Incentives are not sufficient in Africa’s “Green Industry”

February 18, 2014

African governments plan to introduce incentives for industries that implement green practices into their operations in their respective countries have not worked according to a new study. Starting the beginning of this century governments in Africa have been proposing the incentives to investors in the green industries a model that was copied from Europe and North American regions where there are well advanced and developed green industries largely driven by favorable incentives. In countries like South Africa, Tanzania, Uganda, Ghana Angola, Nigeria, Mauritius and Kenya the packages have been in the form of tax holidays or allowances rather than focusing on things that would encourage green practices. In Australia, it’s the opposite of what happens in Africa where the government removes import taxes on goods necessary for green industries instead of costly tax holidays. The study found out more than two hundred companies operating across Africa that are already implementing green practices. Researchers have previously identified the idea of such incentives was to make it the norm and also help spread such practices across the continent.

Multiple studies have concluded that encouraging environmental awareness is critical due to the strong growth in an individual country’s manufacturing sector. African countries that supported green industries sector accounted for 29 percent of Gross Domestic Product growth in sub Saharan Africa and generated $37 billion in 2013, according to data in my possession. Last year, growth in the manufacturing sector in countries that gave incentives in green industries averaged 6.5 percent, higher than continent average economic growth of 5 percent. Despite creating a positive contribution to African country’s economy, the development of African industries also resulted in negative consequences for continent’s environment. Many industries in Africa do not employ efficient production practices, according to the study. African countries combined reported that their manufacturing industry contributed 1 percent of the continent’s greenhouse gas emissions in 2012. That number compares to deforestation that stood at 39 percent, energy consumption 41 percent, waste 9 percent, and agriculture 11 percent.

Aside from providing incentives for green practices, African countries should encourage industries to update their machinery and develop capable human resources and also support extensive research and development that is crucial to greening industry. Countries like South Africa, Ethiopia and Kenya governments have taken several initiatives to encourage good environmental practices such as providing discounts for machinery and equipment upgrade programs in the textiles, footwear and sugar industries. The efforts are expected to reduce energy consumption by 34 percent and improved productivity by 23 percent in the next five years. African countries should also through African Union draft a carbon emission benchmark for factories looking to implement green practices. Giving incentives show African government’s commitment to sustainable growth but there is more that need to be done. African government should also include power companies in green incentives schemes, considering that energy sources contribute a quarter of continent emissions. In my opinion, that can be done through tax cuts and other rewards.

Contador Harrison