TRADE

Investing in a sustainable world

As the world transitions from the 8 Millennium Development Goals (MDGs) to the 17 Sustainable Development Goals (SDG), a new challenge has emerged for businesses, economic planners and policy makers. How can investment be made in a manner that reflects the world’s commitment to sustainability? United Nations Conference on Trade and Development (UNCTAD) recently published a report that extensively highlights and propounds on how to develop an investment policy framework for sustainable development.

Since 1964, UNCTAD has been involved with trade, investment and development issues on behalf of the United Nations General Assembly. This has largely been done in the form of developing policies relating to development, trade, aid, transport, finance and technologies. Due its primary focus on trade and development, and the inextricable link between the two, the role of UNCTAD has become ever greater in recent times, more so in Africa. This is because of two reasons.

First, Africa is ready to do business with the world and the emphasis on trade is clear for all to see. Nairobi winning the bid to host the World Trade Organization 10th Ministerial Conference in December is a compelling example. UNCTAD’s role in facilitating trade and development in Africa has therefore become bigger.

Second, and perhaps more compelling, UNCTAD’s role in Africa has become bigger because the world is transitioning from the MDGs to the SDGs. Sustainable development will be at the center of policy in the next 15 years and there is arguably nowhere where this will be more relevant than Africa, making UNCTAD’s trade and development role in the continent more pronounced.

It is perhaps telling that the Secretary-General of UNCTAD is an African, a Kenyan to be precise–Dr. Mukhisa Kituyi. Considering he has previously served as Trade minister in a country where development is of utmost importance, Dr. Kituyi has the requisite background to articulate matters of trade and development.

For background, the MDGs are a set of 8 goals envisioned at the turn of the new millennium by the UN member states that were to be accomplished in 15 years. They include: to eradicate extreme poverty and hunger, to achieve universal primary education, to promote gender equality and empower women, to reduce child mortality, to improve maternal health, to combat HIV/AIDS, malaria, and other diseases, to ensure environmental sustainability, and to develop a global partnership for development. The MDGs have been replaced by 17 SDGs, which will sharply define the world’s development agenda over the next 15 years.

The 17 SDGs include: (separated by semi-colons) To end poverty in all its forms everywhere; to end hunger, achieve food security and improved nutrition and promote sustainable agriculture; to ensure healthy lives and promote well-being for all at all ages; to ensure inclusive and equitable quality education and promote lifelong learning opportunities for all; to achieve gender equality and empower all women and girls; to ensure availability and sustainable management of water and sanitation for all; to ensure access to affordable, reliable, sustainable and modern energy for all; to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all; to build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation; to reduce inequality within and among countries; to make cities and human settlements inclusive, safe, resilient and sustainable; to ensure sustainable consumption and production patterns; to take urgent action to combat climate change and its impacts; to conserve and sustainably use the oceans, seas and marine resources for sustainable development; to protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss; to promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels; to strengthen the means of implementation and revitalize the global partnership for sustainable development.

The SDGs are broader and more complex than the MDGs. This notwithstanding, the SDGs are what the world feels will be effective in tackling the challenges of the present time and the challenges of the future. UNCTAD on its part has released a report titled, Investment Policy Framework for Sustainable Investment, which will serve as a “major instrument for governments worldwide formulating a new generation of investment policies.”

New generation

“A new generation of investment policies is emerging, pursuing a broader and more intricate development policy agenda, while building or maintaining a generally favorable investment climate, “UNCTAD observes.

This new generation places inclusive growth at the heart of investment and development. Inclusiveness means bringing in those groups in society and the world that have long been marginalized for one reason or the other. It is a critical step to sustainability as it forestalls possibility of future strife brought about by inequality and unjust distribution of wealth. Simply put, inclusiveness is putting people, rather than money or power, back at the center of development.

At the national level, UNCTAD advises that governments will need to integrate investment policy into development strategy. A key challenge will be promoting investment in areas that make the greatest contribution to sustainable development. This poses a challenge for Kenya as some of the areas that are critical to sustainable development have been denied investment. Money is going to the ‘hot’ sectors such as real estate, while sectors such as education, which are critical in levelling the playing field and providing equal opportunities, are neglected.

Kenya has high adult literacy rates in comparison to its neighbors—87 percent compared with Uganda (73.2 percent), Tanzania (72.9 percent), Rwanda (70.7 percent) and Burundi (66.6 percent). This notwithstanding, investments in education are still not at par with the demand for high quality education. This underinvestment is more acute in the institutions of higher learnings where lecture halls are brimming with students but lack lecturers and resources to serve them. The net effect is that the quality of skills in the job market is wanting.

A 2012 report by Nairobi-based African Management Initiative indicates that companies in Kenya are frustrated by the quality of graduates who “seemed to have been stuck in a lecture theatre with 1000 other students for four years and taught to regurgitate facts.” This wanting state of higher education is an impediment to sustainable development, especially now that services, which generally require higher skills, account for more of Kenya’s and Africa’s overall wealth. Services now account for half of Africa’s wealth as measured by GDP, Dr. Kituyi says.

It is therefore imperative that Kenya invests more in education in order to remain competitive in attracting investments. Failure to do so could result in firms sourcing talent from other countries, a situation that, if persistent, impedes sustainable development by encouraging xenophobia, limiting free movement of people and inspiring potential conflict.

Education is just one of the areas that UNCTAD has identified as ‘priority areas’ for sustainable investment. Others areas include: power, transport, telecommunications, water and sanitation, climate change mitigation and adaptation, among others.

UNCTAD’s priority areas

Although there is still room for improvement with respect to education, Kenya has done commendably well in other areas, particularly power and telecommunications. The latter has particularly been a strong area for Kenya and the use of ICT at the Huduma Centers to ease service delivery has gained global acclaim, culminating in President Uhuru Kenyatta’s receipt of an award from the International Telecommunications Union at the UN for his government’s successful use of ICT to bring development.

ICT, however, cannot expand without power. And not just power, but sustainable power—it must always be remembered that investment policy over the next 15 years and beyond should be made within the context of sustainability. This means that power investments should favor renewable forms such as what Kenya is currently doing with geothermal energy, and more recently, wind energy.

The 310 MW wind farm in Turkana, with its 365 turbines and 162 square kilometre land area, is billed to be the largest in Africa, relegating Tarfaya wind farm in Morocco, which is currently Africa’s biggest wind farm with 131 turbines. Kenya is now not only stepping into the world of wind energy, but doing so with strong convictions. It will relegate Morocco and South Africa as the benchmarks of successful wind energy in Africa.

Ultimately, higher supply of energy with a sustainable balance between renewable and fossil, will help Kenya achieve two things. First, it will lower the cost of power and the cost of doing business, which has hitherto discouraged investment in employment generating sectors such as manufacturing, while even forcing some manufacturers to shut down. Increased investment in manufacturing due to lower power costs will help create more jobs and lead Kenya to a sustainable future where unemployment will be lower and consequent tensions from hungry and idle youth will correspondingly reduce.

Second, a balance between renewable and fossil fuel will aid Kenya in its climate change mitigation efforts.

More pertinent issues

Climate change is currently one of the more pertinent issues for Africa. This is particularly so because Africa is one of the areas that is most affected by climate change. The cruel irony is that Africa is responsible for just 2.5 percent of global carbon emissions, but is the region most directly affected by climate change. This is primarily because there is currently little capacity to tackle the threat.

Climate change is one of the megatrends that has greatly changed the investment landscape and placed new demands for investors. And there is nowhere where these demands are greater than Africa and the developing world. “The investment landscape is changing, with increasing weight for developing countries,” UNCTAD notes.

The reason why climate change is such a big issue for Africa and Kenya is that it mostly affects farmers, who happen to be the biggest force in the African labor market, comprising more than half of all working Africans. Moreover, farmers also happen to be the poorest, despite the fact that they work harder than almost everyone else. Any development that deepens their poverty, such as climate change, is therefore starkly and fundamentally opposed to the sustainable development goal number 10 “to reduce inequality within and among countries,” and several others.

The integration of sustainable development goals into investment policy, as called for by UNCTAD, therefore demands that governments, more so the Kenyan government, sets some funds aside to mitigate against climate change in the long-term. Long-term mitigation is not just about providing farmers with some relief fund in the eventuality of floods and other environmental disasters. It primarily entails conducting extensive and continual research on the matter and basing decisions on the findings of this research.

Research into climate change is still limited and many countries have been found flat footed by floods and other natural disasters. The floods in Mozambique, Tanzania and Malawi at the beginning of the year, for instance, are among the worst the region has ever seen. A raging El Niño is also expected to wreak havoc in Kenya any time soon, according to reports from meteorological departments. The only sure means of remaining prepared for the disasters wrought by climate change is to research extensively.

“No challenge is greater for research in Africa today than how to support farmers to adapt to climate change. Climate change will substantially reduce yields of crops, livestock and fisheries, and lead to decline in farm output, farm incomes and worsen poverty and vulnerabilities,” says Akinwumi Adesina, the former Agriculture minister for Nigeria and currently the President of the African Development Bank.

In conclusion, the UNCTAD report is, as it describes itself, a “major instrument for governments worldwide formulating a new generation of investment policies.” This suggests that in addition to going through the report, governments, including Kenya, will have to get a clearer grasp of what the SDGs are and what they truly mean within the context of Kenya. This entails more than just perusing through reports. Rather, it demands that qualified technocrats are employed to deal with the matter; people who are chosen on merit and who truly understand their subject matter. Meanwhile, UNCTAD has availed its report publicly and it is available for free on the internet at: http://unctad.org/en/PublicationsLibrary/diaepcb2012d5Rev1_en.pdf