This commentary was contributed by Agnes Gitau, Executive Director UK & Europe at the Eastern Africa Association.
AFRICA CLIMATE SUMMIT 2023
BUSINESS IMPLICATION AND OPPORTUNITIES IN A CHANGING CLIMATE
This commentary was contributed by Agnes Gitau, Executive Director UK & Europe at the Eastern Africa Association.
The recent Africa Climate Summit 2023, hosted in Kenya, brought together public and industry leaders to discuss the future of Africa in the face of global climate challenges. The leaders, in one voice, called for urgent action by developed countries to reduce carbon emissions to safeguard our planet. The Summit also proposed a new financing mechanism to address Africa’s debt challenges and unlock Climate Finance.
We summarise the key themes highlighting implications for businesses, particularly members of the Eastern Africa Association, given our region’s experience and exposure to the effects of Climate Change.
Decarbonisation is becoming central to business success. Companies that have taken the lead in sustainable practices are gaining market advantages and attracting investors. Big names like Apple and Microsoft are leading the charge with their clear sustainability goals, reinforcing the link between good environmental practices and strong business outcomes.
At the Summit, African leaders stressed the importance of combining investment with climate action. This reflects global financial trends, where there has been a noted rise in sustainable investments. Green bonds, ESG portfolios, and sustainable credits are becoming essential tools for businesses in Africa.
New Business Opportunities in Climate Challenges
While the Continent faces its share of climate-related challenges, they also present opportunities. According to the OECD, the green energy sector alone has the potential to grow into a USD 100 billion market by 2030. Additionally, there’s a vast potential in sustainable agriculture, projected to be worth USD 1 trillion by 2030.
The region has attracted Private Equity investments in e-mobility with Nairobi and Kigali leading in attracting in this area.
Addressing Africa’s Debt and Climate Financing
Africa’s debt crisis was surprisingly a topic for discussion at the Summit, with Governments calling for fairer systems, in our view, must implement robust debt management practices to ensure that borrowing and debt service obligations are in line with the country’s payment capabilities. There must be transparency by both borrowers and lenders. There is an urgent need for countries to develop a sustainable borrowing strategy that prioritises concessional loans and avoids over-reliance on non-concessional debt.
Governments must enhance revenue collection and strengthen tax systems and other revenue collection methods to enhance domestic resource mobilisation.
Lastly, and even as we call for debt restructuring, it is important for public sector leaders to ensure expenditure management, making sure that public spending is efficient, transparent, and directed towards productive investments.
There is a need for new financing methods that can help manage and reduce this debt. Such methods would give African nations more freedom to invest in development and climate initiatives.
Climate Change’s Real Impact on Africa
The profound impacts of Climate Change on the Continent are no longer mere forecasts but tangible realities. African leaders, recognising the severity of the situation, are voicing their anxieties regarding the intensified occurrences of extreme weather events, specifically droughts and floods. These phenomena do not just harm the environment; they have far-reaching implications for Africa’s socio-economic framework.
Africa’s agricultural sector, which forms the backbone of many of our economies, is particularly vulnerable. Drought, a recurrent menace in the Horn of Africa, lead to crop failure, impacting food security and causing price volatility. On the other hand, floods, such as the El Nino, that Kenya is preparing for, destroy infrastructure and disrupt trade. A report from Malawi in 2015 illustrated this when extreme floods led to an estimated economic loss of over USD 335 million, severely impacting its GDP.
The health repercussions are just as concerning. Water scarcity from drought can result in reduced access to clean water, leading to waterborne diseases. Similarly, floods can result in the proliferation of waterborne pathogens.
Finally, the environmental stress from Climate Change often exacerbates socio-political tensions. Scarce resources lead to conflicts among communities or even mass migrations. The Lake Chad Basin, which borders Nigeria, Niger, Chad, and Cameroon, has witnessed drastic reductions in size due to Climate Change. This has not only strained the livelihoods of millions dependent on it, but has also intensified local conflicts.
Africa’s Unique Position in the Climate Narrative
Though Africa’s carbon footprint has been relatively small historically, the Continent is disproportionately bearing the consequences of global Climate Change. From the vast Sahel’s creeping desertification to the unpredictable rain patterns in the Eastern and Southern agricultural belts, these environmental shifts are a testimony to the change. However, this exact vulnerability provides Africa with a moral authority in the global climate dialogue.
It’s a reminder that while the Continent has not been a significant part of the problem, it can and should be a pivotal part of the solution. By investing in sustainable practices, preserving its rich biodiversity, and implementing forward-thinking policies, the Continent can showcase to the world that development need not come at the expense of the environment.
The Continent has the potential to influence global climate action, “Like a hummingbird” as the late Nobel Laureate Professor Wangari Maathai said in her book, “Unbowed”, every action can help safeguard our world.
Africa’s rich cultural history, combined with its diverse ecosystems, positions it as a beacon for sustainable innovation. The vast potential for renewable energy, be it solar power in the Sahara or hydropower in the Congo Basin, presents opportunities for Africa to leapfrog over polluting phases of development that many advanced economies went through.
By pursuing a green developmental agenda, the Continent can inspire other nations and offer lessons in resilience, adaptation, and sustainable growth. Moreover, as the Continent’s influence grows on the world stage, African leaders have the chance to advocate for fairer global environmental policies, ensuring that the voices of those most affected by Climate Change are not just heard but are central to the global climate solution.
Carbon Taxation: Potential Benefits
Kenya’s President William Ruto’s proclamation on carbon taxation stirred significant interest. While some remained sceptical, viewing it as a potential transient policy statement, others perceived it as a step towards a greener and more sustainable economic trajectory for Kenya, and perhaps for the broader African Continent. This fiscal tool, rooted in the “polluter pays” axiom, seeks to economically incentivise corporations towards ecologically harmonious operations.
The intent is straightforward: make it more financially prudent for companies to minimise their carbon emissions rather than bearing the brunt of the tax. This economic leverage drives corporations towards cleaner technologies and places the environment at the centre of their business strategies.
Globally, models from countries like Sweden and provinces like British Columbia in Canada, underscore how economic and environmental agendas can synergise.
British Columbia, Canada’s distinctive approach to carbon taxation initiated in 2008, is another commendable model. Their revenue-neutral stance, which involved redistributing the tax proceeds back to its residents and businesses, led to a significant drop in fossil fuel consumption while simultaneously bolstering the Province’s economic vigour and sustainable tech innovation.
Whether carbon taxation would work for countries in our region we will never know unless we try, but given the examples, it could be a watershed moment, fostering eco-innovation and positioning businesses advantageously in a globally competitive landscape.
Implications for African Businesses
Embracing carbon taxation can spur businesses towards pioneering low-carbon technologies, streamlining operations, and achieving long-term cost-effectiveness.
As the global consumer base evolves, there is a demand for eco-friendly products and services. By aligning with this shift business in the Continent, African Governments can carve out a unique niche for themselves in the global marketplace.
Leveraging Financial Perks: Just as in British Columbia, African Governments can incentivise businesses to adopt greener practices by offering tax cuts, rebates, or subsidies, thus softening any initial financial strains.
Anticipating and Adapting to Future Regulatory Changes: As the global narrative intensifies around Climate Change, businesses that proactively minimise their carbon footprint stand to be better poised in navigating future regulatory landscapes.
In essence, President Ruto’s emphasis on carbon taxation might very well be a harbinger of an eco-conscious pivot for Kenya and, potentially, a beacon for other African nations. While challenges are inevitable, especially for businesses deeply rooted in fossil fuel usage, the overarching benefits, both environmental and economic, are too significant to overlook. If Africa can learn from, adapt, and localise the successful models from other countries, it stands at the cusp of an environmentally sustainable economic revolution.
The Summit’s declaration, while emphasising Africa’s commitment to combating Climate Change, also acknowledges the unique challenges the Continent faces, such as developmental needs, population growth, and resource constraints. For businesses, understanding these nuances is essential, as it provides a context in which they operate and cater to their market.
In a Continent where the effects of Climate Change can be stark like fluctuating rainfall patterns affecting agriculture or rising sea levels threatening coastal establishments, businesses that align will be better poised to mitigate these risks. Their operations would inherently become more resilient to external environmental shocks, thus ensuring continuity, and minimising disruptions.
Building Trust and Brand Value
In an age where consumers, stakeholders, and investors are increasingly conscious of a company’s environmental footprint, aligning with the principles of good and sustainable business can significantly enhance a brand’s value. It sends a strong message about the company’s commitment to not just profit, but the planet and its people. This can translate into increased consumer confidence, loyalty, and even attract international partnerships or investments.
The Summit’s emphasis on sustainable practices can act as a catalyst for businesses to innovate. Whether it’s developing renewable energy solutions, sustainable agricultural practices, or eco-friendly products, there’s a vast realm of possibilities. Companies that take the lead in these innovations not only stand to gain a significant competitive advantage but also set the standard for others to follow.
The Africa Climate Summit 2023 outlined clear implications for businesses in Africa. As the push for decarbonisation and sustainable practices grows, businesses must adapt. They have the chance to benefit from new financing opportunities and play a role in mitigating the impacts of Climate Change.
To succeed, businesses should: focus on sustainable business practices and aim for low-carbon growth; engage with stakeholders; work with Governments, NGOs, and international organisations to make the most of available resources and opportunities; lead in educating the public about Climate Change; and push for positive changes at the policy level.
For the Eastern Africa Association, there is a clear role to play in leading discussions on these matters. To further this, the Association’s UK office hosted a roundtable on 13th October titled: “Scaling up Africa’s Climate Finance Opportunities: The Strategic Role of International Financial Centres”.
This event covered key topics like increasing climate finance access for Africa and leveraging international financial centres for green growth.
With the right mix of collaboration, innovation, and financing, Africa can lead the charge in the global fight against Climate Change.