What are the Implications for Africa? A Green Economy in the Context of Sustainable Development and Poverty Eradication: What are the Implications for Africa?

What is a Green Economy? A Green Economy can be defined as one that results in increased human well-being and social equity, while significantly reducing environmental risks and ecological scarcities (UNEP 2011). A green economy is a vehicle to achieve sustainable development and eradicate poverty. For Africa, the green economy is an agenda for growth, poverty reduction and employment creation. UNEP defines a green economy as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive. In a green economy, growth in income and employment should be driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services.

How can a green economy contribute to sustainable development and poverty eradication in Africa? 3

Inclusive growth and poverty World’s ten fastest-growing economies* Annual average GDP growth, % Africa experienced robust economic growth in the past decades, but growth has not translated into significant levels of poverty reduction and social inclusiveness. New approaches to growth that enhance the basis of livelihood and income generation for the poor are essential. 2001-2010 Estimate 2011-2015 Forecast Angola 11.1 China 9.5 10.5 India 8.2 Myanmar 10.3 Ethiopia 8.1 Nigeria 8.9 Mozambique 7.7 8.4 Tanzania 7.2 Kazakhstan Vietnam Chad 7.9 D. R. Congo 7.0 Ghana Cambodia Zambia 6.9 Rwanda 7.6 6.8 Sources: The Economist, IMF, 2011 Note: * Excluding countries with less than 10 million population and Iraq and Afghanistan; a: 2010 estimate; b: IMF forecast

Employment creation Even in times of high economic growth, Africa still faces high levels of unemployment and under-employment. This is in part because economic growth in the last decade has been led by capital-intensive enclave sectors with low employment elasticity of output growth. There is growing evidence that investments to promote sustainable development can enhance job creation in areas of importance to Africa, including sustainable agriculture (+4%), clean energy generation and energy efficiency (+20%), forest management (+20) and sustainable transport (+10%). Sources: (Economic Report on Africa 2010). (UNEP, ILO 2008; UNEP 2011) The Green Economy Report makes the case that over time the number of “new and decent jobs created” in sectors - ranging from renewable energies to more sustainable agriculture - will however offset those lost from the former “brown economy”. The report acknowledges that in the short-term, job losses in some sectors—fisheries for example—are inevitable if they are to transition towards sustainability. Investment, in some cases funded from cuts in harmful subsidies, will be required to re-skill and re-train some sections of the global workforce to ensure a fair and socially acceptable transition. Net effect is positive and while there is job growth in most sectors this is also job loss in other sectors.

Food security In Sub-Saharan Africa, between 33% and 35% of the population is malnourished, especially in rural areas. Soil productivity is decreasing due to environmental degradation, which is caused by inaccurate management of soil, water and fertilizer; the decline in the use and length of fallow periods; overgrazing and logging; and population pressures pushing farmers to less favorable lands. An important share of the harvest is lost due to pests, diseases and poor handling and storage. All these are being exacerbated by the effects of climate change. New and innovative approaches of smart, sustainable and high-productivity farming are essential for poverty eradication and sustainable development.

Pathways to a green economy in Africa Given the natural resource-dependence of most African economies and the desire to achieve industrialization and economic diversification, and challenges of poverty and employment, a pathway to a green economy might require action on three fronts: capitalizing on Africa’s natural capital, embarking on green industrialization and creating enabling policies and institutions.   First, the economic importance of natural capital in wealth creation, employment, livelihoods, and poverty reduction in Africa needs to be recognized. Africa’s natural resources support its social and economic systems. They provide a basis for livelihood to the poor and most vulnerable who depend primarily on nature for survival. Natural capital assets sustain much of the tourism and associated service industries, which are increasingly becoming essential pillars of external trade, foreign exchange revenue generation and employment creation in African countries. Second, Africa’s early stage of industrialization offers avenues for an industrial development supported by the deployment of clean, efficient, and resource-saving technologies. Such technologies would enable greater energy and resource efficiency in the exploitation of the continent’s natural resources, avoiding wasteful consumption, undue economic costs, and risks of resource depletion. While the technological and financial requirements of a green industrialization are considerable, there are indications that opportunities for leapfrogging exist, as seen in the African aluminum industry. Finally, driving a green economic transformation will require a set of enabling policies and institutions that imply a critical role for the state, through public investment, fiscal policies, regulations, government procurement, and market creation at national, regional and international levels, as well as the facilitation of an active participation of non-state actors. 7

Building on natural capital assets Natural capital assets, both renewable and non-renewable, are estimated to account for 24% of total wealth in sub-Saharan Africa. Sub-soil assets, cropland, timber resources, pastureland, non-timber forest, and protected areas form an essential aspect of economic activity. A number of studies have underscored the larger gains that could be achieved by expanding investments to enhance natural capital. Natural capital and wealth creation in Sub-Saharan Africa Agriculture accounts for 34 per cent of the GDP of sub-Saharan African countries and employs about 70 per cent of the population. A green economy in the context of sustainable development and poverty reduction will need to cope with some of the challenges for this sector. For example, climate change and ecosystem degradation will negatively affect agriculture, and cause a decline in the productivity of rain-fed agriculture. WATER: In a green economy scenario, all MDGs related to water and sanitation could be reached by 2015, according to the UNEP Green Economy Report (UNEP 2011). TOURISM: Tourism, which relies primarily on the continent’s natural and cultural wealth, directly and indirectly contributes an estimated 8.3 per cent to GDP and 5.9 per cent to employment in Africa (World Travel and Tourism Council, 2009). FISH: In Africa 10 million people in Africa or 1.5% of the continent’s population depend directly on fishing, fish farming, fish processing and trading fish for their livelihoods. Fish is also a highly traded commodity and it is one of the leading export commodities for Africa, with an annual export value of nearly USD 3 billion. Fish supply in Africa is in crisis. Per capita consumption in sub-Saharan Africa is the lowest in all regions and it is the only part of the world where consumption is declining.

Green opportunities for industrial growth Taking advantage of the early stage of industrialisation, African countries can freely choose between available technology paths and achieve a “leapfrog” industrial development. Sustainable industrial growth does not only mean limiting the environmental, social and economic costs of industrialization, but also increasing the efficient use of energy and material input, and thereby international competitiveness. Material intensity of the world economy: Domestic extraction of materials per unit of GDP by world region At present, high energy and material intensities are characteristic of most African industries. This adds undue costs to production and ultimately undermines global competitiveness by locking countries into inefficient modes of production. Key challenges to ensuring the sustainable growth of Africa’s manufacturing sector include: (i) pollution – where from the outset clean technologies can be promoted to lessen or avoid significant pollution of air, water, and other environmental media; waste, where the concept of the three R’s (reduce, reuse, recycle) can be promoted. Similarly, existing production processes, both large and small, can be retrofitted with cleaner technology and pollution control measures; (ii) improving productivity to ensure competitiveness of the sector and its active role as engine for growth; (iii) ensuring that trade policies play their full potential in promoting the development of green industries and products.

Leapfrogging The use of outdated technology, smaller-scale plants, and inadequate operating practices are factors causing inefficiency in production processes. In the aluminum sector, Africa has the most efficient smelters in the world due to new production facilities that have the latest technologies in the field. Regional specific power consumption in aluminum smelting International Energy Agency, 2007. Source: International Aluminium Institute, 2003.

Harnessing Africa’s clean energy potential 74% of the population in Sub-Saharan Africa is without access to electricity. Limited access to energy is one of the greatest challenges to achieving the MDGs in Africa. African economies lose 1-2% of GDP as a result of power shortages. Yet Africa has the world’s largest technical potential for renewable energy power generation. Realizing this potential can drive economic growth, job creation and environmental gains. Global investments in renewable energy jumped 32% in 2010, to a record $211 billion. Countries in Africa posted the highest percentage increase of all developing regions, if the emerging economies of Brazil, China and India are excluded. Sources: UNDP and WHO, 2009. World Bank, 2010. UNEP, Bloomberg New Energy Finance, 2011 In Egypt, renewable energy investment rose by $800 million to $1.3 billion as a result of the solar thermal project in Kom Ombo and a 220MW onshore wind farm in the Gulf of Zayt. In Kenya, investment climbed from virtually zero in 2009 to $1.3 billion in 2010 across technologies such as wind, geothermal, small-scale hydro and biofuels. Small but significant advances were also made in Cape Verde, Morocco and Zambia (UNEP, Bloomberg New Energy Finance, 2011). In relative terms, however, investments in clean energy remain negligible in Africa, and concentrated in a very small number of very large projects (UNEP, Bloomberg, 2010), pointing to the need to enhance the capacity of institutions and people and to significantly leverage increased financing.

Enabling policies and institutions 12

Enabling conditions Skills for green jobs Capacity for policy reforms Capacity Building & international cooperation Pricing Instruments Favoring Green over Brown Sustainable Public Procurement Prioritize green investments Policy and regulatory frameworks Skills for green jobs Capacity for policy reforms Entrepreneurship and business development Incentivize green investments and correct negative externalities Create and stimulate markets for green goods and services Government policies and infrastructure can encourage private sector to invest in environmentally sustainable ventures Development strategies Laws and standards International policy architecture Innovative and imaginative public policies will be vital to generate enabling conditions that, in turn, can unleash markets and direct private sector investments into a Green Economic transition. These include: Sound regulatory frameworks, a prioritizing of government spending and procurement in areas that stimulate green economic sectors and limits on spending that deplete natural capital. Removing subidies could save 1-2% of global GDP a year, open fiscal space and makes room for public and private investment for a green economy transition Taxation and smart market mechanisms that shift consumer spending and promote green innovation. Public investments in capacity building and training, alongside a strengthening of international governance. For example, in 2005 the government of Ghana used the findings of a Poverty and Social Impact Analysis which demonstrated that petroleum subsidies go predominantly to higher income groups to initiate a public and parliamentary debate on reforming such subsidies. In parallel to reducing petroleum subsidies, Ghana eliminated fees for attending primary and junior-secondary school, and made available extra funds for primary health care and rural electrification programs (IMF 2008). 13

Policy and regulatory frameworks Government regulations and standards will provide the overall policy framework to encourage a transition to a green economy. A clear, predictable and stable policy environment can create the confidence required to stimulate private investment. In Kenya, investment climbed from virtually zero in 2009 to $1.3 billion in 2010 across technologies such as wind, geothermal, small-scale hydro and biofuels - driven by a feed-in-tariff policy. A proactive engagement of government, industry and consumers would enable African countries to fully participate in shaping the norms for environmentally sound goods and services.

Access to and transfer of technology African nations are recipients of technology in many areas, making effective international cooperation a critical enabling factor. Technology Needs Assessments conducted under the UNFCCC addressed technology needs in the agriculture, forestry and land use sectors. These sectors were followed by the energy sector, noted by 93% of the African parties. More than 82% of African Parties addressed measures in the waste management and industry sectors as priorities (UNFCCC 2009).

Financing African nations will clearly need additional financing, through internal and external public and private investments. There is no comprehensive assessment of the costs of a green economy transition for Africa. Recent estimates of the cost of putting Africa on a low‐carbon growth pathway are about US$9–12 billion per year by 2015 while the incremental cost of adaptation in Africa is estimated between US$13 – US$19 billion, if proper actions are not taken now (AfDB, 2011). In addition to global financing mechanisms, African countries could benefit from new funding instruments that are emerging at the regional level. For example, recent decisions adopted at the African Union Summit in Malabo, Equatorial Guinea, from 23 June to 1 July 2011, requested the African Development Bank to complete an African Green Fund (AfGF).

Seizing trade opportunities Trade is a powerful connector between production and consumption to drive a transition to a green economy. For African countries to benefit fully from their comparative advantage in trade in environmentally sustainable goods and services, tariff and non-tariff barriers and market distortions must be removed. Trade rules should prevent countries from using environmental concerns as a pretext for trade protection. Accelerating and strengthening regional integration can enable African countries to create large markets for intra-African trade and provide incentives for investments to develop a local manufacturing base and spur trade for clean products and technologies.

Africa success stories The green economy is a new concept. Nevertheless, there are many African examples of successful policies and initiatives across Africa in the areas of energy, agriculture and forestry, which prove that green economy related action is already under way in a variety of countries. Such experiences can not only be shared with other African countries, but also enable Africa to engage in global processes with its own views, perspectives, lessons learned and experience to offer. 18

South Africa – Green economy plan South Africa’s US$ 7.5 billion fiscal stimulus package of February 2008 allocated 11% or US$ 0.8 billion to railways, energy efficient buildings, water and waste management. South Africa plans to generate some 15% of its electricity from renewable sources by 2020 and enhance energy efficiency. The government is seeking to rollout a one million solar water heating programme by 2014. In May 2010, South Africa hosted a Green Economy Summit to set the stage for the formulation of a Green Economy Plan.

Egypt– Wind energy development Egypt adopted a “Long-Term Plan for Wind Energy” and fixed a target to meet 20% of electricity needs with renewable energy by 2020, with 12% cent coming from wind energy. A New and Reliable Energy Authority (NREA) was set up to foster growth in this sector. A target of 3500 MW installed capacity has been set for 2025. In 2010, renewable energy investment in Egypt rose by $800 million to $1.3 billion as a result of the solar thermal project in Kom Ombo and a 220MW onshore wind farm in the Gulf of Zayt. Source: UNEP, Bloomberg New Energy Finance, 2011

Kenya – Ecosystem restoration The Mau forest is the largest closed-canopy forest ecosystem in Kenya covering over 400, 000 hectares. Over 25% of the Mau Forest cover has been lost to ecosystem encroachments threatening natural capital, biodiversity and livelihoods. The value of the Mau forest complex to the economy, including tourism, hydro power, agriculture and the tea industry is estimated as much as US$1.5 billion a year. A multi million restoration initiative to reverse trends of decades of deforestation started in 2010. Source: Nellemann, C., E. Corcoran (eds). 2010. Dead Planet, Living Planet – Biodiversity and Ecosystem Restoration for Sustainable Development. A Rapid Response Assessment. United Nations Environment Programme, GRID-Arendal.

Uganda – Sustainable agriculture 185,000 ha, 45,000 farmers (2004) 60%/ 359% increase 296,203 ha/ 206,803 farmers (2008) 48-68% less emissions and carbon sequestration The global market: 97% of buyers in OECD countries; 80% of producers in Africa, Asia and Latin America A $ 60 bn market growing at 10% per year For example, Uganda, the African country with the largest area of land under organic farming, increased the number of certified organic producers from 45,000 in 2004 to 206,803 in 2008. The country’s revenues from the export of certified organic agricultural products increased from $3.7 million in 2003/2004 to $22.8 million in 2007/2008. US$ 22.8 mil (2007/8) US$ 6.2 mil (2004/5) US$ 3.7 mil (2003/4) 22

Namibia – Income from protected areas Namibia’s protected area system covers 17 % of the country’s terrestrial area. Protected areas contribute up to 6.3% of GDP through park based tourism only, without accounting for other ecosystem service values. Namibia increased the annual budget for park management and development by 300% in the last four years. The Ministry of Finance agreed to ear-mark 25% park entrance revenue for reinvestment through a trust fund, providing up to $2 million in additional sustainable financing per year.  Global Environment Facility. 2010. Protected Areas Pay in Namibia. 26 January 2010. http://www.thegef.org/gef/node/2340, accessed on 27 December 2010. Source: GEF, 2010

Ghana – Reforming fossil fuel subsidies In 2005, Ghana used the findings of a Poverty and Social Impact Analysis which demonstrated that petroleum subsidies go predominantly to higher income groups, to initiate a public and parliamentary debate on reforming such subsidies. In parallel to reducing petroleum subsidies, Ghana eliminated fees for attending primary and junior-secondary school, and made available extra funds for primary health care and rural electrification programs Source: IMF. 2008. Fuel and Food Price Subsidies: Issues and Reform Options. Washington D.C.: International Monetary Fund.

helps accelerate the Green Economy Empowering African social and environmental entrepreneurs SEED Initiative: helps accelerate the Green Economy At global level: SEED Awards support and promote promising and innovative social & environmental enterprises AFRICAN PREPCOM FOR RIO+20: ADDIS 20-22 October 2011   Small, micro and medium-sized enterprises working at the grassroots provide a powerful lever for the Green Economy, given their overall role as the engine of the global economy. Start-up enterprises which integrate social and environmental benefits into their business models are implementing sustainable development and can show others how to move in this direction. The SEED Initiative recognises and assists promising and innovative enterprises through the SEED Awards and studies the barriers and enabling factors to allow them to scale up. Nearly 60% of the total number of applicants to the SEED Awards, and nearly 60% of the winners, are from Africa. These are operating in a number of sectors, particularly agriculture and rural development, energy access and climate change mitigation and adaptation, and biodiversity. But these entrepreneurs face huge challenges: SEED studies reveal their need for imaginative financing arrangements from micro-finance through to investment; appropriate regulation and incentives; and access to technologies, skills development and training opportunities for both entrepreneurs and local communities. There is no shortage of innovative entrepreneurs who want to operate at the local level. Given the right frameworks, they can solve local problems in a truly sustainable manner and their potential contribution to the Green Economy can be realised. At policy level: Policy recommendations on how policy can help local entrepreneurs grow in a sustainable way At local level: Capacity building support to local small-scale social and environmental entrepreneurs

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