Are we ready to seize green opportunities?
12th Jun 2014 by Gaylor Montmasson-Clair, TIPS Members
The green economy can stimulate growth, enhance competitiveness and open new markets, both locally and globally. An abundance of natural resources, predominantly solar and wind, but also the minerals needed for the development of green technologies and biodiversity, coupled with a solid financial sector and innovative industries, position South Africa to play a leading role in a greener world.
Green activities already contribute substantially to the South African economy, diversifying and leveraging the assets of the country, such as in the platinum value chain for the manufacturing of catalytic converters, as well as in renewable energy, resource efficiency, recycling, biodiversity conservation and tourism.
Moreover, the growth of a green economy presents an opportunity to create new employment. Government’s industrial policy identifies “green and energy-saving industries” as a priority sector for job creation and its New Growth Path targets the creation of 300 000 additional direct jobs by 2020 in green economy sectors, including 80 000 in manufacturing, and more than 400 000 by 2030.
A study by the Industrial Development Corporation, the Development Bank of Southern Africa and economic research institute TIPS supports government ambitions, estimating the potential in the formal sector of the green economy to be around 462 000 employment opportunities by 2025.
In addition to contributing to job creation, poverty alleviation, enhanced energy security and reduced environmental impacts, the green economy makes economic and financial sense, offering cost savings and enhanced profitability. According to the United Nations Industrial Development Organisation, energy efficiency improvements in developing countries display on average a payback period of less than two years and a five-year internal rate of return of more than 40%.
Green practices can also stimulate commercial activity in numerous sectors of the economy. Opportunities in agriculture (organic produce and cotton production, biofuels), mining (platinum, iron ore, copper), manufacturing (energy efficient and pollution control equipment and machinery, renewable energy components), electricity generation (renewable energy), construction (green buildings) and services (tourism, recycling, public transportation) are a few examples.
“Ultimately, successful management of the global green transition will require short-term pragmatism and longer-term planning, linking business, government, labour, non-governmental organisations and the research community in support of green growth.”
Government has implemented a number of schemes to assist businesses to seize green opportunities in these sectors, although the focus remains on renewable energy and the improvement of resource efficiency, both in terms of energy and water consumption.
Businesses can get support through grants, concessional loans, tax incentives or technical assistance from various governmental entities, such as the Department of Trade and Industry, the National Cleaner Production Centre, Eskom and the Industrial Development Corporation, to implement energy efficiency improvements. Privately-run schemes exist too, such as the National Business Initiative’s programmes.
Government also promotes renewable energy in the country. South Africa is running one of the world’s leading procurement programmes for renewable energy (essentially from wind, solar photovoltaic and concentrated solar power technologies), which has already attracted R150 billion ($14 billion) in investments. Companies investing in renewable energy technologies can also benefit from an accelerated depreciation rate for capital equipment and Eskom’s subsidy for solar water heaters.
However, while many companies are already vigorously investing in the green economy, most opportunities remain underexploited or untapped. Both the private and public sectors must be proactive in seizing these emerging opportunities. Most notably, the significant shortfall in professional, managerial and technical skills, which can operate as a bottleneck for the growth of green industries and services in the country, should be the foundation of all green economy policies in South Africa.
Ultimately, successful management of the global green transition will require short-term pragmatism and longer-term planning, linking business, government, labour, non-governmental organisations and the research community in support of green growth. Only then will South African businesses be able to harness the opportunities created by these new markets and position South Africa as a green frontrunner.
An earlier version of this article was posted on the Business Day Live website, available here.