FDI & ENVIRONMENTAL

ISSUES IN AFRICA

Serge Bounda

Head of UNEP Liaison Office to AUC, ECA & Ethiopia

the 4th Event of China-DAC Study Group

February 17, 2011

CONTENTS

• FDI in Africa: Overview & the Environmental Issues

• Global Movement toward Green Economy

• African Movement toward Green Economy

• UNEP Green Economy Initiative

• Successful Stories in Africa: Emerging Market Opportunities in Green Economy

• FDI in Africa: Recommendations for the future

FDI in Africa : Overview &

the Environmental Issues

FDI in Africa : Overview

FDI inflows, 2000–2009

Source: UNCTAD 2010, World Investment Report

Major developing economy investors in Africa, 2006–2008 (Millions of dollars)

The Environmental Issues of FDI in Africa

FDI in Africa is concentrated in environmental sensitive sectors based on natural resources extractions such as oil, gas, mining, hydropower, timber, etc.

It increases possibility of political, social, & environmental issues related to depletion of natural resources

PROBLEM?Pollution Heaven by

accelerating the deterioration of the

environment

SOLUTION?New opportunities to reduce

environmental damage & Introducing advance

environmental technologies

FDI in Africa: Problem or Solution?

Natural

Capital

(26%)

• Sinopec (China) explored oil in Loango National Park

• Environment impact assessment had not been approved by the ministry of environment in Gabon

• Raised environmental depletion issue and criticism from civil societies and western world

• The government’s national park service ordered to stop its operation in 2006

A Case of Problem of FDI in Africa

FDI in Africa: Problem or Solution?

Problems

Problem in Africa

Large Population with High Dependent on Natural

Resources

Depletion of National Resources

Entrenched Poverty Cycle

&

Social and Political Conflicts

Investment in the

Environmental Sensitive Sectors

Global Movement toward

Green Economy

Emerging Markets for Biodiversity

and Ecosystem ServicesMarket opportunities Market size (US$ per annum)

2008 Estimated 2020 Estimated 2050

Certified agricultural products(e.g., organic, conservation grade)

$40 billion(2.5% of global food and beverage market

$210 billion $900 Billion

Certified forest products(e.g., FSC, PEFC)

$5 billionof FSC-certified products

$15 Billion

$50Billion

Bio-carbon / forest offsets(e.g., CDM, VCS, REDD+)

$21 Million (2006) $10+ Billion $10+ Billion

Payments for water-related ecosystem services (government)

$5.2 Billion $ 6 Billion $20 Billion

Payments for watershed Management (voluntary)

$5 million Various pilots (Costa Rica, Ecuador)

$ 2 Billion $10 billion

Other payments for ecosystem Services (government-supported)

$3 Billion $7 Billion $15 billion

Mandatory biodiversity offsets (e.g., US mitigation banking)

$3.4 Billion $10 Billion $20 Billion

The Share of the Green Sector in

Economic Stimulus Package

Natural

Capital

(26%)

Country Stimulus

USbn

Stimulus

as % of

GDP/GNI

Green

Fund

US bn

% of

Green

stimulus

Green stimulus

as % of GDP

Australia 26.7 2.49 2.5 9% 0.2

China 586.1 13.88 221.3 38% 5.2

Japan 485.9 10.03 12.4 3% 0.3

Korea, Rep 38.1 4.44 30.7 81% 3.6

France 33.7 1.12 7.1 21% 0.2

Germany 104.8 2.74 13.8 13% 0.4

UK 30.4 1.09 2.1 7% 0.1

US ARRA 787 5.27 94.1 12% 0.6

US EESA 185 1.29 18.2 10% 0.1

Canada 31.8 2.03 2.6 8% 0.2

source: HSCB 2009, CIA factbook

China’s Movement

toward Green Economy

Natural

Capital

(26%)

• Second biggest wind power country in the world

• Biggest exporter of Photovoltaics (PV) in the world

• 1.5 million people are employed in China’s renewable sectors with 300,000 of those job generated in 2009 alone

• China will endeavor to lower its carbon dioxide emissions per unit of GDP by 40-45 percent by 2020 compared to the 2005 level

African Movement toward

Green Economy

The 3rd African Ministerial Conference on Financing for Development, Kigali, Rwanda, 21-22 May 2009

The African Ministerial Conference on the Environment (AMCEN), Bamako, Mali, 21-25 Jun 2010

The 1st Pan-African Biodiversity Conference, Libreville, Gabon, 12-17 Sep 2010

The 7th African Development Forum (ADF-VII), Addis Ababa, Ethiopia, 10-15 Oct 2010

The African Union Summit, Addis Ababa, Ethiopia, 24-31 Jan 2011

Africa embraces Green Economy

Opportunity

Responses in Africa

Natural

Capital

(26%)

•Green Energy Campaign

•Restoration of Mau Forest Complex Kenya

•Initiative on Forest Ecosystem Restoration Rwanda

•Initiative to transform agricultural production toward organic farmingUganda

•Carbon Natural Climate Resilient Economy (CNCRE)Ethiopia

•The Tunisian Solar Programme (PROSOL) partnership with UNEP and the Italian GovernmentTunisia

UNEP Green Economy

Initiative

UNEP Green Economy Initiative

Countries’ Gouvernements

Knowledge

Warehouses

Joint

Events

Regional

Technical

AssistanceTEEB

Green

Economy

Report

Green

Jobs

Report

Joint

statements

Key Green Economy Sectors

An in-depth analysis and guidance on macroeconomic

contribution from investing in green sectors:

Agriculture Buildings Cities Fisheries

Forests IndustryRenewable

energyTourism

TransportWaste

managementWater

UNEP Green Economy in Africa

• Green Economy and Social and Environmental

Entrepreneurship Development in Africa

• Burkina Faso, Egypt, Ghana, Kenya, Rwanda, Senegal, and

South Africa

Capacity Building &

Training

Macro-Economy and Policy

Assessment

Developing Policies toward

a transition

Successful Stories in Africa:

Emerging Market Opportunities in

Green Economy

Natural

Capital

(26%)

Emerging Market Opportunities: Case I

Energy Saving Light Bulbs in South Africa

• Philips (Netherlands) entered into a joint venture with the Central Energy Fund (South Africa) and Karebo Systems (South Africa)

• Its new plant in Lesotho to produce energy-saving light bulbs, with the bulk of the plant’s output to date (more than one-million bulbs) being sold to the South African power utility Eskom

Source: UNCTAD 2010, World Investment Report

Emerging Market Opportunities: Case II

Natural

Capital

(26%)

High Efficiency Home Appliances in Ghana

• The Government of Ghana established Public-Private partnership (PPP) with the Bosch and Siemens Home Appliances Group.

• The PPP will support;– the process of creating a market low-carbon in refrigerators

– the establishment of appropriate metrics to assess efficiency improvements in refrigerators in use

– developing CO2 offset possibilities by sharing knowledge and expertise of refrigerator programmes

Source: UNCTAD 2010, World Investment Report

Emerging Market Opportunities: Case III

Organic Agriculture in Uganda

• Uganda uses among the world’s lowest amount of artificial fertilizers, at less than 2 per cent (or 1kg/ha) of the already very low continent-wide average of 9kg/ha in Sub Saharan Africa.

185,000 ha, 45,000 farmers (2004)

296,203 ha/ 206,803 farmers (2007) US$ 22.8 mil (2007/8)

US$ 6.2 mil (2004/5)US$ 3.7 mil (2003/4)

OA Exports in Uganda

OA Growth in Uganda

60%/ 359% increase

FDI in Africa: Recommendations

for the Future

PROBLEM?Pollution Heaven by

accelerating the deterioration of the

environment

SOLUTION?New opportunities to reduce

environmental damage & Introducing advance

environmental technologies

Future of FDI in Africa?

Future of FDI in Africa

Problems

Solutionin Africa

Large Population with High Dependent on Natural Resources

Efficient and Sustainable Use of Natural Resources

- Eradicating Poverty

- Creating Green Jobs

- Providing Capital for Sustainable Development

Green

Investment

FDI & the Environment

Natural

Capital

(26%)

• the Japan Bank for International Cooperation (JBIC) has established specific guidelines in order to judge the environmental and social impacts of supported projects.

Japan

• the Overseas Private Investment Corporation (OPIC) has committed to reducing GHG emissions in OPIC supported projects by 30 per cent over a ten-year period and to shift investment focus to renewable and energy efficient projects

U.S.

• the government has systemized its procedure to consider investment guarantee applications under environmental aspects

German

Natural

Capital

(26%)

Recommendations

• Implementing Green Economy Vision in Africa by investing FDI in green sector to build climate neutral and climate resilient economy

• Mainstreaming Environment and climate change in project plans and in the future investment

• Promoting Corporate Social Responsibility (CSR) in Africa under the umbrella of partnerships such as China-Africa Co-operation Forum(FOCAC) or China-Dac Study Group

Thank you

UNEP GREEN ECONOMY INITIATIVEwww.unep.org/greeneconomy