Building inclusive green economies for Africa’s sustainable development

18 June 2015

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

African economies have been growing fast with an average growth rate of 5.1 percent between 2002-2011. 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 still live in extreme poverty. While the African population is expected to increase to 2 billion people by 2050, the average youth unemployment rate stands at over 12 percent, according to the International Labour Organisation (ILO).

Green economy initiatives in Africa

Recognising that green economy[1] 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 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 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 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 (i.e. African Green Economy Partnership (AGEP), 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 (UNEP). Undertaken across ten African countries over the past four years, the green economy assessments clearly demonstrate how 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 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 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 leads to an additional 3.1 million people being lifted out of poverty by 2030. Such wealth creation includes natural wealth as well. By investing and stewarding the continent’s natural wealth, the region could move far ahead of other regions in terms of inclusive wealth.

Ensuring adequate environment

In order for the identified green economy opportunities to be realised, the appropriate policy environment should be put in place. With sound regulatory frameworks coupled with appropriate pricing and incentives, green investments could accord sustainable benefits 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 and environmental regulations for biodiversity conservation, water quality, and waste management.

A wide range of green economy policy is already being implemented across countries in the region.  In particular, fiscal policy reform can open new space for growth, investment, and social protection – hallmarks of an inclusive green economy. At the same time fiscal policy can provide the necessary incentives to induce green investment and consumers’ behaviour changes. South Africa, for example has already announced the introduction of a 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. 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. 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 International Monetary Fund,  reforming fossil fuel subsidies in Africa would free 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 (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.

Integrating green economy in development planning

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 the green economy becomes an integral part of  development planning, a budget needs to be relocated for green investment and this requires sensitisation of the parliament on green economy. Institutional readiness is essential to mainstreaming the green economy in all development planning. At the national level, 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 ministries of environment. A wide range of stakeholder consultations including civil society and the private sector are also pivotal for successful transformation of green economy.

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

Innovative solutions for financing 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. 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 R800 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.

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

This article is based on a UNEP synthesis report ‘Building Inclusive Green Economies in Africa: From Inspiration to Actions’ and the discussion which took place at the regional workshop ‘Inclusive Green Economies for poverty reduction and sustainable development in Africa’, Cairo, Egypt. The report can be accessed here.

Author:  Joy Aeree Kim is a senior economic affairs officer at UNEP Economics and Trade Branch.

[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, 2011’).

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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