Global climate agenda could be boon for African growth

Reports that SA has secured a commitment of R130bn of concessional climate financing from the EU and other developed countries to help the country move away from coal to cleaner energy signals a step change in Africa’s energy and emissions futures that could pave the way for a safer and healthier future for African citizens — and the world.

At the same time, funding pledges to assist African countries in adaptation efforts are rolling in. For example, the Bill & Melinda Gates Foundation has pledged $315m to the CGIAR global agriculture research partnership to help smallholder farmers adapt to climate threats, particularly in Africa.

While still only a fraction of what is needed, these pledges are good news for a continent facing severe challenges from climate change, with limited resources to improve its adaptive capacity, and are indicative of a growing awareness that Africa has a significant role to play in helping the world reach net zero by 2050.

There are two reasons for this. First, as we show in a new report entitled “Green Africa: A growth and resilience agenda for the continent”, Africa’s emissions profile is more substantial than often thought. While African per capita emissions are, on average, still less than half those of Organisation for Economic Co-operation & Development (OECD) countries, the continent nonetheless accounts for roughly 10% of global annual greenhouse gas emissions when land-use emissions and all greenhouse gases are taken into account. By comparison, global aviation accounts for less than 2%.

With rapid population and economic growth expected over the next 30 years, Africa’s share of emissions is likely to increase if no action is taken. This would clearly set the world back in achieving its net-zero ambition, to say nothing of putting the continent at risk of increasing physical hazards from climate change. Our analysis shows that a 2°C temperature rise by 2050 could see about 45% of the African population — about 900-million people — being exposed to at least one climate hazard by the middle of the century, compared with 36% today.

The other reason for this shift in awareness of Africa’s role is because it is becoming clear that the global transition to net zero opens up many opportunities for the continent that could also benefit the world. For example, by exporting metals such as cobalt, copper, nickel, lithium and manganese that will be critical for the global transition — provided, of course, they are responsibly mined — as well as by producing and exporting green hydrogen. Industrialised countries will require significant supplies of clean energy to fully decarbonise; the EU, for example, estimates that by 2050 it will require between 65-million and 70-million tonnes of green hydrogen per annum to achieve its climate-neutrality goal, but may face difficulties in building out the renewable assets required to produce hydrogen domestically.

Because Africa’s endowment of renewable energy resources far exceeds expected domestic energy demand, African countries could valorise these “stranded” renewables through the production and export of clean energy or of processed goods based on clean energy. If the continent is able to supply about 20% of the EU’s expected 2050 green hydrogen demand it could realise between $20bn and $30bn of export revenue and create 120,000 to 160,000 African jobs.

Further opportunities lie in protecting and enhancing carbon sequestration and export carbon credits. The Congo basin and rainforest, for example, has the lowest-cost abatement and largest potential from avoided deforestation than any other region globally, with the exception of the Amazon Forest. Significantly, more than 100 world leaders at COP26 have pledged just over $19bn of public and private funds to end deforestation in global regions, including the Congo. Other sequestration opportunities lie in initiating an at-scale reforestation programme in Madagascar and restoring Africa’s iconic savannah rangelands. Realising 20% of the continent’s carbon sequestration potential and bringing it to market at a price of $10 per ton of CO2 could create a new export “commodity” with a potential volume of $3bn per annum and an associated 500,000 direct and indirect jobs.

Our new report highlights 10 opportunity areas with numerous ideas like this that could help power African growth and prosperity in a net-zero world. Importantly, we show that there does not have to be a trade-off between growth and development and climate action in Africa, in fact the opposite is true. Our analysis shows, for example, that switching to renewables — considered critical for reducing emissions — is also the best way to bring affordable power to the more than 600-million Africans who are still without energy. And by transitioning to greener transport, cooking, sanitation and waste management African countries can reduce emissions and improve quality of life for citizens while freeing up their time for more productive tasks.

However, to seize these considerable opportunities substantial additional financing needs to be mobilised. As the world looks to reorient itself towards a low-carbon future there is much that African countries can do now to position themselves to attract more capital so that they can make the impact they can. Countries could consider developing ambitious and detailed climate action plans with specific initiatives and near-term milestones that can be translated into bankable projects, working to reduce knowledge and data gaps for investors, and developing financial instruments targeted at climate projects.

Based on this, industrialised countries, development finance institutions and philanthropic institutions could provide at-scale financing and in-kind support for climate projects that deliver concrete benefits to Africans, tying the financing flows to decarbonisation milestones achievement. Collaboration will be key here. The climate agenda creates an opportunity for co-operation between countries, which is potentially more powerful than competition. The commitment to protect the Congo basin and rainforest, for example, has been made, but a multi-stakeholder, transboundary effort will likely now be required to deliver on it.

The transition to net zero offers African countries an opportunity to work together, and with the broader global community capitalise on Africa’s assets, mobilise finance and build a low-carbon economy. While it will not be easy, the continent has the resources and growing global support to write a bold new chapter in its development story. By recognising climate risk, understanding the landscape of opportunity and integrating these perspectives into decision-making and strategy, stakeholders can build a stronger Africa in a net-zero world, where quality of life is enhanced and new economic opportunities are created.  

• Engel, Jayaram and Kendall are co-authors of the McKinsey report “Green Africa: A growth and resilience agenda for the continent”.