AFRICA& THE GREEN ECONOMYFINANCIAL TIMES SPECIAL REPORT | Wednesday June 20 2012

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Inside this issueClimatechangeSouthAfrica isat theforefront ofefforts tograpplewith theeffects of global warmingPage 2

Geothermal Kenya’ssteam has captured theimagination of internationalfinance institutions keen toback clean energy Page 2

Forestry Gabon’s junglesare central to thegovernment’s ambitions tofashion a non-oil dependentfuture Page 2

LandA flurry ofinterest inAfrican soilhas igniteda debateover therisksattached to

large-scale foreigninvestment Page 3

China As business tiesgrow, China’s environmentalreputation is under closerscrutiny Page 3

Sustainable cities Rapidurbanisation is set to raiseliving standards but it isfraught with risk Page 4

Food The continent is inneed of technology andtargeted policy if it is tocontribute to global suppliesPage 6

Water Ethiopia’s neighboursare alarmed by itsGrand Renaissance Damproject onthe Nileand donorsare keepingtheirdistancePage 6

In a partnership takingeffect on July 20, the Afri-can Development Bank andthe World Wide Fund for

Nature, the global conservationgroup, are forming an allianceto produce a report on the stateof Africa’s environment. TheAfDB-WWF marriage is anappropriate one.

As awareness grows of theinextricable links between envi-ronmental conservation andsustainable development, noregion of the world demon-strates the connection as clearlyas Africa.

As always on the continent,prospects for sustainable devel-opment coincide with seeminglyinsurmountable obstacles.

Rising prices for oil and com-modities present many Africancountries with the chance tobuild stronger economies, whilethe rise in demand for food hasprompted many to look to Afri-can agriculture as a potentialengine for growth.

But climate change poses a

serious threat – African nationsmay be among the world’s low-est emitters of greenhousegases, but parts of the continentare also among the most vulner-able to climate change.

Extreme weather events suchas floods and drought are likelyto become more frequent andwidespread, according to theIntergovernmental Panel on Cli-mate Change. Protracteddrought in east Africa hasaffected millions, and more thana third of Africa’s populationlives in drought-prone regions.

There are 14 countries on thecontinent experiencing watershortages, according to theWWF, and 11 more nations areexpected to be in the same situa-tion by 2025.

Moreover, as rapid populationgrowth and rising prosperitylead to shifts in patterns of con-sumption, the ecological foot-print of many African nations isexpanding rapidly. This is tak-ing its toll on the environment.In the past four decades, forexample, there has been adecline of almost 40 per cent inbiodiversity, according to theAfrica Living Planet Index.

While low levels of power gen-eration partly explain the conti-nent’s low carbon footprint com-pared with other regions, lack ofaccess to energy means that mil-

lions of Africans still use woodfor fuel, leading to widespreaddeforestation.

Many people see the potentialfor large multinationals to con-tribute to sustainable develop-ment on the African continent.Companies such as Unilever andNestlé are working with thefarmers in their supply chainsto help them use more sustaina-ble agricultural methods, whilealso increasing yields and rais-ing incomes.

For these companies, suchengagements are not only partof their efforts to act as respon-sible businesses, but boostingthe capacity of smallholders andother African businesses helpsbuild more robust supply chains

for commodities such as coffeeand cocoa.

However, some foreign invest-ment in Africa is raising con-cerns. As Chinese groups rushto the continent, many worrythat the companies behindmany of their large projects onAfrican soil do not maintainhigh environmental standards.

Meanwhile, other foreigninvestors – such as from import-dependent Gulf Arab states –have been attracted by theirsoaring food prices to take aninterest in underdeveloped fer-tile lands.

Debates centre on whetherland acquisitions will injectbadly needed investment intoagriculture – or have a negative

impact on the environment andon local communities, whichrisk losing access to the land onwhich they depend.

The good news is that, withmany countries in the earlystages of development, there isstill a chance to design moreenvironmentally and sociallysustainable systems, and learnfrom the mistakes of others inorder to leapfrog technologies.

Anyone seeking evidence ofthis only has to look at the evo-lution of telecommunications inAfrica, where millions of peoplehave bypassed landlines andmoved directly to mobile com-munications.

Many believe that this patterncould be replicated in other sec-

tors. In agriculture, for example,there is the potential to avoidmany of the damaging effects ofsome farming techniques –including water pollution fromchemical fertilisers, pesticidesand herbicides, loss of biodiver-sity and soil degradation.

With much of Africa’s landstill undeveloped, movingstraight to organic or conserva-tion farming, or introducingnew cultivation technologiescould be easier as the soil thathas not yet been altered by theheavy use of fertilisers and pes-ticides.

Underinvestment has meantthat less than 5 per cent of

Awarenessgrows ofneed to besustainableEnvironmental systemsare easier to set upwhen development isstill in its early stages,reports Sarah Murray

Continued on Page 2

Well watered? Less than 5 per cent of African arable land is irrigated, providing a chance to try water-efficient, affordable technologies Getty

2 ★ FINANCIAL TIMES WEDNESDAY JUNE 20 2012

Africa’s arable land is irrigated,which offers the opportunity tointroduce new water-efficient,affordable, technologies.

Energy presents a similar pic-ture. Since much of the conti-nent’s population lacks accessto any source of power apartfrom traditional fuels, it couldbe easier to move to renewablesources than in countries wherelarge legacy systems and vestedinterests lie in the way of morewidespread adoption of cleanenergy.

Massive investment will berequired. Sub-Saharan Africahas the world’s lowest electric-ity access rate, and some esti-mate that, in the absence ofstronger policy measures, halfits population will still be with-out power by 2030.

However, renewable energycould help fill the gap. In sub-Saharan Africa, electricity gen-eration from renewable sourcesgrew by 72 per cent between1998 and 2008 (from 45 to 78 tera-watt hours a year), according tothe United Nations Environ-ment Programme (UNEP). Thismeans that, from 1998 on, 66 percent of all new electricity gener-ated in the region has comefrom renewable sources.

To help create a self-support-ing financing market for sus-tainable energy projects, theInternational Finance Corpora-tion – the private sector arm ofthe World Bank – has estab-lished the Climate ChangeInvestment Programme, toassist banks in making moremoney available for private sec-tor energy efficiency efforts andrenewable energy projects insub-Saharan Africa. It also runsan advisory programme.

While such initiatives areencouraging, rapid developmentand the expansion of the middleclass brings with it new envi-ronmental problems – ones thatwere once the preserve of richernations.

For example, Africa has formany years imported largeamounts of electronic waste fordisposal, but as the digitaldivide narrows, a growing pro-portion of e-waste is being gen-erated domestically.

The combination of importede-waste and rising domestic con-sumption of mobile phones,refrigerators, televisions andother equipment means that lev-els of e-waste could surpassthose of Europe by 2017, accord-ing to the UNEP, and createhigh levels of pollution and itsaccompanying threats to humanhealth.

At the same time, the growthof cities will put intense pres-sure on natural resources. Asthe world’s fastest urbanisingregion, some predict that, by2030, Africa will no longer bepredominantly rural.

This means that policy mak-ers need to move aggressively ifthe continent is to avoid thesocial inequities and environ-mental degradation that havebecome associated with cities inmany developing countries.

When it comes to achievingeconomic growth that is alsoenvironmentally sustainable,the reality is that Africa is in arace against time.

The question for policy mak-ers and businesses is whetherthey are moving fast enough tocapitalise on the opportunitiespresented by the green econ-omy, while preventing rapiddevelopment leading to environ-mental disaster.

Awarenessgrows ofneed to besustainableContinued from Page 1

ContributorsSarah MurrayFT Contributing Editor

Andrew EnglandSouth Africa Bureau Chief

Katraina MansonEast AFrica Correspondent

John ReedFT Correspondent

Xan RiceWest Africa Correspondent

Stephanie GrayCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

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Africa & the Green Economy

At the UN climate change con-ference last year, it becameclear that South Africa, the hostnation, was a front line in thebattle against the effects of glo-bal warming.

If there were doubts, theAfrica Pavilion, set up in largemarquee, sought to explain therisks through a photo exhibitionstarkly laying out the main con-cerns. The first in the photoseries showed lush crops, andpointed out that 75 per cent ofAfricans are farmers, while thesecond noted that agricultureaccounts for more than a thirdof exports.

Then images of the feared per-ils of climate change followed –

floods, desertification, riversrunning dry, the effects oncrops and wildlife, and thethreat of more droughts,cyclones and floods.

Africa is considered highlyvulnerable to the effects of cli-mate change. With the conti-nent already afflicted by regulardroughts and desertification,experts see a shift in the waygovernments and companies areseeking to respond to the issues.

South Africa provides some ofthe clearest examples of thechanges that are beginning totake shape – partly because itis the continent’s most industr-ialised and advanced economy –with both the private and publicsectors putting in placemeasures in response to climatechange and its potential impact.

The country was built onmining, and its abundant coalresources are used to generateabout 95 per cent of its electric-ity – placing South Africa inthe top 20 of the world’s worst

emitters of greenhouse gases.The government, however,

has pledged to reduce emissions,and its energy plan envisagesrenewable power contributing42 per cent of new generationcapacity by 2030. And compa-nies are looking to cut costs atthe same time as seizing oppor-tunities for new business.

Peter Oldacre, a renewableenergy expert at Deloitte, says:“I’m pretty sure at this stage ofthe game that there are feworganisations that don’t acceptthat climate change is a reality– even if they are not looking atthe science, they are certainlybeing required to respond toissues of legislation and regula-tion. Eight countries in Africanow have independent powerproducer segments that concen-trate heavily on the frameworkthat will allow for the produc-tion of renewable energy.”

South Africa’s energy planhas already provided new open-ings for the private sector

inwind and solar power, as thegovernment has begun toapprove licences for independ-ent producers as part of itsplans to add 3,750MW of renewa-ble energy by 2016.

If all goes to plan, independ-ent power producers will play asignificant role in electricitygeneration for the first time,

and break the monopoly ofEskom, the state utility.

Some companies are also tak-ing the initiative. Santam, aCape Town-based short-terminsurer, looked at the impact onthe insurance business of peopleliving in areas that are vulnera-ble to floods and other disastersto gauge the impact on clients’

claims and premiums. It hasalso been engaging with localauthorities on building regula-tions in vulnerable areas.

Woolworths, the South Afri-can retailer, has been usingchicken fat to produce about 5per cent of the fuel for its truckfleet. That is part of a broaderprogramme that has seen thecompany introduce measures toreduce its energy usage by 23per cent. It also obliges suppli-ers to reduce the chemicals theyuse, and to improve water man-agement.

Justin Smith, head of sustain-ability at Woolworths, says thecompany is seeking a competi-tive edge, as well as demonstrat-ing its commitment to long-termsustainability, particularly inagriculture. “Our target marketis quite aware of these issuesand they expect us to be playinga key role in responding to it,”he says. “There’s a lot of risk,particularly in farming in SouthAfrica [with] water scar-

city . . . so if we want to con-tinue to produce and sell, wehave got to try to manage thoserisks properly.”

Yet in spite of some progress,Richard Worthington, climatechange programme manager atthe World Wide Fund for Nature(South Africa), says that, rela-tive to what is needed, neitherthe private sector nor the publicsector “are coming close”.

He says the South Africanfinancial sector is not makingsufficient financing available forenergy saving projects, whilecomplaining of a “yawing dis-juncture” between what govern-ments are saying about climatechange and what is happeningon the ground.

“If governments are serious,they need to be doing more interms of policy framework,” MrWorthington says. “The onlyway we’re going to move to agreener economy is with slowerand lower returns on invest-ment.”

S Africa in front line of global warming battleClimate changeAction needs to matchambition, writesAndrew England

Organisationsare having torespond tolegislation andregulation,says PeterOldacre

Deep inside the rim of theworld’s second largest volcaniccaldera, the smell of rotten eggsand furious clouds of whitesmoke hug the rugged land.Here, where the earth’s crustthins as the Rift Valley twistsits way north, scientists arehunting for steam.

Stephen Kalgogo, an engineer,stands at the foot of a $30m rigthat plunges its drill-bit morethan 2km into the sulphurousheart of the Menengai volcano,180km north-west of Nairobi. Hesays: “We’ve drilled eight wellsand found steam in every one.”

It is at the forefront of hopesthat geothermal energy willboost Kenya’s dismal power out-put. By channelling high pres-sure steam sourced deep under-ground to turn turbines, thegovernment hopes to make themost of an estimated 10,000MWof geothermal potential.

For now, the entire countryproduces 1,200MW, serving only20 per cent of the population,and power prices are so highthat they limit manufacturingand the jobs that go with it.

The approach appeals to deep-pocketed international develop-ment finance institutions thatare keen to back clean energy.

Gabriel Negatu, east Africaregional director at the AfricanDevelopment Bank, says: “It’srisky technology, but in thelong term it is clean, sustainable– much more reliable thanhydro, which is vulnerable torainfall and drought – and abun-dant.”

The bank is putting $145minto the Menengai project. TheWorld Bank, French and Japa-nese development agencies andothers have given more than$500m in loans and grants andpromise more.

Even so, progress has beenslow. Olkaria, south of LakeNaivasha in Kenya’s Great RiftValley and Africa’s first geother-mal power field, has taken morethan 30 years to develop.

Today it produces 210MW,which makes Kenya the largestgeothermal producer in Africa.However, it is a long way shortof the 5,530MW target for 2030,by which time the governmentpredicts that overall powerdemand will rise to 21,620MW.

Olkaria alone can produce1,600MW, and has started drill-ing more projects.

“The pace of development hasbeen slower than we wanted,partly because of the risks ofhitting dry wells,” says HinoHiroyuki, economic adviser tothe prime minister RailaOdinga, who is spearheadingKenya’s green energy develop-ment.

To establish even a 50MWsteam resource, prospectorsmust drill an average of 13 holescosting close to $100m just tolocate the steam, and billionsmore are needed for large powerplants. State-controlled KenGen,the country’s main power gener-ator, says the 5,000MW target islikely to cost $20bn.

The state-owned GeothermalDevelopment Company (GDC),set up three years ago, hastaken on much of the risk. Itassesses and drills the holes,with a view to handing steamconversion and power genera-tion to private investors, whocan recoup their costs againstfixed power prices. With the aidof loans, it is buying its owndrill rigs rather than contract-ing expensive Chinese equip-ment, which will shave one-third off the cost of drilling.

But it may not be enough,says Prof Hiroyuki. “The pace ofdevelopment is constrained bythe amount of tax money thatcan be made available, or bor-rowings from the World Bank,African Development Bank andothers,” he says, mindful thatsome private sector groups siton licences and wait for thevalue to rise.

Financiers say investorsshould be able to come insooner, and GDC has asked forequity funding of up to 80 percent for early-stage developmentfor Menengai’s phase two; thisis set to deliver 800MW by 2021.

Several technological andfinancial developments maylower costs and make privatesector participation easier.

One will reduce the lagbetween discovering steam andturning it into power – andmoney. Mini-plants installed atthe well head can convert steamto power on-site, quickly andinexpensively. “Well head is theway to go for both speed andefficiency,” says David Horseyof Civicom, which built Kenya’sfirst 2.5MW wellhead at Eburru.

Construction experts say awell could drilled for $2m,rather than government esti-mates of three times more.

Steam-powered energy fromwell head mini-plants couldpower rigs that are drillingother wells, saving on expensivediesel. Private sector outfits arewinning bids to build well headgenerators next year.

The other effort is to reducethe risk of drilling dud holesthrough various insuranceschemes, which could accelerateprivate investment. A geother-mal risk mitigation facility fromGermany’s KFW DevelopmentBank will finance 40 per cent ofexploration, and Munich Re, aGerman insurance company, isdeveloping a policy for Kenya.

“Kenya has a fantastic prece-dent in the 200MW that theyhave already installed,” saysGeorge Delacherois Day, opera-tions manager at UK-based CluffGeothermal, which is interestedin building a steam conversionplant at Menengai.

He says Kenya’s “very nice”geothermal legal frameworkmakes the country investor-friendly, while insuranceschemes would be a greatbonus: “All the mechanisms arethere to get excited, and now weare looking to the Kenyan gov-ernment to allow us to partici-pate in exploration.”

Kenya pinsits hopes onsteam powerGeothermalThe potential is therebut progress has beenslower than expected,says Katrina Manson

The Menengai volcano, whereengineers are hunting for steam

V isitors who arrive inGabon by air on aclear day are treatedto sweeping views of

lush jungle, wetlands, and pris-tine coast.

With a territory the size of theUK, the country has 1.5m inhab-itants, 70 per cent of whom livein two cities, Libreville andPort-Gentil. This means it hasfewer pressures on its environ-ment than neighbours such asCameroon or the DemocraticRepublic of Congo.

Gabon’s tropical forest, whichcovers about 85 per cent of itsland, forms a small but vitalpart of the Congo Basin’s “greenlung”, the world’s second-larg-est after the Amazon. It con-tains the world’s largest popula-tion of African forest elephants– a draw for the tourist compa-nies beginning to invest in lux-ury lodges.

As the country seeks to fash-ion an economic future outsideits oil industry, it is makingconservation of the environmenta guiding principle. Gabon vertor Green Gabon is one of thethree pillars of President AliBongo Ondimba’s master planto make the country an emerg-ing economy by 2025.

If Gabon follows all the pro-gressive policies it has adoptedon paper, it could become a

best-case illustration for Africa.Bas Huijbregts, a regional

campaigner with the WorldWide Fund for Nature (WWF),says: “If there’s one countrythat should succeed in principle,it’s Gabon – not only because ofits very low population, but alsobecause of its significant natu-ral resources in oil and gas andmining.” But, on the otherhand, if Gabon cannot protectits environment, it bodes ill forthe rest of the region.

Environmental campaignerssay the country could indeed bea regional role model. However,they also worry that its progres-sive policies could buckle underthe pressure of a resource-hungry outside world.

The green ethos dates back tothe rule of Omar BongoOndimba, father of the currentpresident, who faced down log-ging companies and formallycordoned off 11 per cent of thecountry’s territory for a net-work of 13 national parks in2007.

The younger Mr Bongo hastaken things further, naming aninter-ministerial Climate Coun-cil to develop the country’s low-carbon strategy, and setting upa national parks agency thatreports directly to him.

His government is promotingbest environmental practices forthe resource industries it is pro-moting, including logging, min-ing, and palm oil, includingrequirements for environmentalimpact assessments on bigprojects.

In 2010, he imposed a morato-rium on the export of unproc-essed logs in an effort to compel

foreign investors to processlocally more of what they har-vest.

As a centrepiece of that policyOlam, a Singaporean resourcescompany, is building a $200mspecial economic zone nearLibreville that it will own withthe Gabonese state on a 60:40basis. Olam plans to build a sec-ond SEZ in Port-Gentil, and hasseparate plans to build a ferti-liser plant and develop up to150,000 hectares of palm oil.

Mr Bongo’s government isseeking to strike a balancebetween protecting the environ-ment and luring foreign inves-

tors with perks such as taxbreaks and long-term supplycontracts in a bid to create morejobs outside oil. But campaign-ers are sceptical about whetherlogging and other resource com-panies will stick to the govern-ment’s “sustainability” criteria,when profits are being squeezedby the global economic crisis.

“‘Sustainable’ is a loadedword,” says Filip Verbelen, aforest campaigner with Green-peace, the environmental cam-paign group. “I don’t know ofany example in the Congo Basinof a logging company I wouldgenuinely call sustainable.”

As the government doles outlucrative resource concessions,he adds, Gabonese society gen-erally “is not engaged in howthese resources are allocated”.

Mr Bongo’s government hasnot been patient with all of itscritics. Marc Ona, director ofBrainforest, an environmentalgroup, was detained this monthwith several colleagues aftertrying to organise a demonstra-tion on the sidelines of the NewYork Africa Forum held inLibreville.

Campaigners also warn thatGabon’s prized national parkscould face a threat fromresource companies. The WWF’sMr Huijbregts says in somecases exploration permits havebeen given out that abut oroverlap with national parks.

As an example of the pressurethe region’s forests face, cam-paigners point to neighbouringDemocratic Republic of Congo,where oil permits have beengranted in the Virunga NationalPark, a Unesco World HeritageSite.

Gabonese officials themselvessay they recognise the danger.In a recent interview, LeeWhite, who heads the nationalparks agency, acknowledgesthat while “it isn’t all perfect”,the government still has thepotential and ability to makethe country a role model.

“The story of hope for me isthe way things have changed,and the high-level political com-mitment – not just to be a con-servation country, but to find away to balance economic devel-opment and the environment,”he says.

Gabon is a test case forcommitment to habitatForestryJohn Reed considersthe chances of policiesaimed at conservation

Campaigners worrythat Gabon’s greenlegislation mightbuckle in the face ofa resource-hungryoutside world

A bend in the river: 11 per cent of the country’s territory is off-limits to loggers and forms a network for 13 national parks Alamy

FINANCIAL TIMES WEDNESDAY JUNE 20 2012 ★ 3

Africa & the Green Economy

A s food prices soaredand some producercountries placedrestrictions on their

exports in 2008, a flurry of inter-est in foreign investment inagriculture was ignited.

Africa, endowed with muchfertile but underdeveloped land,found itself the focus of much ofthe attention, particularly fromoil-rich, import-dependent GulfArab states.

The interest triggered a seriesof announcements aboutplanned mega-projects, from

Zambia to Sudan, as food secu-rity took on fresh importance.

But it also had a secondimpact – raising the debateabout the sustainability andrisks that accompany large-scaleforeign investment in the landof often poor, undeveloped Afri-can states that in many casesstruggle to feed their own peo-ple.

Often the schemes attract thepejorative tag of “land grab-bing” and there have been high-profile controversies, such asthe attempted involvement Dae-woo, the South Korean conglom-erate, in an agricultural projectin Madagascar.

Experts say that, ultimately,many of the plans of 2008-09failed to materialise as the foodcrisis abated and investorsbecame more aware of the politi-cal risks and huge logistic diffi-culties. But as populations growand consumption habits change,

the trend of foreign investorinterest in Africa’s soils isexpected to continue.

There are no precise figureson the scale of land acquisi-tions, but Land Matrix, anonline database of land agree-ments, has tracked 986 dealssince 2000, amounting to 57.3mhectares of land – 41 per cent ofit acquired in Africa, with Ethio-pia, Sudan, Zambia, the Demo-cratic Republic of Congo andMadagascar among the top 10targeted countries.

Africa stands out becausemuch of the land is in the handsof the state and can be rela-tively cheap, while several gov-ernments have been seekinginvestment in agriculture, saysMichael Taylor, at the Interna-tional Land Coalition.

“It is of serious concern thatthe investment model that hasbeen used up to now, that ofacquiring land, is seemingly the

dominant one, so there’s a needfor regulation. There’s a needfor governments to be makingfirm decisions in light of abroader strategy on rural devel-opment,” he says. “We talk tomany stakeholders and the onething we hear right across theboard is that we need invest-ment, but it has to be the rightkind.”

It is an issue that goes to theheart of the debate aroundlarge-scale land projects inAfrica – whether foreign invest-ment can be used to aid badlyneeded development rather thanbeing deemed exploitative.

Paul Mathieu, a senior landtenure officer at the UN’s Foodand Agriculture Organization,says: “It cannot be seen as nec-essarily negative, it can be posi-tive, if it’s handled in the properway from the start,” says .

“People may become morecautious and more keen to con-

sider types of investment thatdo not necessarily imply theacquisition of land.”

Investors could employ peopleas contract farmers rather thandisplacing them. “It all dependson how it’s done,” Mr Mathieusays.

He says that what is oftenoverlooked is the increasing roleof domestic investors in agricul-ture, but adds that governmentsoften struggle with limited tech-nical and human resources tomonitor and regulate projects.

However, there is a risk that,if governments and investorsbecome too cautious, it couldstymie investment altogether,says Chris Isaac, director ofbusiness development atAgDevCo, a non-profit organisa-tion that works on sub-SaharanAfrica agricultural projects.

He says: “There need to bemore visible examples of thingsthat work well and that will

take some time, because patientcapital [long-term, low costdebt] has become available onlyrecently.”

He believes there are benefitswhen multinationals sourcelocal produce through contractfarmers or if commercial farm-ing hubs are extended to enablecommunities to share in expen-sive large-scale infrastructuresuch as irrigation systems.

Mr Isaac says: “We think thatmodel is the only way for cer-tain crops, particularly fieldcrops such as rice, to get pro-ductivity levels up to where youcan really tackle food insecu-rity.

“If you can secure the mar-kets for farmers, that puts youin a good place. But you need todo more than that. You need tohelp farmers become more pro-ductive.”

Mr Isaac is based in Mozam-bique, a poor country with an

estimated 36m hectares of ara-ble land available, of which lessthe 16 per cent is under produc-tion, according to the UN. It hasattracted significant foreigninvestor interest in biofuelsprojects, rice schemes and for-estry plantations.

But some have failed, whileothers have come into conflictwith local communities.

Mozambique also illustratesthe underdeveloped state ofdomestic farming in many Afri-can countries – two-thirds ofMozambican farms struggle ontwo hectares or less, while 42per cent of farms are unable toensure food security for thehousehold throughout the year,according to a UN report.

“Unless you bring in privateinvestment, technology andskills, it’s going to be very diffi-cult for the agriculture sector tomove beyond where it is today,”Mr Isaac says.

Countries need right kind of investmentFood securityForeigners buyingland to grow crops forthemselves is not thebest model, reportsAndrew England

Pick of the crop: as populations grow and consumption habits change, the trend of foreign investor interest in Africa’s soil is expected to continue, raising the debate about large-scale projects in states that struggle to feed their own people Alamy

In southern Ethiopia, agiant wall of concrete is ris-ing between the sides of asteep gorge. When com-plete, the Gibe III dam onthe Omo river will be thehighest in Africa. It willalso be one of the most con-troversial.

Depending on which sideof the debate you stand, itoffers proof of China’s ever-increasing contribution toAfrica’s development, orevidence of Beijing’s will-ingness to compromise onenvironmental standards asit pours billions of dollarsinto the continent.

Ethiopia’s governmentand many ordinary peoplethere say that the dam is ano-brainer. With numerouslarge rivers flowing from itshighlands, the country hashuge hydroelectric poten-tial, but in 2009 was produc-ing less than 1,000MW ofpower to serve its 80m pop-ulation. Gibe III, one of sev-eral huge dams under con-struction in Ethiopia, willalone have a capacity of1,870MW.

Yet the project causedalarm from the start. Envi-ronmental campaigners saythat the dam will have adisastrous impact on hun-dreds of thousands of peo-ple living downstream aswell as on Lake Turkana, inKenya, a World Heritagesite, into which the OmoRiver runs.

Construction of the$1.75bn dam commencedwithout funding beingarranged, or an environ-mental impact study com-pleted. Intense pressurefrom activists helped dis-suade the African Develop-ment Bank, the World Bankand the European Invest-ment Bank from offeringfinance. But then the Indus-trial and Commercial Bankof China (ICBC), which isstate-owned, stepped inwith a $500m loan.

Last year, Unesco, the UNbody responsible for moni-

toring World Heritage sites,urged Ethiopia to halt allconstruction immediatelyand called on “all financialinstitutions supporting theGibe III dam to put on holdtheir financial support”.The request was ignored.

Ikal Angelei, a Kenyanactivist, said in a recentinterview with the NewYork Times: “China mayhave green policies it is try-ing to implement, but solong as there’s no formatfor holding Chinese compa-nies and banks accountable,then the policies do notwork.”

It is an issue that is gain-ing increasing attention asthe business ties betweenChina and Africa continueto grow. Last year Chineseinvestment in Africa topped$10bn, bringing accumu-lated investment to morethan $40bn, according to theXinhua news agency. Itsays more than 2,000 Chi-nese companies, from hugestate-owned enterprises tosmall businesses, have putmoney into Africa.

Ian Taylor, a professor ofinternational relations andAfrican politics at the Uni-versity of St Andrews inScotland, says there is atendency to create an“awful Chinese people in

Africa” discourse, as well asa level of hypocrisy, giventhe poor record of someEuropean and American oilcompanies in places such asthe delta region of Nigeria.

But, he says, there arelegitimate environmentalconcerns related to theincreased Chinese presence.

At an individual level,Chinese nationals havebeen linked to the illegal

harvesting of abalone, anedible mollusc, in SouthAfrica, as well the increasein the smuggling of ivoryand rhino horn there andelsewhere on the continent.There are also worriesabout illegal logging inplaces such as Gabon andLiberia, says Prof Taylor.

Looking at corporates, theenvironmental focus ismore on mining and hydro-power projects, which usu-ally involve large state-runcompanies. “In China, theenvironment is not very

high on the agenda, sowhen its companies are per-ceived to misbehave, theyare only exporting practicesfrom back home,” he says.

Chinese companies arealso under far less scrutinydomestically than theirwestern equivalents, whichare closely monitored bycivil society organisationsand human right groupssuch as Global Witness,Amnesty International andFriends of the Earth.

But Prof Taylor says theChinese government isbecoming ever more sensi-tive about the country’simage abroad, and that thisis slowly changing the wayits companies do businessoverseas. “Large Chinesecompanies are increasinglycommitted to corporatesocial responsibility. Asmore of them plan to list onstock exchanges in thewest, the pressure will onlyincrease.”

Xiao Yuhua, a researchassociate at the ZhejiangNormal University’s Insti-tute of African Studies,agrees. He says that, whilesome Chinese companieshave behaved poorly inAfrica, local governmentsalso needed to adopt meas-ures to ensure the environ-ment was protected. “It’sgood for Africa to have Chi-nese companies investing.But it’s important to moni-tor and regulate them inorder to avoid trouble andto create more opportuni-ties,” he says.

The Gibe III controversyshows that this often failsto happen. It was the Ethio-pian government thatinsisted the project wasenvironmentally sound.

In addition it was a west-ern company – Italy’s Salini– that had no objections tobuilding the dam.

Still, the outcry over theICBC loan serves as a les-son for other Chinese com-panies and financial institu-tions operating in Africa,Mr Xiao says.

“They have to be morecareful and do more workbefore agreeing to go aheadwith a project,” he says.“While China’s strategy is‘go out and expand’, thatneeds to be balancedagainst the need for corpo-rate social responsibility.”

The money is welcome butmore controls are neededChinese investmentIt is important tomonitor andregulate companies,writes Xan Rice

Gibe III dam in Ethiopia is being built with a loan from China

’They have to bemore careful anddo more workbefore going aheadwith a project’

4 ★ FINANCIAL TIMES WEDNESDAY JUNE 20 2012

Africa & the Green Economy

In the history of cities,few have seen anexpansion as rapid asOuagadougou, capital

of Burkina Faso. Its popula-tion is projected to grow by81 per cent in 10 years, from1.9m in 2010 to 3.4m in 2020,according to UN Habitat.

But while it may be anextreme case, it is part of atrend that will lead toAfrica ceasing to be mainlyrural as early as 2030.

This has important impli-cations for the countries ofwhat is the world’s fastesturbanising continent.

Tony Mwai is IBM’s coun-try general manager foreast Africa, which, as partof its pro bono Smarter Cit-ies Challenge, is workingwith several African cities.

He says: “Many are at anexciting and highly signifi-cant point in their develop-ment, with enormous poten-tial and enormous chal-lenges both looming largerthan ever.”

Urbanisation presentsopportunities to raise livingstandards for millions ofpeople across the continent.

However, in the absenceof progressive public poli-cies and infrastructureinvestment, the risks aregreat. These include mas-sive urban slum expansionand rising social and eco-nomic inequities, but alsoenvironmental degradationand unsustainable pressureon natural resources.

The growth of Africa’s cit-ies will put severe pressureon water supplies. And pro-viding citizens with accessto clean water and adequatesanitation facilities isalready creating headachesfor many of Africa’s munici-pal authorities, particularlywhen it comes to unplannedslum developments.

Meanwhile, in traffic-choked cities such as Accrain Ghana or Lagos inNigeria, cars and trucks arecreating rising levels of pol-lution. The world’s citiesaccount for about 80 percent of global greenhousegas emissions.

Simply building moreroads does not necessarilyhelp. Despite investment ininfrastructure, transportinefficiencies in Nairobi,the Kenyan capital, costabout $517,000 a day in lostproductivity, fuel consump-tion and pollution, accord-ing to IBM.

The company’s SmarterCities Challenge team isdesigning an IT-based sys-tem, using technologiesthat include mobile phones,sensors and closed-circuittelevision that will allowcities to highlight trafficproblems, make trafficinformation accessible tocitizens, police and plan-ners and digitise functionssuch as parking.

To benefit from such sys-tems, African cities haveplenty to do, from layingfibre optic cables to digitis-ing public records.

However, Mr Mwai saysthat technology can play animportant role in address-ing the difficulties associ-ated with rapid urbanisa-tion.

He adds: “Recent techno-logical advances are creat-ing new opportunities fortransforming cities. We cannow monitor, measure andmanage nearly any physicalsystem at work in ourcities.”

Another solution to grid-lock and pollution is a busrapid transit system (BRT)such as that developed inBogotá, the capital ofColombia.

What distinguishes BRTsystems from regular serv-ices is the bus routes aresegregated from the rest ofthe traffic and not used byother vehicles.

To raise throughput,passengers pay for ticketsbefore they board and thehigh-capacity buses are con-trolled centrally.

Nairobi, Lagos and CapeTown have developed or aredeveloping such systems.Policy makers believe that,by slowing the growth ofprivate car ownership, theywill reduce the emission ofgreenhouse gases.

Meanwhile, social entre-preneurs are coming upwith innovative solutions inplaces where city authori-

ties sometimes fear totread.

David Kuria, a Kenyanentrepreneur and architect,has developed a new con-cept for public lavatories.

The Ikotoilet uses sus-tainable technologies suchas bio-digesters and water-less urinals.

To make the toilets finan-cially self-sustaining, MrKuria has developed amodel whereby small shopssuch as newspaper stands,shoeshine stalls and mobile

phone airtime vendors clus-ter around each Ikotoilet,subsidising its operation, sothat locals need only pay asmall fee to use it.

Gordon Pirie, deputydirector of the African Cen-tre for Cities at the Univer-sity of Cape Town, believesthat these kinds of locallybased efforts have hugepotential when it comes tomaking Africa’s cities envi-ronmentally and sociallysustainable.

“In the search for innova-

tion and enterprise, smallcompanies are doing amaz-ing work,” he says. “There’sno shortage of entrepre-neurial spirit and innova-tion.”

In South Africa, a com-munity-based initiative –Violence Preventionthrough Urban Upgrading –is exploring new ways totackle crime in CapeTown’s township of Khay-elitsha.

Among VPUU’s initiativesis the establishment ofsmall community centres –known as “active boxes” –in regular positions alongpedestrian routes in danger-ous areas.

The centres, which offersports and youth facilitiesas well as crèches, act asinformation hubs and, witha caretaker flat on site, areoccupied around the clock.

“We talk about the Afri-can city as a mega event,”says Prof Pirie. “But VPUUis using architecture andplanning at a local scale toimprove lives for people liv-ing in these places.”

Prof Pirie also emphasisesthe importance of creatingpublic spaces in cities. “Inthese spaces everyone cantake a share of the city andmeet and mix freely,” hesays. “There’s a wonderfulway in which public spacecan create a cohesion.”

Initiatives to get citiesworking smoothlyUrban livingBig problems needsmart solutions,says Sarah Murray

Entrepreneurs arecoming up withsolutions in placeswhere authoritiesfear to tread

Traffic in central Lagos illustrates the problems faced by the continent’s growing cities Getty

Given the difficulties facing Africa’srapidly expanding urban centres,policy makers might be forgiven fornot putting the provision of cityparks high on their list of priorities.Yet this is something the Aga KhanTrust for Culture (AKTC) – thecultural agency of the Aga KhanDevelopment Network – is focusingon in several African cities.

The trust believes parks are vitalpublic spaces whose social andenvironmental role goes far beyondoffering picnic areas or views.

“Obviously, there are manypressing problems in cities, butparks are not just physical spaces,”says Luis Monreal, general managerof the AKTC. “In reality, these citiesneed social spaces where differentpopulations can meet at leisure.”

In Cairo, the AKTC has used thesite of a 500-year-old dump tocreate a 30-hectare green space, the

Al-Azhar Park, which opened in 2005.More recently, the park project wasextended to include the restorationof ancient buildings and the

12th-century Ayyubid wall.In Bamako, the capital of Mali – a

city that is home to more than 1mpeople – the AKTC has rehabilitateda colonial-era botanical garden builtby the French. The parkencompasses areas of indigenousflora, open lawns, flower gardens,wooded areas and a medicinalgarden, as well as jogging andcycling tracks and nature trails.

More recently, in April, the trustsigned an agreement with theKenyan government to take on therestoration of the Nairobi City Park.

The idea is to protect from furtherencroachment a space that,according to Mr Monreal, has alreadylost 40 per cent of its territory and torestore the park’s physical andecological infrastructure.

Such projects clearly haveenvironmental benefits. Parks helpconserve natural resources andcreate habitats for wildlife.

“These places are tremendousreservoirs of biodiversity,” says Mr

Monreal. “A park can create amicroclimate, regulate the rainfall inthe city, contribute to aquifers andprovide a home to chimpanzees,birds and small mammals.”

In cities, green areas can alsomitigate what is known as “urbanheat island” – a phenomenonwhereby the surfaces of buildingsabsorb solar radiation and return itto the air as heat.

Trees, shrubs and vegetation notonly provide shade but also helpreduce city temperatures byreturning moisture to theatmosphere, preventing the sun’sheat from being absorbed andretained by buildings.

However, says Mr Monreal, parksserve people, as well as the planet.In addition to providing recreationalspaces, he says that they have thepotential to become educationalresources for schools programmes onecosystems.

Moreover, in many African cities,open spaces are places that bringtogether some of the diverse ethnicgroups that are increasinglymigrating from rural to urban areas.

“This multi-ethnicity can generatefriction because people lackknowledge of each other,” he says.“Parks are social spaces wherefamily groups can meet in a relaxedatmosphere at a time of leisure. Soin a way they contribute to policiesof integration.”

Good for people and the planetCase studyAga Khan TrustSarah Murray looksat the work of thecultural agency

Cities need socialspaces wheredifferentpopulations canmeet at leisure,says Luis Monrealat the Aga KhanTrust

FINANCIAL TIMES WEDNESDAY JUNE 20 2012 ★ 5

6 ★ FINANCIAL TIMES WEDNESDAY JUNE 20 2012

Africa & the Green Economy

W ith poor transporti n f r a s t r u c tu r e ,weak regulatoryframeworks and

lack of access to finance, manyAfrican farmers find it difficultto participate in global agricul-tural markets.

However, experts argue that,with appropriate investmentand a shift to new technologies,African countries could not onlyincrease farm yields substan-tially – they could do so whileminimising their impact on theplanet.

Ousmane Badiane, director forAfrica at the International FoodPolicy Research Institute, says:“By investing in science andtechnology and acceleratingtechnological change, Africa hasan opportunity to increase pro-ductivity while preserving envi-ronmental resources,”. Mr Badi-ane says the continent hasalready made substantialprogress in increasing farmyields. “Growth in land andlabour productivity in agricul-ture has been in the region of 1to 5 per cent since the mid-80s,”he says.

He believes that, if this trendcontinues, the continent couldplay a bigger role in shoring upglobal food security. “This maynot necessarily be enough forAfrica to become a leading sup-plier to the world,” he says.“But it will increase supplyinternally and reduce the bur-den of African demand on theglobal supply.”

Nevertheless, the continentstill has some catching up to do,says David Cleary, director ofagriculture at the Nature Con-servancy, the US-based environ-mental advocacy.

“If you compare yields in dif-ferent commodities to yields inother places, there’s a big gapbetween Africa and the rest ofthe world,” he says. “Thatshows you the potential forincreases, but it also shows howpersistent are the factors press-ing down on the industry.”

For a start, in many parts ofAfrica farmers will have to findways of adapting to the effectsof climate change, such as ris-ing temperatures and theincreasing frequency of floodsand droughts.

Environmental problems arealready affecting agriculturalproduction. The UN Food andAgriculture Organization esti-mates that African yields are upto 40 per cent lower than theyshould be because of soil degra-dation.

Water is another problem.“Water is going to be a key lim-iting factor,” says Mark Driscoll,head of the one planet food pro-gramme at WWF UK. “Morework needs to be done to sup-port smallholders in conservingwater through irrigation tech-niques, and governments needto work on better watershed andecosystem management.”

Meanwhile, in many coun-tries, poor infrastructure ham-

pers farmers’ ability to expand.Innovative models to address

this are being piloted in someplaces. Erinch Sahan, privatesector policy adviser at Oxfam,the UK development charity,cites a system whereby farmerscan deposit grain in a ware-house and get a receipt for it,which can be used to secure abank loan.

Broader policy initiatives willalso be essential if African farm-ing is to be transformed into anindustry that is both environ-mentally sustainable and helpsthe continent become a moresignificant contributor to theglobal food supply.

Some cite the example set byBrazil. “Thirty years ago, manyparts of Brazil looked like partsof east Africa in terms of soiland climate,” says Mr Cleary.

“Brazil had inadequate infra-structure, but with good invest-ment it transformed its agricul-ture – and the secret of success

was smart policy.” Thisincluded funding for agronomictraining and investment inthe development of new seedvarieties.

However, while pushing upyields is one thing, many arguethat this must be done withoutincreasing environmental degra-dation. Here again, Mr Clearycites the example of Brazil.“You had a massive increase inagricultural production but youalso had a strong regulatoryframework,” he says.

Laws were introduced requir-ing a protective buffer of nativevegetation around watercoursesto prevent soil erosion and thecontamination of fresh water byagricultural chemical run-off.

“If you have a good regulatoryframework, that makes a hugedifference to the environmentalimpact of agriculture,” says MrCleary.

In some respects, however,African countries have a head

start when it comes to develop-ing environmentally sustainablefarming practices – the abilityto leapfrog agricultural technol-ogies.

With agronomic trainingthrough agricultural extensionservices, says Mr Cleary, farm-ers could learn how to apply fer-tiliser efficiently and discrimi-nately. “That way, you could geta huge increase in yields with-out a lot of environmentalimpact,” he says.

The traditional lack of reli-ance on fertilisers and pesticidesmeans that African farmerscould also move more swiftly tonext-generation technologies.

“They can look around andsee the downside of fertilisersand work on technologies thatallow them to raise productivitywhile managing the environ-ment,” says Mr Badiane. “Beinga laggard and late-comer has anadvantage – the ability to learnfrom the mistakes of others.”

Countries need to catch upFoodBut being a late-comercould have advantages,writes Sarah Murray

Thirsty work: a woman digs a trench to collect rainwater near the village of Tibiri in Niger’s southern Zinder region AFP/Getty

Nile dam Water wars averted for now

When Ethiopia’s plan to dam theBlue Nile grew grander within amonth of the resignation ofPresident Hosni Mubarak, it didnot go unnoticed in his country,downstream, Nile-dependentEgypt.The Grand Renaissance Dam,

at 6,000MW, will be Africa’slargest hydroelectric project.“We have the right to develop

our natural resource,” saysAlemayehu Tegenu, Ethiopia’sminister for water and energy.“We were not benefiting much

from the Nile. There is a groupof people who are totally againstthe dam and they are not right.”Aside from some green

lobbyists who fear thedestruction of the environment,he means Egypt.Clinging to a colonial treaty

signed in 1929, Egypt has vetorights over any upstreamdevelopments that might affectthe Nile’s flow.A series of agreements sees

neighbouring Sudan awarded18.5bn cu metres a year and55bn cu metres for Egypt, eventhough Ethiopia is the source for85 per cent of the river and wasleft out of a later 1959 deal.Meles Zenawi, Ethiopia’s prime

minister, has long challenged“old-fashioned ideas based onthe assumption that the Nilewater belongs to Egypt”. Evenso, the dam could deprive Egyptof more than 17bn cu metres ayear. The country relies on theriver for 90 per cent of itswater.“Ethiopia has pushed this

through in a time of turmoil inEgypt,” says an internationalofficial. “Egypt has not had thetime or breathing room to focuson it – the new leaders have notbeen able to unite the countryaround a single issue andcertainly not around the Nile.“The guys in Addis have seen

this opportunity and steppedright through it. If Mubarak wasstill in power today, it wouldhave been the beginning of awater war,” says the official.Mohamed Nasr El Din Allam,

Egypt’s outgoing minister ofwater, says the dam will createshortages in water, power andfarming land and lead topolitical, economic and socialinstability.Ethiopia insists that its

downstream neighbours Sudanand Egypt have nothing to fearfrom its decision to dam the

Blue Nile, which feeds bothcountries. On the contrary, theywill in fact both gain.Mr Alemayehu says: “The dam

will benefit both countries: it willnot reduce the flow, but regulateit. They will benefit because itwill reduce silt, control floods,regulate water flow throughoutthe seasons.”Sudan and Egypt have calmed

their responses in the past yearand a technical committee hasstarted work on an assessmentof the dam’s impact. Thecommittee is expected to reportnext year, but Ethiopia is notwaiting. “We are allowing theestablishment of the technicalcommittee so as to buildconfidence,” says Mr Alemayehu.Costing an estimated $4.8bn

and taking four years to build, itis the sort of large-scale projectthat usually has donors anddevelopment finance institutionsrushing to help, glad to have aproject in so poor a country tospend their money on.But they have not touched it.

Instead, Ethiopian statetelevision airs nightly appeals toeveryone from bus drivers tobusinessmen, to buy bonds tosupport the project. Evenpolitical opposition figures arebuying bonds in what hasbecome a national rallying cry.“Meles is being very smart on

this – it is a very expensive dambut it is a transformativeproject,” says an internationalofficial. “I think Ethiopia willdeliver on the first 20 per centof it and by then donors will berushing to come in.”“Everyone is looking nervously

to see how much progress thereis,” says the official. Sudan andEgypt must also face thelikelihood that the Ethiopianproject sets a precedent, shouldother upstream countries suchas Uganda or South Sudan, onthe White Nile, decide to damthe river flow too.Over the past two years,

Uganda, Ethiopia, Kenya,Tanzania, Rwanda, Burundi andDemocratic Republic of Congohave all signed an agreement toseek more water from the Nile,which they argue should beshared more fairly, Egypt saysthe agreement does notoverturn the 1929 agreement.The Nile’s water wars may

merely be on hold.

Katrina Manson