PUNKI MODISE: Climate action holds opportunities for Africa

There is growing consensus on the importance of Africa transitioning to cleaner energy. It is not just impractical but also undesirable for just half of the world to transition while the other half does not.

Second, there is increasing optimism about the potential opportunities that climate action presents for Africa. Last, there is a strong belief that Africa should not be a mere passenger in climate change matters but should shape its own response boldly, considering that it is not the primary contributor to the unfolding global climate crisis. 

 The optimism surrounding Africa and its potential in climate change opportunities is well founded. With an estimated 30%-40% of the world’s mineral deposits, Africa possesses vast untapped wealth.

The global energy transition presents a unique opportunity for the continent to unlock prosperity from its resources. Africa is poised to benefit from this transition, especially by embracing environmental, social, and governance (ESG) integration through mineral beneficiation. Many of the materials needed for a just energy transition can be found within the continent. For example, the Democratic Republic of Congo holds 70% of all global cobalt deposits, SA accounts for 90% of platinum group metals. The continent is also home to most of the world’s copper and rare earth metal deposits. 

 These minerals play a vital role in clean energy technologies. Demand for them is expected to skyrocket over the next decades. Depending on the world’s commitment to net zero, the total mineral demand from clean energy technologies could double or even quadruple by 2040. It is therefore crucial for African leaders to prioritise beneficiation as a non-negotiable priority to ensure the continent’s citizens benefit from these developments. However, it is important to acknowledge the potential environmental and social impacts of mining activities. Stringent regulations and responsible mining practices must be in place to mitigate these impacts and ensure sustainability. 

 The rapid increase in mineral production and beneficiation must be carried out in a just manner to maximise the socioeconomic benefits. While the mining industry has faced increased scrutiny in recent years on ESG issues, African nations still struggle with poor governance, posing risks for the industry and potential investors.

 Companies with mediocre ESG records are finding it difficult to secure investment. To remain competitive, businesses seeking investment must strike the right balance between short-term focus on profitability and the long-term benefits of ESG integration. It is essential for African governments to prioritise responsible and sustainable mining practices and collaborate with private-sector entities to establish stringent regulations, industry best practices, and transparent reporting mechanisms. 

 However, it is encouraging that several African countries have made notable progress in promoting sustainable mining practices and attracting investment through ESG integration. Ghana, for instance, stands out for implementing the Ghanaian Mining and Environmental Guidelines, which outline environmental and social requirements for mining operations, and establishing the Minerals Development Fund to allocate mining revenue for community development projects.

SA has integrated ESG principles through its Mining Charter, which includes provision for BEE, environmental management and social development in the sector. Namibia has implemented sustainable mining practices through its legal framework, including the Minerals (Prospecting and Mining) Act and the Environmental Management Plan for the Mining Sector. 

Botswana has focused on responsible mining practices by incorporating environmental protection and mine closure requirements into its Mines and Minerals Act, while also emphasising a stable political and regulatory environment to attract ESG-conscious investors. Rwanda has taken big strides in promoting sustainable mining practices by implementing strict regulations, establishing boards to trace and certify minerals, and enhancing transparency in the mining sector. 

Despite these achievements, continuing efforts are crucial to further improve sustainable mining practices and attract responsible investment in these countries.

Delegates at recent global gatherings have identified several daunting challenges that lie ahead for Africa’s transition. The first challenge is the perception of risk associated with Africa, which affects the cost of capital. The continent’s transition ambitions are hampered by the heightened perception of risk. With a staggering 93% of African countries rated as subinvestment grade, Africa lacks the necessary fiscal space to finance its own transition. 

Energy insecurity also remains a concern, with about 600-million people lacking access to electricity and 900-million lacking access to clean cooking fuels and technologies, according to the African Development Bank. While renewable energy sources are crucial, the continent faces challenges due to the variable nature of wind and solar power, and the absence of nuclear power. Even hydroelectric power is becoming less reliable due to droughts and low water levels. Consequently, Africa will continue to use its abundant energy resources, both renewable and nonrenewable, to meet energy demands, but reducing dependence on fossil fuels is essential.

Businesses and governments must prioritise renewables as an immediate and vital solution rather than a distant future project for Africa’s sustainable energy transition. 

There is the perceived lack of effective co-ordination among African policymakers and decisionmakers. This severely hampers the continent’s ability to effectively scale its climate change response actions. It is crucial for African governments to prioritise collaboration and establish platforms for policymakers and decisionmakers to share knowledge, align strategies, and co-ordinate efforts. By fostering co-operation, Africa can harness its collective strength and enhance its impact in the global energy transition. 

Furthermore, there is a pressing need for credible data to measure the impact of ESG efforts. In recent years ESG investing has gained traction as investors seek to align sustainability goals with long-term value. However, access to credible and standardised ESG data is essential for making informed investment decisions.

New mining projects require comparable, factual, and verified data sets. Collaboration between private and public entities is crucial in establishing appropriate ESG data collection, analysis, management processes, reporting standards, and best practices. Internationally recognised ESG performance frameworks, such as those from the Global Reporting Initiative and the Sustainability Accounting Standards Board, can provide a foundation for this process. Verification of data will also play a crucial role in improving reliability and investor certainty. 

Recognising the African Continental Free Trade Area (AfCFTA) as a unique opportunity, Africa can address the challenges of finance, ineffective co-ordination, policy integration, and scale its climate change efforts. As the continent embraces the principles of ESG and sustainable development, the AfCFTA can serve as a platform for regional co-operation and harmonisation of policies. By integrating ESG considerations into African trade policies, the AfCFTA can encourage businesses to adopt sustainable practices, promote data transparency and standardisation, and facilitate the sharing of best practices across the continent. 

Addressing the challenges of ESG requires collaboration between public and private entities.

• Modise is chief strategy & sustainability officer for Absa Group.