Building a low-carbon manufacturing industry can help Africa’s economy and energy transition- McKinsey

The pathway to achieving a net-zero emission future by 2050 is paved with challenges. Yet these pale in comparison to the risks of not exploring every avenue to reach this goal.

As the effects of climate change play out in different forms across the world, great emphasis has been put on global efforts to reduce greenhouse gas emissions. An example is the Paris Climate Agreement of 2015 where an international benchmark to limit warming to 1.5°C was set.

The African continent, though the least contributor to global emission, is among the most vulnerable to climate shocks. As a result, there is a strong reason to join in the fight to reduce global warming by pursuing a net-zero emission future like the rest of the world.

I decided to write this piece after reading the latest McKinsey Sustainability report titled “Africa’s green manufacturing crossroads: Choices for a low-carbon industrial future“ which explores the African manufacturing sectors, actions points that can be taken to curb greenhouse gas emissions as well as areas of opportunities for entrepreneurs.

The comprehensive report was co-written by McKinsey’s partners namely, Kartik Jayaram, a senior partner in the Nairobi office, Adam Kendall, a partner in the Lagos office, Ken Somers is a partner in the Brussels office, and Lyes Bouchene, a consultant in the Casablanca office.

Here are my 3 key takeaways:

A low-carbon manufacturing sector can help to achieve a faster transition

Globally, the manufacturing sector (and the power it operates on) is the single largest contributor to greenhouse gas emissions. Africa for its part only contributes 3 percent to global manufacturing GHG due to the relatively small size of its manufacturing sector. This however can be an advantage.

According to the McKinsey report, this is because half of Africa’s potential 2050 GHG-emitting industries have not yet been built, the continent still stands a chance of leapfrogging more developed nations and build a low-carbon manufacturing sector at all levels.

Countries around the world are at different stages of transitioning from fossil fuels to renewables. For more advanced economies, particularly in Europe, North America, and some parts of Asia, there is a very high level of energy performance, including the resilience and efficiency of generation and transmission, and progress to renewable energy.

While a full transition to cleaner energy is thought to be the most ideal way to tackle greenhouse gas emissions and climate change, it is an expensive process to navigate.

Building a low-carbon manufacturing industry, the study revealed, would help Africa avoid future costs by sidestepping the expensive transition from fossil fuels to renewables that the developed world is having to work through while creating a competitive and more resilient economy.

Per the report, “if Africa’s manufacturing sector follows the growth pattern of developed markets over the past 20 to 30 years, it will most likely double in size. And without any decarbonization efforts, its emissions could nearly double as well to about 830 MtCO2e by 2050.” The result would have a significant bearing on global efforts to reduce emissions as well as hurt Africa economically.

Decarbonizing Africa’s manufacturing and power sector could boost employment

While the report estimates that decarbonizing Africa’s manufacturing and power sectors and building new green assets will be at a significant cost (about US$2-trillion) it also highlights that this pathway could have profound economic implications for the continent.

For example, a transition to a low-carbon manufacturing sector could create around 3.8 million net new jobs across emerging cleantech businesses.

African entrepreneurs and investors face exciting prospects

The study explains that a move towards new green manufacturing presents remarkable for entrepreneurs operating across various sectors such as energy, agriculture, biofuels, transportation, packaging, and plastics among others.

Leveraging Africa’s abundant natural resources, they will be able to build new products that are less carbon-intensive as well as those that enable the energy transition.

“New green businesses could deliver billions of dollars of revenues per year while collectively helping to abate the continent’s GHG emissions across the supply chain by up to 60 MtCO2e annually by 2030; they also have the potential to create about 700,000 direct and indirect jobs by 2030, with even stronger job growth in the decades beyond,” states the report.

Africa’s just energy transition, as exemplified in the manufacturing sector, is a significant yet challenging undertaking that would require collective actions from various parties including governments, businesses, associations, international organizations, development finance institutions, investors, and other relevant stakeholders.

You can download the full report here.