The pursuit of profits and sustainability are not mutually exclusive goals and can be aligned through informed dialogue between the public and private sector. Governments need the private sector to support infrastructure development and provide financing to combat climate change. The financial services sector in Africa only contributes about 12% of developmental funding. Increasing this is imperative to transforming local energy consumption and thereby, achieving the ‘net zero’ rule of the Paris Agreement 2015. Consulting giant McKinsey & Co recently estimated private companies across Africa could collectively give as much as $550 billion for infrastructure development. Private companies can serve as engines of growth, by creating jobs and supporting research and development (R&D) while the governments implement the necessary political, legal, and economic frameworks.
Other than investing in green solutions, the private sector in Africa can promote climate consciousness across their supply chains and workforce, thereby fortifying their own Corporate Social Responsibility (CSR) agendas. In South Africa, which is the 12th biggest emitter of Greenhouse Gasses (GHGs), private businesses have made large, strategic commitments to reduce carbon intensity in manufacturing processes and/or projects they finance.
Of course, that is easier said than done. Private investors, local or international, tend to get dissuaded by the political, regulatory, and economic instability in Africa. Support from Development Finance Institutions (DFIs) like Africa Finance Corporation (AFC) and Banque Ouest-Africaine de Développement (BOAD) is crucial to mitigating these. Also, private sector engagement in environmental opportunities suffers from a lack of awareness and understanding of the desired outcomes which governments must provide to drive meaningful change.
Startups and Small/Medium Enterprises (SMEs) can also do their part as they constitute more than 95% of businesses in most countries in Africa. They also provide possess the skills necessary for innovation in green technology and resource efficiency at the micro level. We could take cue from the dynamic youths in Sudan and Seychelles who are engaged in developing the private sector in a climate-friendly way, with strict adherence to the Paris Agreement.
Whether COP26 will prove a success or failure, we do not know. But either way, the importance of prompt action against climate change cannot be denied, in and outside Africa. Luckily, the continent – rich in renewable energy resources – holds great potential for private firms. In fact, it is amongst the world’s fastest-growing regions, thanks to a rapidly improving business climate, increased internet and tele-density, rising incomes and new consumption patterns. These pose an abundance of commercial and green opportunities, making it a market that cannot be ignored.