Green communities have a vital role to play in economic growth and development

December 6, 2023 Newsroom

One of the most frequently echoed narratives you’ll encounter when discussing the implementation of any green initiatives in Africa is the notion that doing so jeopardizes much-needed growth. As COP 28 goes on in the United Arab Emirates (UAE) from November 30 to December 12, this argument is likely to resurface.

Historically, this argument hasn’t been entirely baseless. African countries reportedly contribute only four percent to global emissions. The reasoning behind this perspective is that, having made such a modest contribution to the climate crisis, why should they be expected to reduce their emissions, potentially at the expense of growth and development, while developed countries continue emitting large amounts of greenhouse gases into the atmosphere?

However, these arguments overlook a crucial point. Green initiatives, incentives, and policies don’t necessarily have to come at the expense of development. Quite the opposite. The right green projects, particularly in the renewable energy sector, can stimulate growth and drive development. Moreover, such projects can form the nucleus of green communities that, in turn, foster further sustained growth.

Africa’s big, green opportunity

Before delving into how that might happen, it’s worth exploring the substantial green opportunities in Africa.

Consider the agricultural sector, for instance. According to a study by the UN Environmental Programme (UNEP), adopting practices such as organic farming, precision agriculture, and agroforestry could enhance productivity, minimize human impacts on nature, and prevent food insecurity. The study also reveals a $1 trillion opportunity in digital agribusiness technologies across the continent, and addressing soil erosion and nutrient depletion could unlock $62.4 billion in value annually.

However, perhaps the most significant green opportunities for the continent lie in renewable energy. One evident opportunity is in the solar space. After all, Africa is home to 60 percent of the world’s best solar resources but has just one percent of installed capacity, according to the International Energy Agency. In addition to the inexpensive, renewable energy that more extensive use of these resources would offer, launching comprehensive solar programs would also unlock immense value in areas like skills development and job creation.

When these solar resources are combined with other untapped renewable energy sources such as wind, hydro, biomass, and geothermal resources, the potential value is even greater. According to the UNEP, they could increase the continent’s GDP by 6.4 percent from 2021 to 2050 and generate anywhere from 100 percent to 400 percent of the current global energy demand. Even with Africa’s predicted population growth, that means there’s a significant opportunity for Africa to become a net exporter of clean energy.

There are also significant opportunities to build the circular economies that many believe are crucial to humanity’s future survival and welfare. Circular economy initiatives could help reduce plastic waste and pollution, unveil new forms of sustainable packaging, and enhance recycling, including for e-waste.

Vital action being taken, but communities must be centred

Fortunately, an increasing number of stakeholders across Africa are recognizing the positive impact that green initiatives, policies, and practices can have. For instance, more than 40 African states were revising their national climate plans in 2022 to be more ambitious, outlining greater commitments to climate adaptation, and implementing mitigation measures.

Additionally, several major African cities have embraced sustainability. The Arcadis Sustainable Cities Index 2022, which measures urban sustainability across cities, ranks Nairobi at 96 out of 100 global cities. The country’s Vision 2030 roadmap has sustainability at its core, aiming to achieve middle-income status in the next seven years.

Further south in South Africa, Cape Town has been a leader in exploring biofuels for transport, implementing renewables in public facilities, and preparing its power grid for a surge in electric vehicles. Abidjan’s Cocody suburb, meanwhile, has committed to cutting its carbon emissions by 70 percent by 2030 through the extensive use of solar power and energy-efficient stoves.

While such commitments and initiatives are vital, governments cannot fund them on their own. It’s estimated that Africa requires $2.8 trillion to fulfill its commitments under the Paris Agreement. This makes the role of investors critical.

But those investors cannot simply provide funding and hope for the best. Communities must always be at the heart of their investments, with their long-term welfare given equal footing, at least, to profit. To do otherwise is to risk failed projects, lose community buy-in, and ultimately give in to the narratives that claim green projects don’t benefit ordinary Africans.

Unleashing a green revolution

As one of those investors, we recognize that understanding and responding to climate change is a journey that requires ongoing learning, training, and a revision of our current investment process and ESG screening processes to ensure climate change is not only priced into our investments but also factored into our impact monitoring and management process.

As investors in Africa, we need to be agile and equip our clients with the necessary skills and resources to implement climate adaptation and mitigation measures that ensure the sustainability of their businesses and create the desired impact.

Ultimately, it should be clear that there is little merit to arguments asserting that Africa cannot develop unless it employs the same carbon-intensive methods as other global regions. A sustainability-focused shift can unlock massive amounts of value that drive growth and development. Moreover, if the green projects driving that shift are community-oriented, the impacts can be even more significant.

The author, Kuda Mukova, is the Head of Impact and Sustainability at Norsad Capital, an impact investor and private credit provider offering tailor-made debt solutions to profitable growth-stage companies that deliver desirable social and environmental impact.