Economic Commission for Africa
Africa remains one of the most vulnerable continents to climate change, and its level of economic development and low adaptive capacity compounds this situation. The current dynamic growth of the continent is mostly accredited to increased commodity prices, and a surge in investment and domestic demand. Now the time has come for structural transformation, particularly industrialization.
Industrialization is closely linked to energy since construction and manufacturing are energy intensive. Currently, the continent’s 1 billion citizens account for only 4 per cent of the total global energy consumption while representing 15 per cent of the world’s population; however, by 2035 that energy consumption is projected to increase by 93 per cent. According to the 2013 World Energy Outlook, about 600 million Africans live without access to electricity; and in rural sub-Saharan Africa, the electrification rate is only 19 per cent. If current energy demands are not met, Africa’s aspirations will be a pipe dream.
Although Africa has abundant fossil fuels, industrialization based on fossil fuels is harmful to the environment and aggravates climate change. The dilemma facing African countries is to industrialize while avoiding technologies that will increase global warming. A new set of business opportunities can be explored to avoid the risks of current trends while positioning Africa into the future.
Africa has renewable energy potential to produce clean energy to meet its growing needs and allow for development and industrialization. The continent’s hydropower capacity of 1852TWh per year can satisfy its needs through power pooling and cross-border power trade. Africa has an average uniform 325 days of bright sunlight per year, receiving 2,000 kilowatt hours per square metre per year. The wind and wave power potential along the west coast exceeds 3,750 kilowatt hours. Significant geothermal potential in the Eastern Rift Valley stretches to about 3,700 miles in length, with a potential in Kenya alone estimated at 10,000 megawatts.
Yet, in spite of this huge potential, the African continent loses 2–3 per cent of its GDP due to the lack of reliable energy sources. Nigeria is a good illustration as it loses at least 2 per cent of its GDP growth annually due to a deficit infrastructure. Indeed, some energy-rich countries have had challenges in meeting their needs. Nigeria should be able to generate more than 4,000 megawatts of energy for its 170 million people, when gas flaring has been going for 50 years at a cost of about $2 billion to $3 billion every year.
Africa cannot escape the obligation of developing these huge sources of hydro, solar and wind power and geothermal energy. Countries should move towards efficient utilization of biomass to produce clean energy that will insulate people and economies from climate related shocks and stress. By investing in the long-term energy solutions of cleaner technologies, mini-grids or stand-alone off-grid installations in local or rural areas that are cost effective, African countries can significantly benefit in the longer term, while avoiding problems developed nations are currently facing.
Equally, investing in renewable energy could lead to increased production in agriculture as well as the creation of new and better jobs. Industrialization in the agricultural sector is key to Africa’s transformation since agriculture employs the majority of Africa’s work force. In the absence of modern energy systems, the continent experiences significant post-harvest losses and does not have adequate transport and distribution infrastructure to allow smallholder farmers to maximize returns on their investments. Climate change will continue to affect all four elements of food security, i.e., food availability, food access (physical and economic), food consumption, and stability.
Renewable energy has the potential for agribusiness to embrace small- and medium-scale entrepreneurs. Through the deployment of solar and biomass-based technologies, clean energy can propel the agricultural value chain. The use of solar energy low-heat/drying applications, wood- and domestic waste-produced electricity and other energy forms have the potential to make agricultural productivity more affordable and accessible, as well as optimize productivity.
With increased numbers of SMEs involved across the agricultural value chain, the pace of rural transformation can be hastened through job creation, thus improving rural incomes, raising agricultural productivity through irrigation and improved technologies and eventually ensuring food security. The rate of expansion of agriculture into new areas will be reduced as productivity increases per unit area thus reducing the rates of deforestation and greenhouse gas emissions.
For more than 20 years Africa has been dubbed the “hungry continent”, with the Horn of Africa facing severe droughts for the past 60 years, affecting more than 13 million people. It is evident that the transformation of Africa would be contingent on a stable agricultural base and an industrial agricultural pathway.
Africa’s rapid urbanization could rest on a stronger foundation if smallholder farmers could maximize their growth potential and use agricultural trade as an opportunity to feed the markets. Africa’s fast-growing population, set to reach 2 billion by 2050, means that agricultural yields have to significantly grow. Current productivity, at an average of 1.5 tonnes per hectare, is the lowest in the world.
Exploring the frontiers between energy and agriculture will be an important contribution towards transformation since energy access is not only a problem in itself, but also an obstacle in addressing the food crisis on the continent.
The transition to renewable energy development needs to take into account problems related to limited finance, inappropriate technologies, limited human skills and dysfunctional policies. The question is not whether Africa can adopt such a pathway; the question is whether Africa is ready.
Most existing energy policies in numerous countries suggest that the current policies are unable to accelerate the development of renewable energy resources. There is a need for countries to establish investor-friendly policies, which would provide a level playing field for potential investors. For example, this would mean phasing out subsidies to fossil fuels and addressing perceived risks and sustainability of investments. In addition, the rationalization of electricity tariffs towards phasing out fossil fuel subsidies and introducing peak-load pricing would assist in accelerating the exploitation of renewable energy resources.
Africa’s path towards industrialization offers the world a unique possibility to re-look at value chains with climate change in mind. Industrial production closer to where the commodities are reduces CO2 emissions. Starting new industries allows for cleaner technological platforms. Inclusive policies reduce poverty and promote better consumption patterns. Renewable energy promotes green options. All of the above are in Africa’s favour if and when the opportunities are seized.