would not be preserved. Specifically in agriculture, ecosystem services such as soil formation, water, nutrient recycling, off-and on-farm biodiversity, underlie food production. Destroying ecosystems would mean Africa’s key economic sector and potential contributor to inclusive growth would be severely hampered. Africa will likely take positions in Paris that balance both adaptation and mitigation actions. This will not only go a long way in protecting the region’s ecosystems, but also facilitate inclusive growth in the continent by enhancing performance of the region’s agriculture sector, which is highly climate-sensitive.
The views expressed here are those of the authors and do not necessarily represent those of the institution with which they are affiliated. This article is based on a longer version published in Bridges Africa ICTSD’s regional focused publication on African trade and sustainable development.
Richard Munang, Climate Change Development Policy Specialist and Expert, UN Environment Programme (UNEP).
Robert Mgendi, Ecosystem Based Adaptation and Development Specialist at UNEP.