Caleb M Fundanga: Economic and environmental growth of Africa
Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the 2nd Green Accord Media
Forum, Rapolano, Italy, 3 November 2004.
The references for the speech can be found on the Bank of Zambia's website.
* * *
1. Introduction
The world community faces unprecedented ecological challenges in the twenty-first century. Many
sustainable
political and business leaders have embraced the idea of development, calling for
economic growth without destroying the natural environment or depleting the natural resources on
which future generations will depend. Yet the concept has remained controversial, and implementation
has been difficult. The task for policy makers and corporate leaders will be to find ways to meet both
economic and environmental goals in the coming decade, without sacrificing either
(Post-LawrenceWeber, 1999). In Africa, environmental issues are also frequently sidelined on most policy makers'
agendas due to insurmountable economic and social problems that the continent continues to face.
Notwithstanding the economic and social hardships, as Africa constantly strives towards attaining
economic development, environmental sustainability remains a key area of concern (UNEP, 2003)
although usually remote to most economic policy makers. In addition, environmental sustainability is
hardly seen by many in Africa as an underlying factor in economic development yet it is so critical that,
if adequately and promptly addressed, will have positive secondary effects on other crucial areas
pertaining to economic development and people's welfare.
In this paper, I attempt to examine the interrelationships between environmental growth and
sustainable economic growth from the African perspective. The paper is organised as follows; section
2 examines the current economic disposition of Africa, and attempts to determine its relationship with
environmental developments. Prominence is given to the components that affect environmental
sustainability, namely (i) pollution and (ii) degradation. The latter will prove to present a relatively high
risk to environmental sustainability in Africa. Section 3 presents a further analysis on the effects of the
environment on economic growth, and that of economic growth on the environment. Section 4 tackles
issues of Africa in the world economy and its environmental prospects. Section 5 provides current
solutions aimed at mitigating and/ or reducing the various negative externalities related to
environmental pollution and degradation such as national, regional, and international environmental
management policies. Recommendations that are considered necessary to foster environmental
friendly economic development are also given as input for further improvements in environmental
management in Africa.
2. Economic disposition of Africa
With an estimated total population of 835,479 thousand people representing 13% of the world's
estimated 6,395, 557 thousand people,1 and spanning the 53 countries of Africa, the continent faces
numerous challenges predominantly on the economic, social, and political fronts. Despite these
difficulties, Africa recorded a growth rate of 3.6% in 2003, an increase from 2.7% recorded in 2002.
The increasing trend in economic growth is expected to continue into 2004 [African Development Bank
(AfDB), 2003]. Yet the challenge remains to meet the targets set by the Millennium Development
Goals (MDGs) aimed at reducing the number of the world's poor by half by the year 2015.
Unfortunately, improvements in some economic indicators may not be sufficient enough to enable the
majority of African countries to meet the MDGs targets.2 Specifically, single digit economic growth
rates are not sufficient for tackling the widespread poverty in the continent. According to the African
Development Bank, only Algeria, Egypt, Libya, Morocco, Tunisia, and Mauritius will attain the specified
targets. The majority of the population of Africa is located in rural areas where agriculture and
dependence on natural resources remains the predominant means of livelihood [United Nations
Development Programme (UNDP), 2003]. Soil, grasslands, freshwater sources, and oceans play a
critical role to sustain crop cultivation, grazing land for livestock, and fisheries.
The energy sector equally plays an important role in the African economy due to the dependence of all
national economies on oil for their production activities. On one hand, significant dependence on oil
exports from countries such as Angola, Chad, Equatorial Guinea, Nigeria and Libya is becoming
increasingly pronounced.
Consequently, rising oil prices have contributed towards augmenting revenues of these oil-producing
nations, while on the other hand threatening the revenues of the other nations that only use but do not
produce oil. In spite of the energy obtained largely from hydro and some geothermal and solar sources
in Africa, the population continues to lag behind the rest of the developing world in terms of access to
electricity. Approximately 77.5% of the sub-Saharan population has no access to electricity, with the
majority of the population relying on biomass (dung and firewood) for domestic energy needs (OECD/
ADB, 2003).
To a large extent, economic growth in Africa is still largely driven by production of raw materials that
are hardly subjected to meaningful industrial processing. This source of economic growth has a direct
dependence on the use of natural resources mainly in agriculture and mining. The lack of
valueadding processing largely underpins the historical low levels of economic growth.
3. Effects of environmental growth on African economic growth
3.1 Environmental issues in African economic growth
Environmental issues ought to be an important area of concern for leaders and policy makers, when
making policy decisions about human development and economic welfare, especially those in the
developing world. Many growth sectors are in effect directly or indirectly related to the environment. A
study by Jha and Whalley (1999) argues that the main environmental issue generally affecting the
developing world is degradation, as opposed to the common belief that pollution is the principal factor
of environmental decay which is predominantly applicable to industrialised countries. Degradation
comprises of the following key areas; soil erosion, declining soil quality due to pesticide residue,
exploitation of open access resources due to ill-defined property rights, and congestion and traffic.
Other perverse forms of degradation are deforestation and desertification.
While Africa continues to suffer economic stagnation, the factors that result in environmental
degradation are continually on the increase. Some of the factors, such as burning of fossil fuels which
release carbon dioxide, are possible causes of global warming, although to a lesser extent when
compared to emissions of greenhouse gases by industrial activities. Specifically, the predominant
ways that these factors affect the ecosystem are as follows;
Soil erosion involves the washing away of tracts of land due mainly to human activities. Such
activities, while providing a source of livelihood for many, do not have safeguards to preserve the land
for long-term use. Typical activities include clearing of land for crop growing and animal grazing.
Related to soil erosion is the declining soil quality due to pesticide residue. This in turn leads to more
clearing of virgin land once fertility reduces on existing land.
Exploitation of open access resources due to ill-defined property rights presents environmental
management in Africa with tremendous challenges. Most of the natural resources in Africa tend to be
viewed as a common good for the entire population. As a consequence there is open access to
especially land under what is commonly referred to as traditional system of land tenure. It is because
of this that rampant clearing of tracts of land go unrestricted hence resulting in degradation.
In urban areas, ill defined land ownership is responsible for mushrooming of shanty compounds, illegal
dumping of waste, etc.
Congestion and traffic is related to the population growth rates and urbanisation. In most of Africa,
modern economic activities are concentrated in urban centres. These tend to be the export enclaves
that support African economies. With an obvious economic tendency for the population to gravitate
towards points where they can maximise economic welfare, the urban areas have found themselves
faced with congestion, which in turn overstretches utility service facilities resulting in poor sanitation
and rampant epidemics such as respiratory diseases, cholera, etc. In addition, the general increase of
the population implies not only increased pressure on natural resources but also more carbon dioxide
released through the human respiratory process.
Deforestation is currently a serious concern for Africa, with forests being lost at an annual rate of
more than 5 million hectares (United Nations Environmental Programme [UNEP], 2003). The growing
demography of Africa has resulted in the clearing of land in order to accommodate for more houses
and areas for cultivation due to the significant dependence of the majority of the population on
agriculture. According to UNEP 2003, 60% of the tropical forest areas that were cleared in Africa as a
whole between 1990 and 2000 were converted to permanent agricultural smallholdings. The cutting
and not replacing of trees contributes to global warming. Worse still is the burning of forests to clear
land for grazing or agriculture which also releases carbon dioxide.
Desertification is another area of concern for the continent. Over 45% of Africa is affected by
desertification, while 55% is at high-to-very-high risk of erosion (UNEP 2003). Desertification is
compounded by the other major environmental concern of deforestation. In fact, studies have shown
that mortality rate, maternal health, and girl child education in the region are directly linked to
environmental changes such as deforestation. In rural areas, households rely on females to fetch
firewood, therefore, continued deforestation implies longer walking distances for women and girls.
These result in complications in pregnancy, other ailments, as well as less time for girls to do school
work. Studies have also shown that women and girls in Africa spend an average of three hours a day
fetching water, hence expending more than a third of their daily intake of food (UNDP 2003).
Although only 26% of the oil produced in Africa was used locally in 2003, energy consumption
increased by 44% in Northern African countries (ADB and UNEP, 2003). However energy
consumption of liquid fuels comes at a cost. The carbon dioxide pollution as a result of energy
(CO2)
consumption in Africa was approximately 3.5% of the global emission of (UNEP, 2003).
CO2,
Growth in demand in the fishing sector has ultimately resulted in the threat of the sustainability of
particular coastal and marine populations. To-date the per capita fish catch worldwide has remained
static since 1972, however, this measure for Southern Africa has declined significantly (UNEP 2003).
Globalisation has resulted in the specialisation of economies in areas in which they have a
comparative advantage. The prevalence of cheaper labour costs has led African countries to primarily
move towards the role of producing goods in labour intensive sectors such as agriculture and mining.
The demand for cash crop exports from African countries by the developed world has equally soared.
However the use of pesticides in cash crop production in order to maintain certain international
standards has the potential to reduce soil quality due to toxic residue build up. Future population
growth, expansion in the agricultural sector, and general economic expansion in Africa will see
heightened competition for water resources among these sectors. Competition for water resources
between households, industry, and agriculture is expected to increase in future, as currently 25% of
the population is living in areas already facing severe water stress (UNEP, 2003).
Although Africa's exports at the global level are very small at about 2%, the concentration of the
exports in the extraction sector is cause for concern on the environment. It means that the more Africa
is integrated into the global economy the more the consequences for extraction activities on the
environment will become pronounced, unless mitigating measures are taken. In addition, multinational
businesses are quickly realising the existence of less strenuous environmental standards in most of
the African countries, which themselves are desperately seeking for Foreign Direct Investment (FDI).
As a result, these businesses are rushing to invest in these economies and realise profits but may
never be available to attend to the possible redress of negative effects their business activities leave
on the environment.
In this respect, as African policy makers and other stakeholders pursue economic growth, it is
important to appreciate the benefits presented by the natural ecosystems and diverse forms of wildlife
and other species. Despite the economic benefits of constructing roads, mining areas, and farming
blocks, there exists a real threat of the destruction of large areas of natural habitats.
The emergence of industries and the effect of urbanisation in Africa, has largely contributed towards
increased air pollution in many towns and cities. The incidence of smog and respiratory diseases in
these areas has increased (UNEP, 2003), and is set to continue this trend in the foreseeable future.
Africa does not contribute significantly to the emission of pollutants arising mainly from combustion in
complex chemical processes of industries. This is so because of the low industrialisation characteristic
of the continent, whose economy is still trapped in the shackles of economic stagnation. Sadly the
rate, at which industrialised nations are emitting especially greenhouse gases, implies that Africa will
global
also soon begin to experience effects of warming. The effects of global warming, which include
floods, hurricanes and general weather changes that can also affect agriculture production, with
prospects to damage material wealth and property will negate the little gains that African economies
have attained thus far. To complicate the situation further, majority of African economies do not have
buffer resources to enable them rebuild infrastructure that may be damaged from the effects of global
warming. Consequently, in respect to effects of global warming, the tendency in most of Africa will be
increased poverty, exacerbation in poor sanitation and outbreaks of epidemic.
Ignoring environmental sustainability, even if doing so leads to short-run economic gains, can hurt
poor people and undermine long-run poverty reduction (UNDP, 2003). The two areas, economic
growth and the environment are interrelated. Therefore developments in one coexist with
developments in the other.
The exclusion of accounting for the value of nature in economic indicators such as the Gross National
Product (GNP) and the Human Development Index (HDI), gives a subordinate role of nature in
promoting growth; in addition to this, property rights to natural capital are frequently difficult to
establish (Dasgupta, 2002). Dasgupta's analysis of World Bank estimates of genuine investment in
countries, discovered that the accounts used were incomplete, as they did not include measures such
as water resources, air and water pollution, and biodiversity among other measures. In addition,
Dasgupta pointed out that shadow pricing strategies aimed at measuring the social worth of goods
and services in an economy were questionable. Despite these setbacks, the author was appreciative
of the pricing model. Dasgupta further stated that GNP and the Human Development Index as
measures of economic growth at times provide contradicting evidence. Evidence supporting the
findings of Dasgupta is shown by the change in the Sub-Saharan net savings rate from positive to
negative in most years between 1976 and 2000, when the costs of environmental degradation and
natural resource depletion were taken into account (UNDP 2003). Another measure of environmental
deterioration in this case pollution, is the UNDPs Global Environment Monitoring System (GEMS),
however this system does not take degradation into account (Jha and Whalley, 1999).
The relationship between economic growth and its impact on the environment is ably demonstrated by
the Kuznets Curve. The Kuznets Curve states that there is an inverted U-shaped relationship between
economic growth and the environment. Negative environmental externalities increase steadily
proportionately to economic growth up to a turning point during the initial stages of economic
development (see Chart below). Once the turning point is reached, the economy then begins to place
more emphasis on the importance of the environment, by devoting resources to negate further
negative effects on the environment. As a consequence, environmental pollution and degradation
begin to decline since the country has the capacity to invest in environmental friendly technology.
Similar results were found by Grossman and Kruger (1995).
However critics of the model [Common, 1995, Shafik 1994, Selden and Song, 1994, and Lopez,
1994], argue that there may be irreversible environmental damage before the top of the curve is
reached, the model does not hold for all environmental indicators. Elasticity of substitution between
factors of production, pollution and consumer utility must be taken into account.
Empirical evidence from South Korea (Lim, 1997) shows that the relationship between economic
growth and environment cannot simply be explained by a trade-off or inverted U-shape relationship.
The result can be attributed to the worsening (increase) in indicators such as and industrial waste
CO2
as per capita income increases in contrast to other indicators such as water quality and domestic
waste which experience a U-shaped relationship. Other factors such as pollution due to transportation
were found to possibly be lower when people live closer together (Selden and Song, 1994).
Globalisation has resulted in the spill over of technology and knowledge from developed countries to
several middle-income and many industrialising economies via Foreign Direct Investment (FDI) and
Research and Development (R&D) efforts, thereby leaving developing countries lagging behind
(Panayotou, 2000). Panayotou further notes the failure to provide evidence that the occurrence of lax
environmental standards in emerging economies leads to FDI, on account of the fact that investment
decisions by manufacturing plants and other multinationals to invest in countries is based on factors
such as political stability, favourable economic policy, labour quality, and infrastructural developments.
It is therefore clear that economic development is not without costs. In fact, the much desired
economic growth if not carefully balanced with the need to protect the environment may result in
permanent adverse effects on the environment for a country and the world.
Specific to Africa, the application of these models and research findings lends itself to further caution.
With the continental economy still facing numerous problems to the extent that most national
economies are yet to provide sufficiently for their nationals, it is unlikely that a point would soon be
reached in Africa's economic growth, at which adequate resources become available for commitment
to environmental concerns. In other words, thought needs to be given to the social background against
which utilisation of resources from economic growth will depend. The various human and social
challenges such as poverty and epidemics confronting the continent may well explain the relatively low
emphasis by policy makers on environmental concerns when compared to their western counterparts.
That said, however, it must be recognised that in respect to the ecosystem, the globe is one and
benefits that accrue to one corner due to environmental preservation, accrue to the entire globe. In
this regard, measures need to be developed to quickly put Africa's high potential economic growth on
a path that is environmentally sustainable. Deliberate actions need to be taken in successfully
transferring environmentally friendly technologies to Africa. A case in point is the use of solar
technology, for which achievements thus far are promising. Most of Africa is endowed with solar
energy, and transforming it into usable energy would substitute the widespread use of wood fire
energy by the majority of the continent's population. In addition, because this is proven technology no
more resources need to be devoted to Research and Development. Further, solar energy circumvents
the costs related to the generation and distribution of yet another clean source of energy,
hydroenergy. In addition to generation, distribution of hydroelectricity presents Africa with a unique
challenge of supply network or grids due to the vast landscapes that constitute the rural setting where
majority of the population resides. This is part of the wider infrastructural constraint that the continent
is yet to overcome.
4. Africa and the world economy
In the real sector, a number of African exports experienced an overall increase in prices in 2003.
International gold prices increased, much to the benefit of the continents top producers, South Africa
and Ghana. Likewise, oil prices increased during the same period leading to higher revenues for
countries such as Nigeria, Equatorial Guinea, and Chad (ADB, 2003). The developments in the Middle
East, Iraq in particular have resulted in soaring oil prices reaching highs of about US$50 per barrel,
due to the insecurity and uncertainty pertaining to the global oil supply. Both gold and oil prices are
expected to maintain high prices throughout 2004. Increased foreign assets obtained from export
earnings from the real sector will in effect improve the capability of oil exporting African countries to
release more funds towards the achievement of their environmental goals.
In line with the expectations of the Heavily Indebted Poor Country (HIPC) initiative, many heavily
indebted African states have cut their fiscal expenditure and are focussing on staying within their set
targets. Attainment of the HIPC initiative completion point, will lead to the much needed debt
cancellation by Paris Club members resulting in an overall improved financial position of these
economies. Failure to reach the target will however prolong reduced fiscal expenditure. Despite the
long-term economic benefits of the HIPC initiative in achieving the MDGs, short and medium-term
growth strategies of development concerning the environment and other areas will be constricted.
4.1 Prospects of economic growth
The prospects for economic growth in Africa remain bright. The African Union (AU) is currently making
efforts towards ensuring political stability in the continent aimed at promoting both foreign and
domestic investor confidence. International support of the New Partnership for Africa's Development
(NEPAD) had led to some increase in aid in 2002; the trend was expected to continue in 2003 (OECD,
ADB). The future outlook in the performance of the real sector is set to improve due to:
•
low production costs (labour, electricity, and water, among other inputs);
•
comparative advantage in areas such as specialised agricultural production;
•
Numerous investment opportunities are available in the mining sector, which remains largely
untapped, despite the richness and variety of minerals in Africa. The scope for improvement
of environmental sustainability in Africa, hence economic growth is extremely vast;
• Expansion of markets through regional integration within Africa with necessary networks will
facilitate for increased capacity utilisation among existing and potential productive
businesses; and
• Additional areas of improvement include the expansion of hydroelectric power facilities along
the major rivers such as the Nile, Congo and Zambezi to provide a viable source of clean
energy to the majority of the population, which presently primarily relies on biomass fuel.3
For the African continent to embrace the potential benefits of globalisation, it is vital for African
countries to implement supportive fiscal and monetary frameworks that promote investment. Prudent
policies in these areas provide an important contribution to macroeconomic stability, a key prerequisite
for economic growth. In addition, African countries must now commence the process of adding value
to their export products as they compete and interact with a global market.
5. Environmental protection
Due to the high dependence of rural communities on common property, it is necessary for local
governments to implement environmental policies in order to protect the rights of the poor, who are the
most affected when the quality of the environment worsens. Data from villages in Zimbabwe estimate
the proportion of household income from common property as high as 40% (Dasgupta, 2002).
A number of environmental protection campaigns are currently being executed in several African
countries. One such campaign is the National Soil Fertility Action Plan, which is currently being
prepared in 23 countries. In addition to this development, 15 National Action Plans have been
submitted within the United Nations Convention to Combat Desertification (UNCCD). Natural
resources need to be maintained in order to provide a livelihood to largely communal rural
communities, which for the most part depend on forests, and other open natural resources for their
survival. It has been shown that in Tanzania the poor derive as much as half of their cash incomes
from the sale of forest products, such as charcoal, honey, firewood and wild fruits (UNDP 2003). This
is true for most Sub-Saharan African countries In addition, most methods used to purify minerals such
as gold by most small-scale rural people involve pollution of rivers with toxic chemicals.
Regional institutions in Africa have worked towards the implementation of development programmes
aimed at reducing pressure on natural resources in the various areas of the continent. General
concerns for all regions in Africa primarily encompass the problems of deforestation, scarcity of water
resources, access to clean water sources, and access to non-pollutant energy sources such as
electricity. Primary concerns of the northern and some parts of the eastern, western, and southern
sub-regions however include the effects of desertification on human development and economic
growth.
Regional government policies in Tanzania, have led to implementation of environmental management
policies aimed at promoting waste management, urban planning, and impact assessments for large
projects. Government authorities have created designated protected areas aimed at conserving
forests as well as supporting community-based income. This initiative is also being implemented in
Zambia. Africa now has a total of 1,254 protected areas, or 7% of the landmass.
The Southern African Development Community (SADC) plays an important role in the implementation
of programmes aimed at improving the environmental sustainability of the region. Acknowledging the
importance of water in development, the SADC Water Sector Coordination Unit was established in
1996. Prior to the formation of this Unit a Protocol on Shared Water Course Systems was ratified by
the majority of the SADC Member States. This Protocol aims to promote the availability of fresh water
resources in the region. In addition, a Forest Policy and Development Strategy, was implemented in
1997 by the SADC forest sector to address the issue of forest protection in the region.
In order to protect marine life, agreements such as the Oil Spill Contingency Plan have been
developed. The sustainability of fisheries resources is also now monitored by control agreements, and
a Sustainable Fisheries Livelihoods Programme has been developed in West Africa.
Other regional Protocols adhered to by some African states include cooperative efforts to implement
programmes that aim to combat desertification by the Arab Magreb Union (AMU), the Common Market
for Eastern and Southern Africa (COMESA), Economic Community of Central African States (ECCAS),
Economic Community of West African States (ECOWAS), Intergovernmental Authority on
Development (IGAD), Inter-State Committee to Combat Drought in the Sahel (CILSS), and Southern
African Development Community (SADC).
International Agreements such as the Vienna Protocol, which called for the formation of a co-operative
framework and policy structure aimed at protecting human health and the environment from adverse
effects of human activity which modify, or are likely to modify the ozone layer4 are also observed. The
Vienna Protocol was, effectively signed by 46 African countries. The Montreal Protocol which was
signed by 47 African countries called for the implementation of cost effective alternatives to
ozonedepleting substances, and the Kyoto Protocol which was signed by 4 African countries5 out of a total of
84 countries globally, aims to curb greenhouse gas emissions that result in global warming. Despite
the ratification of these protocols by some African countries, it is worth noting that rich countries with
16% of the world population emit 51% of the worlds green house gasses (UNDP, 2003). The Kyoto
Protocol is yet to be implemented due to non-ratification by some key developed countries, who
happen to be the emitters of substantial amounts of the worlds greenhouse gases (Russia ratified the
Protocol in September 2004).
A United Nations Forest Forum (UNFF) was established in 2000 to promote the management,
conservation, and sustainable development of forests. The institution effectively serves to monitor
national, regional, and global developments of forests. United Nations Organisations such as United
Nations Environmental Program (UNEP), United Nations Development Programme (UNDP), United
Nations Convention to Combat Desertification (UNCCD), and the World Bank have done a
commendable job in implementing multiple projects that aim to promote environmental sustainability in
Africa. These organisations provide both financial and technical support to programmes designed to
promote environmental sustainability in Africa. African governments have pledged to support such
programmes.
6. Recommendations
From the foregoing, it is clear that environmental protection goals should be realised in order to
achieve sustainable economic growth. Effective environmental protection policies relating primarily to
the effects of degradation and depletion of the environment need to be implemented and maintained
by institutions and individuals at all levels of society namely, local governments and national, regional,
as well as international institutional bodies. This is even more critical for Africa which is also faced with
unique constraints such as rapid urbanisation, poverty, poor legislation and inadequate capacity to
implement and enforce legislative controls where they exist.
The trend of population growth in developing countries, estimates that 95% of the total world
population growth will occur in Africa, Latin America, and Asia over the next 30 years
(Post-LawrenceWeber, 1999). The resulting increasing strain on natural resources due to the imminent population
boom in Africa if not checked, will cause many setbacks to economic growth and human development.
It is therefore advisable that stricter environmental policies be implemented in these countries so as to
offset encounters with such negative developments.
The anticipated future demographic pressure on urban areas due to a shift of the expanding
population to the cities and towns in search of jobs will ultimately result in increased levels of air
pollution, and pressure on transportation facilities, urban sanitation, access to clean water supply, and
waste disposal. The total population of Africa is projected to reach 1,941 million by the year 2050, from
approximately 885 million in 2004 (Ashford, 2004). According to statistics collected by UN-Habitat
2002 and UN 2002, they indicate that out of a world total of 923,986 thousand urban slum dwellers,
869,918 thousand (94.1%) were from developing countries, with Africa accounting for 187,563
thousand or 20% (UNDP, 2003). It is important for local governments to ensure adequate planning