Building inclusive green economies for Africa’s sustainable development

9 November 2015

Harnessing a strong endowment of natural resources and skills, Africa can become a model of green economic transformation, demonstrating that growing without eroding the underlying stock of natural wealth is possible.

African economies have been expanding fast with an average growth rate of 5.1 percent between 2002 and 2011. 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 percent of people in Sub-Saharan Africa live in extreme poverty. The African population is expected to double to two billion by 2050, and the average youth unemployment rate stands at over 12 percent, according to the International Labour Organisation (ILO).

Green economy initiatives in Africa

Recognising that the green economy [Ref 1] could play a pivotal role in achieving sustainable growth in Africa, leaders from the continent have made a strong commitment to orient domestic development paths towards long-term sustainable development. As of today 14 countries in the region have, or are in the process of, developing green economy strategies or action plans at the national level. This includes Burkina Faso, Egypt, Ethiopia, Ghana, Kenya, Mauritius, Mozambique, Rwanda, Senegal, Sierra Leone, South Africa, Uganda, Tunisia, and Zambia.

Several countries have also succeeded in making the green economy an integral part of national development planning. In Kenya, for instance, the country’s Green Economy Strategy and Implementation Plan has now become part of its medium-term Plan for 2013-2017. This is based on the understanding that national development planning processes should be reframed in the context of green economy for successful sustainable development outcomes.

African leaders’ determination to move towards a more inclusive and greener economy has also been demonstrated through the African Ministerial Conference on the Environment (AMCEN). During the 14th AMCEN session in 2012, the 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.

Potential impact of green economy

Green economy assessments have played a catalytic role for action on national green economy initiatives in the region as distributed by the UN Environment Programme (UNEP). Undertaken across ten African countries over the past four years, the assessments clearly demonstrate how the green economy could accelerate wealth creation in Africa by increasing growth, generating jobs, reducing poverty, and improving the overall well-being of the population.

The assessments analyse 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 percent higher by 2030 under a green economy scenario, compared to a BAU scenario. The assessments of Burkina Faso, Kenya, Senegal, and South Africa all demonstrate that green economy policies will be an important source of new employment. Investments in the expansion of solar and wind capacity in Senegal are projected to generate between 7600 and 30,000 additional jobs by 2035. In Burkina Faso, 160 million more jobs could be created under a green economy scenario than the corresponding BAU scenario, reaching 27.6 to 27.7 million additional jobs by mid-century. In Kenya a shift in investment to green sectors leads to an additional 3.1 million people being lifted out of poverty by 2030. Such wealth creation includes natural wealth as well. A key message in terms of the latter is by investing and stewarding the continent’s natural capital, Africa could move far ahead of others in terms of inclusive growth.

Ensuring adequate domestic environment

In order for the identified green economy opportunities to be realised, however, appropriate policy environments should be put in place. Crucially, using sound regulatory frameworks coupled with appropriate pricing and incentives, green investments could accord sustainable benefits more inclusivity.

Effective regulations are also contingent upon rigorous monitoring and enforcement mechanisms. Kenya, for instance, has instituted several effective policies for monitoring and compliance including tax exemptions on renewable energy projects and environmental regulations for biodiversity conservation, water quality, and waste management.

A wide range of green economy policies are already being implemented across countries in Africa.  In particular, fiscal policy reform can open new space for growth, investment, and social protection, the hallmarks of an inclusive green economy. At the same time fiscal policy can provide the necessary incentives to induce green investment and changes in consumer behaviour.

South Africa, for example, has already announced the introduction of a carbon tax in 2016. If managed with careful consideration of potential side effects, the carbon tax could help the country reduce carbon dioxide emissions, by providing appropriate market signals to curb unnecessary or wasteful consumption. The carbon tax can also generate substantial resources that can be used to finance social protection and investments in education, health, as well as green sector research and development to stimulate innovation. Careful design of incentives is nonetheless crucial given that these may have an impact on trade and 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 International Monetary Fund (IMF), reforming fossil fuel subsidies in Africa would free up public resources, amounting to 1.4 percent of the region’s GDP. The government of Ghana, for example, removed fossil fuel subsidies in June 2013, freeing up public resources of around US$1 billion per year that will be used to implement inclusive green economy policies.

Any economic transition requires adjustment and planning at all levels. 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 upfront 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 or are most vulnerable. Specific and direct support may be required where upfront costs, such as energy investment, are significant. 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.

Development planning

In order for ongoing green economy initiatives in Africa to accelerate, however, all development planning processes should be reframed in this context. The green economy should be a backbone of not only national, but also sub-regional, and regional strategies.

Moreover, once the green economy becomes an integral part of development planning, a budget needs to be relocated for green investment and this requires socialisation of the democratic process towards the green economy. Institutional readiness is essential to mainstreaming the green economy in all development planning.

At the national level an inter-ministerial approach to implementing the green economy is crucial as relevant policies cut across all arms of government. In particular, leadership by the ministries of finance, economy, and planning is needed along with the support of the ministries of environment.

A wide range of stakeholder consultations, including with civil society and the private sector, are also pivotal for a successful green economic transformation. Technical support from regional organisations may be required to integrate green economy policies in development planning. Regional organisations could support countries by fostering cooperation for a common vision and knowledge sharing on good practices and success stories.

Financing the green economy

Innovative solutions for financing the green economy – both internal and external – are the key next step to a successful transformation to sustainable growth. Significant domestic resources could be mobilised through fiscal reforms to finance green economy, as already touched on above.

Several additional options could be considered. For instance, national green funds with environmental tax revenues, as well as other resources such as well-designed 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 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 ZAR800 million (US$68.2 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 strategic ways to access the liquidity of regional banks and existing global financial mechanisms such as the UN’s Reducing Emissions from Deforestation and Forest Degradation and the sustainable management of forests (REDD+), the Clean Development Mechanism (CDM), and the new 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.

Regional mechanisms such as AMCEN could play an important role. In particular AMCEN could provide a clear road map for financing the green economy. The African Green Economy Partnership (AGEP) also provides an overall framework for green economy support in Africa, with programmes such as the Partnership for Action on Green Economy (PAGE) [Ref 2], assisting interested countries in their green economy transition.

This article is based on a UNEP synthesis report “Building Inclusive Green Economies in Africa: Experience and Lessons Learned  2010-2015” and subsequent discussion at a regional workshop “Inclusive Green Economies for poverty reduction and sustainable development in Africa,” in Cairo, Egypt in March 2015.

Joy Aeree Kim, Senior Economic Affairs Officer, UNEP Economics and Trade Branch

[Ref 1] UNEP defines a green economy as “one that improves human well-being and social equity while significantly reducing environmental risks and ecological scarcities.” Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, UNEP, 2011.

[Ref 2] The Partnership of Action for Green Economy (PAGE) is a joint initiative by UNEP, ILO, UNDP, UNIDO, and UNITAR to support countries’ efforts for a green economy transition.

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