Prospects for a green boost for African industries and economies

With large quantities of natural resources, including oil, copper, and diamonds, much investment in Africa has involved the extraction and processing of these resources by foreign companies—a fact that has kept Africa's emissions low, but which has also hindered the creation of large-scale local industries.

Despite its small contribution to global environmental shifts, African countries have felt the impacts of climate change through desertification, droughts, floods, and the depletion of its vital resources.

As a result, leaders such as Rwandan President Paul Kagame have pushed for more responsibility from developed countries in cutting emissions and putting in place innovative and effective incentives-based measures to prevent all countries from either beginning or continuing to damage the environment.

Business leaders and development experts have recently pledged support for a possible change for African economies, rallying around the idea of more widespread use of environmentally friendly sources of energy.

Speaking at the UN's Climate Change Summit on 22 September 2009, Al Gore, a major proponent of this change, said, “The advantages from low-carbon industries to economic development will be comparable or greater than the advantages from the Internet.” Global business leaders attending the summit echoed these sentiments, explaining that countries in Africa would be starting with a “clean slate.”

With the current low level of industry present, a unique opportunity for the continent's economies to go green may spark an economic renaissance.

Shilpa Patel, chief of the IFC's Climate Change Unit, told MediaGlobal, “In the case of energy, many factors come into play. The cost of green technology continues to be high. Some countries lack the technical platform to fully absorb these new technologies and may have limited human capacity to man and manage them.” She added that lack of financing could also be an issue in some cases, further constrained by the high cost of borrowing in developing countries.

Because of high start-up costs, Patel explained that conventional energy sources, though unsustainable, continue to be seen as preferable, especially for cash-strapped economies, leaving little incentive to switch. Patel pointed out that traditional fossil fuel, though not necessarily cheaper than alternative energies, has its costs more evenly spread out between capital and operational costs and technicians have already been trained.

Domestically caused environmental issues also remain with one major problem being deforestation. According to the United Nations Environment Programme, Africa's deforestation rate is twice that of the world average. The alarmingly high rate comes as a result of illegal logging, low state capacity to protect forests, and population pressures that raise demand for living space, agricultural areas, and energy sources.

Deforestation continues even though it is known to be unsustainable, a source of local and inter-state tension, and part of a cycle that leads to lower rainfall, soil erosion, and famine.

Water and air pollution — especially in the growing urban areas — are also other major problems affecting local populations.

Patel told MediaGlobal, “Several possibilities for ‘leap-frogging' clearly exist and developing countries in many cases have taken advantage of them. This is most obvious in the mobile telephone market.” Leapfrogging refers to the idea that adapting new technologies may allow developing countries to advance more efficiently, more cost-effectively, and more sustainably than industrialised countries were able to in the past.

Another example of environment-friendly means of revenue generation exists in Haiti where a program is in place that recycles garbage into tightly packed “briquettes” as an alternative source of energy over charcoal.

Though possibilities for renewable alternatives in Africa have yet to provide energy on a large scale, small projects do exist using solar, geothermal, and wind technologies. Harnessing the advantages of large sun-lit areas such as the Sahara desert and other large areas across Africa offer chances for clean, efficient, and profitable energy use provided the current technological, financial, and political hurdles can be overcome.

Concrete steps must now follow the pledges made by various leaders to support equitable and feasible energy sources for development. Patel believes that cooperation across groups will be essential, telling MediaGlobal that “no one party can tackle this problem on its own. Governments need to make the right policies, and industry needs to come through with investment.”

She continued, “There have been a number of private sector fora where business leaders have come together and essentially said that industry is prepared to rise to the challenge of addressing climate change, but that governments need to set the rules and parameters so that industry has some policy and regulatory certainty under which to make decisions.”

Responsibility must also be taken by leaders of African countries in pushing for a shift to renewable and more sustainable energies. Patel and other experts agree that along with steps taken to combat climate change on a global scale, internal issues such as deforestation will also be important and should be addressed through effective and appropriate policies.

IFC is a member of the World Bank Group. For more information on the work of the IFC, go to http://www.ifc.org.

Article published courtesy of MediaGlobal