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As Africa seeks to chart its path to recovery after the Covid-19 pandemic, many African leaders may feel like they are walking a tightrope between managing the short-term effects of the pandemic while also shaping a more resilient and prosperous future for the longer term.
With pressure on Africa to step up commitments to cut greenhouse gases by about 90% by the middle of the century mounting before the global climate change talks in November (Cop26), a new report from McKinsey, “Africa’s green manufacturing crossroads: Choices for a low-carbon industrial future”, suggests that these two imperatives can be aligned.
In Africa, as in the rest of the world, efforts to reach net zero will inevitably see a change centred on the manufacturing sector. Manufacturing, and the power it consumes, is one of the single largest contributors to global greenhouse emissions, placing this sector in the crosshairs of global abatement efforts.
McKinsey analysis estimates that African manufacturing now emits about 440 megatons of carbon dioxide equivalent — about 30% to 40% of total African emissions. Though this is only a fraction of global manufacturing emissions, if African manufacturing follows the growth trajectory of developed markets over the past 20 to 30 years it is likely to double in size without any decarbonisation efforts.
Its emissions could nearly double as well. Aside from the potential environmental costs, this could leave the continent isolated as the rest of the world pulls ahead in the race to net zero.
To remain competitive African manufacturing would need to reduce its emissions in line with global efforts to shift to sustainable production. While all African countries have made nationally determined contributions as part of the Paris agreement, much more will be required to put the continent on a sustainable growth path.
The net-zero target may seem impossibly steep, but our research indicates that it is achievable in Africa. Moreover, a swift and focused commitment to decarbonisation offers the continent an opportunity to drive the AU’s Agenda 2063, delivering growth, jobs, and a safer and healthier future.
By using all available levers to drive a steep decline in emissions our analysis shows that Africa could bend the curve to reduce its greenhouse gas emissions to about 47 megatons of carbon dioxide equivalent by 2050. These gains would be driven primarily by the aggressive adoption of low-carbon technologies — most of which are readily available — a significant transition to renewables in the power sector, and a reduction of demand in high-emitting sectors such as cement and refinery as low-carbon alternatives become available.
About $2-trillion of additional investments over the next 30 years would be required by 2050 to achieve these shifts, mostly to drive power decarbonisation and for the establishment of new green business opportunities that offer low-carbon alternatives to high-emitting products such as cement or to support the green transition.
Investing in these new businesses and technologies inevitably carries some risk, but there is potentially a strong upside. Decarbonising manufacturing can ensure growth and create jobs without adding emissions — enabling Africa to remain globally competitive.
While about 2.2-million jobs could be lost as old technology is displaced, overall job gains are substantial. In the net-zero scenario a net gain of 3.8-million jobs is possible by 2050. New jobs growth would arise predominantly by growth in new green businesses, increased complexity in certain processes and investments in renewable power — mainly hydrogen, solar and wind.
In Africa, where there is an abundance of natural resources including solar and wind power, minerals and agricultural land, the conditions are favourable to support new green growth.
The continent also has one factor weighing in its favour: its manufacturing sector is relatively immature. This means most of its 2050 manufacturing assets have not yet been built. While the industrialised world is having to navigate an expensive manufacturing transition from fossil fuel reliance to renewables, the continent can grow a low-carbon manufacturing sector from the ground up. New green assets are likely to pay for themselves over time while creating a competitive and more resilient economy that does not rely on resources that will become more costly.
Our analysis shows the risks of not reaching net zero outweigh the costs of the choices that would have to be made to get there. As UN secretary-general António Guterres has said, this is the “moment of truth for humanity”. The road ahead will not be easy, but across the world there is optimism that countries could use this moment to make a transformational leap towards a more sustainable society that limits dangerous global warming and meets the needs of all people.
Nowhere is this more urgent than in Africa, where inequality is rising and the latest science is showing that the continent is warming faster than the rest of the world.
The economic recovery from the Covid-19 crisis could ensure that Africa becomes a more inclusive, sustainable and equal economy with green manufacturing at its core. However, all stakeholders would need to work together to achieve this.
• Jayaram is a senior partner in McKinsey’s Nairobi office, and Kendall a partner in the Lagos office.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.