Repost: Exploring opportunities for domestic-local investments for water and sanitation

 

South Africa is a water scarce country, with very high variability and unpredictability in water availability. The rainfall is highly variable and is characterised by incidences of extreme weather conditions leading to droughts and flooding. As a result, the water management context of this is driven by these prevailing conditions, which has led to a demand for water exceeding demand by a large margin.

The availability of water resources is also not equitably distributed, with most economic hubs of the country located in geographic locations with very limited water resources, leading to high dependence on physical infrastructure to move water from very far locations.

The country has very old infrastructure, posing a major challenge to basic service delivery. The average age of water infrastructure in 39 years, with poor maintenance records, frequent disruptions in service delivery have become commonplace, leading to drastic measures such as water rationing, especially during drought.

Water management in South Africa has also been characterized by significant lack of capacity among water professionals. Many water professionals have been lost to the private sector, as a result of better working conditions, and South Africa generally suffers from inadequate engineering skills, which is key for infrastructure development.

We conducted a study aimed at develoing understanding on the perceived challenges and constraints faced by the private sector, which prevents them from harnessing the opportunities of investing in the water and sanitation sector in South Africa. The key headline messages from this study are summarised below: –

  • There are significant investment opportunities: Various studies have estimated that the total cost of
    funding requirement for the water sector in South Africa is around R700 billion.
  • Too much focus on new water infrastructure. Financiers are biased towards projects that focus on delivering new infrastructure projects. Such projects are perceived to be more profitable and less risky, as they are often ringfenced or guaranteed by the public sector;
  • Inadequate capacity leading to under spending of allocated funds: Even though the sector is experiencing significant funding challenges, under spending has been reported in some cases, partly attributable to the lack of capacity both at local and national level
  • Private sector is too risk averse to effectively invest in the water sector: The high level of private sector risk aversion in relation to the water sector has hindered their effective participation;
  • More innovative funding mechanisms urgently needed to unlock investments: The traditional mechanism of private sector participation in water management under the private-public-partnerships (PPP), have not yielded any effective outcomes;
  • Insufficient evolution in the political landscape in South Africa poses a challenge. The political landscape in South Africa has not evolved sufficiently enough to allow the private sector to confidently partner with Government in delivering water infrastructure;
  • The absence of an Independent Regulator is a barrier to unlocking private sector investments: The potential establishment of an independent regulator would be an extremely useful mechanism to bolster private sector confidence in investing in water infrastructure

You can download the full report here: Exploring opportunities for investing in water (0 downloads)

 

Building resilience of rural communities against climate change

Not a drop of water to drink

The Orange- Senque river basin is one of the most important river basins in southern Africa, powering the economies of at least 4 countries. With its origins in Lesotho, it encompasses half of South Africa, a quarter of Namibia and a significant portion of southern Botswana. The Orange river is crucial for the region. The upper reaches of the river is a major water supplier to the industrial hubs of South Africa, namely Johannesburg.

The middle reaches of the river is key for agricultural production especially grains, a staple crop in South Africa. The significance of this river is even much more pronounced in the semi-arid Northern Cape Province of South Africa, where most agricultural activities take place along the river bank.

Reliance on the river as a primary source of irrigation has been seriously threatened as a result of a changing climate, with a resultant significant reduction in water levels. This has, in turn, intensified the competition for scarce water between different water users. For example, the region is currently experiencing extreme drought conditions that have hampered rainfed agriculture, prompting the government to declare the region a disaster zone.

The stories emanating from the ground as a result of the drought are extremely sad. Many farms are closing down because the cost of operation has become prohibitive. Livestock are succumbing to the extreme heat, lack of water and inadequate pasture.

Impact of drought on vulnerable communities

The toll of the drought is not only impacting commercial farmers, but also the livelihoods of many rural folks and smallholder farmers in particular. In rural communities, the skills base is very low, so many members of the local communities are employed as labourers on farms while others manage their own small scale farming activities. However, due to the harsh conditions many of these local community members have been forced to abandon their livelihood activities, resulting in significant vulnerability in poor households.

Harnessing local capital

There is an urgent need to build the adaptive capacity of the most vulnerable communities, because extreme events such as droughts, will be exacerbated by climate change. The main question is, how do you build the resilience of highly vulnerable and under-resourced communities, with a poor skills base and often very isolated?

Based on our experience, the key opportunities for building resilience are based on developing a good understanding of the local context and using the principles of co-creation and co-learning to harness local resources. A key component of this process is understanding indigenous knowledge systems. For example, most vulnerable communities, have been exposed to some of these challenges before and have developed coping strategies to manage their situations. Such coping strategies may include post-harvest management and livelihood diversification.

 

Catalytic interventions

To ensure that vulnerable communities develop the adaptive capacity to respond to climate change, its often critical to implement catalytic interventions, such as awareness-raising, training on new farming and livelihood practices and to invest in the local economy.

This is what we will be doing over the next couple of months in selected communities in the Northern Cape Province (pictured left). Our interventions will focus on creating an enabling environment to unlock investments but at the local and landscape level. We will also build the capacity of local communities members on climate-smart practices so that they can adopt farming practices that improve productivity, supply nutritious food and bolster household incomes.

 

Carbon tax revenues could be harnessed to help South Africa’s poor

By Harald Winkler & Andrew Marquard, Energy Research Centre, University of Cape Town**

Climate change needs urgent action by all countries, and by all means. All countries agreed in the Paris Agreement to keep temperature “well below 2℃” and pursue efforts to keep global temperature increase below 1.5℃. Virtually all countries have nationally determined contributions, but currently these are on a path to 3℃ or more. The negative impacts of climate change increase as the temperature increase – and the poor suffer the most.

As part of its contribution to the global effort on climate change, South Africa is introducing the Carbon Tax Act. It comes into effect on 1 June 2019 and is a great step for the country; it also puts South Africa in the company of a steadily-increasing number of countries that are pricing carbon. There are 46 national jurisdictions and 28 subnational jurisdictions that have implemented a price on carbon, or are scheduled to do so, according to the Carbon Pricing dashboard created by the World Bank

Companies in South Africa will now pay a small amount each time they emit a ton of greenhouse gases. Putting a price on carbon is a key way of responding to the climate emergency. It will also raise awareness and improve reporting on emissions. The tax revenues should be used to ensure benefits to poor communities, and the tax will need to be increased over time to provide a long-term price signal to decarbonise the economy.
How it works

The carbon tax is being introduced at a much lower rate than needed in the longer term. The nominal amount of carbon tax that a company will pay is R120 per ton CO2-eq.

But multiple allowances, including a 60% “basic” tax-free allowance, means big emitting companies pay at most R48/ton. The tax is payable by companies which exceed the threshold of carbon emissions. Other further “allowances” mean that several of South Africa’s major emitting companies will pay a minimum of R6/ton. At current exchange rates, that is as little as $0.42/ton, much lower than required globally.

The High Level Commission on Carbon Prices recently reported that by 2030, countries should be looking at a carbon price of US$50–100/tCO2. Given the rate of change of key technologies for mitigation, the appropriate tax level will have to be periodically assessed. But there is no doubt that South Africa’s current tax rate is too low to transform the economy.

The tax will be paid by companies to the South African Revenue Services (SARS). As for other taxes, SARS collects the revenue for the general fiscus. Revenue should be used for two purposes, which should be funded on budget.

To fund programmes that provide access to cleaner and safer energy to the poor. Poor households should pay less for energy under a carbon tax-revenue scheme, rather than more.

Energy-intensive firms should be able to claim transitional assistance if they pay the full tax, contribute to socio-economic development, and agree to reduce where they can. The assistance would be money clawed back by the company, to fund lower-carbon activities – until this is no longer needed.

How the tax could be used

Most important from an ethical point of view is that the tax should be implemented in a way that ensures poor communities pay less for energy. This can be done by using revenues to fund programmes to reduce energy poverty.

Various scenarios exist for carbon tax revenues, depending on whether companies on average pay R6 or R48 per ton CO2-eq. The revenues could fund the national budget for electrification – if companies paid a “medium” carbon tax of R30 per ton.

Another option is that hundreds of thousands, and up to tens of millions, of households could be given 5kg liquified petrolum gas free each month, extending free basic electricity to other energy.

A few hundred thousand better houses – warmer in winter with better insulation and with fewer health impacts due to use of cleaner fuels indoors – could be funded from carbon tax revenue. Or the country could decide to subsidise at least 100 000 rooftop solar systems per year for poor households.

The carbon tax should be complemented by other mitigation measures, such as carbon budgets for companies and a cap on greenhouse gas emission from electricity in the integrated resource plan, the country’s national electricity plan.

Given the climate emergency, all these measures need pursuing and the understanding of how they best relate to one another. Many other countries have carbon taxes, emissions trading, indirect carbon pricing and regulations, and South Africa could learn from their experiences. These countries include the EU, Scandinavian countries, China, India and increasing numbers of developing countries.

Whatever approach it takes from here, South Africa’s decision to introduce a carbon tax should be hailed as an important milestone in the transition to a low-carbon and climate resilient economy and society.

** Published under Creative Commons License. Original post can be read here

We need a sustainable African Continental Free Trade Area (AfCFTA)

Last week marked an important milestone for Africa, when the African Continental Free Trade Area (AfCFTA), came into effect on 30th May. AfCFTA has major implications for Africa’s development, if its is well implemented. AfCFTA could potentially create a single market for goods and services for Africa’s 1.2 billion people, with a combined GDP of $ 2 trillion. At this scale, Africa could truely be on its way to realising its potential.

One of the major challenges hampering Africa’s development is the poor intra trade on the continent, which is at a dismal 16%. This figure might just seem like a statistic, until you try to cross any African border, whether its from Tanzania to Zambia or from Nigeria to Benin, the chaos that you encounter, corrupt officials and general insecurity is just all too stark to ignore.  So the the AfCFTA is way more important than one could imagine.

From a purely economic perspective, according to UNECA (UN Economic Commission For Africa), AfCFTA could raise trade on the continent by 15% to 25%. This could truely signal Africa’s prosperity, or is it?

Much as improved intra trade on the African continent is highly desirable, the potential for it to revolutionarise the Africa has to be tappered against other barriers and negative externalities the continent faces, like climate change.

Agriculture is Africa’s main economic driver, with very few countries having diversified into other sectors like manufacturing and services. As a result, alot of the intra-trade in Africa will still be based on agricultural goods and services as the main offering of some countries. Agriculture on the hand will be highly impacted by climate change, as increase in temperature will result in reduced yields, prevalence of diseases and extreme events such as drought and flooding. Agriculture also uses a very large amount of water, which is going to be even more scarce.

Therefore for AfCFTA to be effective, it needs to promote sustainable trade on the African continent, to enable businesses effectively adapt to the impact of climate change, while ensuring that its impact on the environment are minimised. It will be extremely callous to ignore the need for sustainable trade in promoting a united Africa, as the continent will be one of the hardest hit by climate change.

 

Global meeting: Building an inclusive green economy

Preparations are well underway for the forthcoming Green Economy Coalition Global Meeting, which will take place in Cape Town South Africa, from January 8th – 9th 2019.

The Green Economy Coalition’s annual Global Meetings are vibrant, delegate-led events, dedicated to exploring the future of the green economy. They bring together representatives of business, finance, NGOs and citizen’s groups from around the world in order to debate and decide how we can help to make the economies of the future equitable, inclusive, and people-focused.

This year, our particular focus is ensuring that everyone gets a stake in the green economy. We know that the green economic transition is necessary, urgent, and already underway. But we need to ensure that the new green economy improves the lives of ordinary people everywhere.

This year also marks an organisational milestone for the GEC: our tenth anniversary as a network. With 7 country programmes now up and running around the world, our partner organisations will be sharing their stories from the frontlines of the green economic transition: evidence of real and positive improvements, with the potential to achieve scale across nations, and change lives.

Co-hosted with our South African partners, The African Centre and Trade & Industrial Policy Strategies (TIPS), we will be taking stock of the global transition and planning our next steps together as the largest civil society movement for fair, green economies.

This year we also hold our meeting back to back with the UN-PAGE Ministerial meeting, on 10 – 11th January, Cape Town. If you are interested in attending the PAGE Ministerial, please make sure you have registered for passes here.

 

South Africa Green Economy Barometer- 2018

5 out of 10 for South Africa’s transition to a green economy

The South Africa Green Economy Barometer 2018 provides a snapshot of the transition to a fair, green economy. It is drawn from evidence of policy progress as well as the insights of civil society organisations who are tracking the transition on the ground. One thing is clear: South Africa’s brown economic model is struggling.

South Africa’s economy is overly reliant on fossil fuel-based energy and transport systems and carbonintensive industries. These sectors are failing to provide enough jobs, with over 38% of the population currently unemployed.

South Africa Green Economy Barometer 2018 Final WEB

The South Africa water innovation story

The current global water crisis is creating a heightened level of awareness around the need for effective water management.
Policy makers, private companies and consumers are starting to realise the need for immediate and sustained action. Even
though water is widely recognised as being essential for life, its management has seldom been truly effective. In addition,
the value of water is not adequately reflected through its cost to consumers. The significance of water to everyday life only
becomes apparent during periods of acute water shortages, such as droughts and other natural disasters that threaten the
assurance of supply.

This report  track the ‘journey’ of various water-related innovations in South Africa from research and development to
commercialisation, so as to understand the effectiveness of the South African innovation ecosystem. More specifically, the
case studies unpack the experiences of individual innovators (this is explored more in the larger document of this report),
including challenges encountered and the kind of support they require or have received.

Dowload Full Report

The transition to a clean energy future is inevitable, lets embrace it!

Summary

  • The African Centre for a Green Economy welcomes the signing of the 27 renewable energy power purchase agreements after a two year delay.
  • The IPP’s should build strong partnerships with the local communities that go beyond mere compliance to create sustainable meaningful inclusive impact for all.

Cape Town, 5th April 2018 – The African Centre for a Green Economy (AfriCGE) welcomes the signing of the 27 renewable energy power purchase agreements by the Minister of Energy Jeff Radebe after a two year delay which has caused a lot uncertainty in the sector. We are glad the South African government has honoured its commitment to transitioning to a clean energy future as part of it efforts to combat climate change, as per the Paris agreement.

We are cognizant of the recent threat from the National Union of Metalworkers of South Africa (NUMSA) not to vote for the ANC in the 2019 general elections because of the perceived losses of jobs resulting from the pursuit of clean power. We however categorically reject this view. The potential for job creation from the Independent Power Producers (IPPs) is very clear and will not result in the demise of other energy sources. Even though in the long the goal should be to decouple SA’s economy from an energy intensive trajectory.

It is therefore important for the country to chart a clean economy trajectory considering that the impact of climate change will be catastrophic especially among the poorest and most vulnerable. The transition to a green economy presents opportunities, but with potential implications for the future of work. Change is however inevitable, so instead of NUMSA fighting this transition, they should embrace it and prepare their members accordingly.

We therefore call on all stakeholders including the trade unions to partake in this transition journey, and to reskill their members to capitalize on these emerging opportunities.

IPPs too, have a big responsibility to make sure that they impact local communities positively, to not only guarantee their social license to operate, but to also build a truly inclusive economy in South Africa. We therefore call on the IPPPs to build strong partnerships with local communities that go beyond mere compliance to one anchored on creating shared value for all.

Executive level training on mainstreaming green economy

Executive level training on ESG related issues

Primary Beneficiaries: CSI Executives, LED managers, CEO’s of REC’s and mining companies, Stakeholder relations managers

Broad focus on mainstreaming ESG related issues

Specific focus on Local Economic Development strategies for mining and renewable energy companies

Learning Outcomes

  1. Measuring impact/metrics
  2. Developing effective strategies for local economy development
  3. Effective participation and stakeholder engagement
  4. Strategies for diversification & beneficiation of LED interventions
  5. Effective stakeholder engagement at the local level

Proposed duration: 3 days

Proposed cost: R 12,000

Proposed Partner: Bertha Centre, Graduate School of Business

For more info on the detailed module breakdown, send queries to: training@africancentre.org

Moving the money: Climate change adaptation and entrepreneurship

There is an increasing recognition that entrepreneurship plays a critical role in driving climate change adaptation. Recognising that business as-usual can no longer suffice in the sustainability transition, the need for innovation has become extremely important. Business model innovation both for existing and emerging enterprises, offers an opportunity to test new concepts that can drive a low carbon development trajectory, while creating decent job opportunities for the multitudes of unemployed young people.

The role of small and medium enterprises (SME) in charting the transition is paramount, partly because SME’s are responsible for most job creation, but crucially are key for testing new business models. Large business are difficult to transform in most cases because of well established business processes that might be deemed effective, especially for companies that are profitable.

Even though the role of SME’s in climate adaptation is well recognized, they face insurmountable challenges, more especially access to finance. Due to the nature of ‘green’ enterprises, they often can’t meet the funding criteria of traditional financial institutions such as commercial banks. There is a dearth of generous and patient capital that is willing to fund untested business models, regardless of the potential impact they hold. This has greatly impacted on the deployment of innovative mechanisms and solutions for climate change adaptation.

Impact investing has emerged as a key pathway for financing green enterprises, even though its real ‘impact’ is yet to be felt on the ground. It has been estimated that impact investment as an asset class is worth $50 billion, in the US alone. In South Africa, it was been estimated that close to $4.9 billion of impact investments have flowed into the country, according to the Global Impact Investing Network (GIIN).

So why is funding not reaching onto the ground, more specifically to the Base of the Pyramid (BoP), where the impact of climate change is going to be felt the most?

The poor dealflow, could almost solely be attributed to a broken ecosystem, where financiers and entrepreneurs are not interfacing effectively to understand each other’s needs. Governments and development agencies are pre-occupied with policy formulation without any foresight on implementation, leaving the poor and vulnerable victims of climate change to fend for themselves.

It’s encouraging to see that some key stakeholders have recognised the problem and are attempting to fix the broken system.

As part of this effort, UNEP and the government of Flanders, recently convened a dialogue that brought together key stakeholders from government, development agencies and the entrepreneurship support ecosystem in South Africa. As expected lack of funding for SME’s, poor deal flow of bankable projects and lack of innovative partnerships, were outlined as major bottlenecks in financing climate change adaption.

More of this kind of discourse is required, but talk is also cheap. We need a critical mass of change agents that are willing to work directly with entrepreneurs and communities on the ground to effectively channel resources. Unfortunately this is not the case as most of the incubators and accelerators that purport to support enterprise development are out of touch with the needs of local entrepreneurs.