GRACELIN BASKARAN: Greening of African industry an antidote to economic woes

There are three words that have become synonymous with the continental development narrative: youth, jobs and energy. Though they are large areas, the nexus at which these strategic development priorities intersect — green industrialisation — may be an antidote to many economic woes. 

Green industrialisation seeks to decouple growth from emissions and environmental damage by using clean energy and green production technologies. For SA and the rest of the continent, green industrialisation enables governments and firms to work towards three objectives: managing the challenges associated with a rapidly growing youth population; generating jobs at a time when SA and most of its neighbours have unemployment rates exceeding 25%, and working towards UN sustainable development goal seven — achieving universal energy access. 

Africa’s explosive population growth is putting pressure on all parts of the system, from service provision to housing, jobs and food security. The continent has an annual growth rate of 2.7%, which is more than double South Asia’s (1.2%) and triple Latin America’s (0.9%). By 2050 Sub-Saharan Africa’s population is forecast to reach 2.5-billion — at which point one out of every four people in the world will be African.  

By 2100, Sub-Saharan Africa’s population is expected to increase to 4.3-billion. Demographic forecasts show that a handful of countries will be responsible for most of this — by 2100 Tanzania’s population is expected to have grown 378%, the Democratic Republic of Congo’s 304% and Ethiopia’s 156%. Nigeria is forecast to become the third most populated country in the world, surpassing the US. 

Rapid population growth has created another challenge: demand for basic services such as energy is far outpacing supply. Beyond the rolling blackouts of Johannesburg, another 590-million people in the region still lack access to electricity. The reality is that at present Africa has 18% of the world’s population but consumes just 6% of global energy. The only solution is to increase the supply of energy available to the continent. 

Green industrialisation can help tackle these challenges by creating jobs and increasing power supply. The jobs dimension is one of the most understated benefits of renewable energy. Global renewable energy employment reached 12.7-million people last year, including 4.3-million jobs in solar photovoltaic (PV), the fastest growing sector; 2.4-million direct jobs in hydropower, including manufacturing, construction and installation and operation and maintenance; and 1.3-million jobs in wind power. 

The employment growth potential is significant. In seven years it is expected that global employment in renewable energy will reach 38.2-million jobs, a 200% increase from today. Data from the International Renewable Energy Agency (Irena) shows that the number of jobs in the energy sector could rise to 139-million by 2030, including 74-million in energy efficiency, electric vehicles, power systems and hydrogen. 

In the case of Africa, green industrialisation will create an additional layer of jobs through infrastructure development. In 2018 the International Energy Agency estimated that Sub-Saharan African countries would require $28bn per annum in minigrid, grid and off-grid investments until 2030 to reach universal access to electricity.  

The US, China, India, Brazil and the EU have made considerable strides to push green industrialisation. Data from Irena shows that about 42% of the 12.7-million jobs in renewable energy are in China, followed by Brazil and the EU with 10% each, and then the US and India at 7% each. 

Green industrialisation will require collaboration between the public and private sectors. Globally, renewable energy investments generally come from the private sector. On average, just 14% of direct investments in renewable energy are publicly funded. But the narrative is quite different on the African continent — in the period between 2010 and 2020 78% of financing for renewable energy came from term loans while 20% was financed through balance sheets. This is a product of the region’s high exposure to economic and political risks. 

Governments need to use derisking instruments and create a more enabling environment for domestic and foreign investors, rather than turn to public finance. Increasingly unsustainable external debt burdens make this an unviable long-term strategy. 

The world is already well on its path towards green industrialisation. African countries need to decide if they want to jump on board. The benefits — generating jobs, energy and exports — could not come at a better time. Otherwise, a future is imminent where the challenges we see today — particularly high youth unemployment and low levels of energy access — will look insurmountable in the face of a population that exceeds the sum of India and China. 

• Dr Baskaran (@gracebaskaran), a development economist, is a bye-fellow in economics at the University of Cambridge.