It's time for green investment in Africa
- Bob Wekesa
As climate change alters business and governance forever, there is no time to lament, only to use the power of investment to change the world for the better.
Where there’s a challenge, there’s a business opportunity. So says Dr Mima Nedelcovych, AfricaGlobal Schaffer’s chairman, and a co-chair of the US Business in Africa Awards. With climate change’s current trends and future projections irrevocably altering business and governance, there’s no time to lament, but to use the power of investment to change the world for the better.
In particular, Africa is ripe for "green investment", presenting a $3 trillion investment opportunity by 2030. Indeed, the US companies operating in Africa have shown that doing business on the continent brings the highest returns compared to other emerging markets. But, as the African Development Bank says, less than 3% of overall climate finance comes to Africa. This is on a continent where there is poor access to electricity, notably in rural areas.
African governments are hopefully committed to providing enabling environments for private investment. This was evidenced at the Intra-African Trade Fair in Durban recently. It seems to me that business and government cannot have separate agendas or be diametrically opposed.
The Sustainable Development Goals, particularly number 13, urge every single person and larger entity on this planet to combat climate change. In addition, the African Union’s Agenda 2063 implores governments to act urgently against climate change. Furthermore, most African countries have committed to combatting the effects of climate change through the Nationally Determined Contributions protocol.
What opportunities does this pose for private companies investing in Africa? There’s a lot of potential in many fields, such as climate resilient infrastructure, green bonds, solar and wind energy. My colleagues at Prosper Africa have a plethora of case studies illustrating successful business operations in climate trade and investment.
Yield Lab (based in Missouri, USA) has created a Yield Lab Africa to invest in innovative and climate-resilient agro-processing technologies. Should this be used in cassava processing in West Africa for example, countries in that region may not need to import expensive food products, or rely on overseas entities to beneficiate any raw material. Moreover, cassava investments and trade would be sustained by a huge consumer base within Africa itself.
Prosper Africa highlights the work of US-based company CR Energy Concepts working in Djibouti – a small region in Africa but on the Red Sea and as such, a gateway region to the Middle East. Djibouti’s port is one of the busiest shipping routes in the world. While this is laudable, that country is beset by economic and social problems, including pollution and high electricity costs.
CR Energy has found a way to convert landfill waste into “clean” energy by using high temperatures in an oxygen-starved, non-reactive environment, thus creating energy without harmful gases or carbon emissions. Now, the Government of Djibouti and CR Energy are building a $190 million renewable energy park with the aim of adding 35 megawatts of baseload electricity per hour to the power grid.
In Cameroon, where 37% of the population have no access to electricity (despite an urban electrification rate of 96%), a market opportunity presents itself: There is a fledgling off-grid market to tap into – about 2.5 million households. Cameroonian company, Renewable Energy Innovators partnered with SimpliPhi Power in California to gauge whether 100,000 households in rural Cameroon would be able to use solar minigrids.
There are many more examples, and businesses now have the support of the Green Climate Fund for "climate-smart" initiatives. Indeed, the African Development Bank is working closely with international climate funds to upscale climate finance and to strengthen institutions to directly access climate funds.
Another critical development to bolster green trade and investment is the Africa Continental Free Trade Area (AfCFTA) act adopted by most African countries. The first shipment traded under the act departed from Ghana in January 2021. The ship bound for Guinea and South Africa symbolised a new era: the rapid implementation of a free trade agreement to create a more inclusive and prosperous future for Africa.
AfCFTA opens the continental market up considerably – there are 55 AU member states, comprising 1.3 billion people, and trade worth $4.3 trillion. Trade costs will be significantly reduced and truly makes Africa the next global trade and investment frontier.
But, removing tariff barriers on 90% of goods and services is a starting point, not a destination. A significant amount of work needs to be done to allow the seamless flow of goods and trading among Africans.
This is a challenge for overall growth in Africa with wealth flowing out of the continent and African businesses paying more for finished materials and imported products. Should the green climate financiers choose to invest in Africa, they need to change this trajectory, and work towards the common good for African people and for the planet.
Dr Bob Wekesa is the Acting Director of the African Centre for the Study of the United States. The US Business in Africa Awards launched in November 2021 and is a collaborative initiative involving the US Foreign Commercial Service for Africa, the US Embassy, the US Chamber of Commerce, the Wits Business School, the William Davidson Institute, Africa Business Group and the African Centre for the Study of the United States, based at Wits University. US Business in Africa will award companies for their impeccable corporate custodianship on the continent following a rigorous 9-month judging process. This article was first published in News24.