'Greening Botswana's post-COVID-19 economic recovery
Bakang Ntshingane | Friday August 21, 2020 14:29
There’s a need and an appetite for multidisciplinary and new-fangled approaches to usher in a new era of economic development.
The era of the Asian Tigers and others demanded different. Today, those of us tracking behind have a different playbook: post-industrial, high tech, services driven economies. In addition to that, post-pandemic economic recovery will likely be dominated by narratives of ‘clean growth’, characterised by balancing rapid industrialisation and economic growth with sustainability and climate change in mind.
The OECD defines a ‘Green Stimulus’ as “the application of policies and measures to stimulate short run economic activity while at the same time preserving, protecting and enhancing environmental and natural resource quality both at near and long-term.”
Botswana’s COVID-19 economic recovery prospects aren’t looking too good. The country hasn’t been immune to the impacts of climate change and is amongst the most vulnerable. As former President Obama once aptly put it, “We are the first generation to feel the impact of climate change and the last generation that can do something about it.”
The transition from a carbon-intensive growth model to a low-emissions, climate-resilient development one has never been easy, even for hyper industrialised economies like South Korea (which is one of the most fossil-fuel reliant economies in the world). For a small, diamond dependent country with ambitions for rapid industrialisation to save its ailing economy, the prospects are more difficult yet important.
Asking developing countries to dump their abundant coal reserves for environmentally-friendly energy alternatives does sound dodgy, since after all, the big economies remain the largest polluters.
But, the current rave on climate change-driven economic recovery options presents undeniable opportunities to fix several of our socioeconomic problems of power and energy supply, unemployment, a narrow economic base and our inherent food security problem by investing in innovative climate resilient agriculture.
In addition, we can boost access to water across the country, remodel public buildings to become more energy efficient and climate resilient, create public urban forest-inspired parks, establish recycling centres, have massive renewable energy investments and create low-carbon energy industrial complexes to increase our manufacturing and export base.
Like many others, Botswana faces a growing urgency to remodel its development strategy and improvise. It is understandable though, that the scope of a green recovery is limited given the overwhelming pressure that coronavirus has placed on the national budget.
Setting Priorities in National Development Planning
Botswana has a two-year window to set out priorities for the next National Development Plan (NDP). The thinking henceforth must be shifted to finance large scale climate and environmentally-friendly national development projects. The key lies in positioning the NDP, budget planning and the nation’s premier development finance institutions like Citizen Entrepreneurial Development Agency, Botswana Development Corporation, National Development Bank etc. to finance scaled-up, impactful climate-friendly development projects that can boost aggregate demand and employment.
As Ministry of Finance and Economic Development (MFED) designs and rolls out its stimulus packages, climate change must be more than a footnote as it encompasses key sectors that the Ministry considers salient like agriculture, infrastructure, tourism and manufacturing. Capacity should also be built within government to help planning and implementation of the green aspects of the stimulus.
Opportunities in public investment projects include investments in climate smart infrastructure and technology. Botswana’s advantage in access to sunlight all year round is an unexplored value. Investments in renewable energy infrastructure for households and industries, and a planned transition to a hybrid electric grid will remarkably lower the country’s already skyrocketing energy costs. The coal question is both complex and sensitive since it stretches into the entire country’s dependence on coal for electricity and power generation.
In the same breath, the problem of insufficient electricity supply presents opportunities for private sector and independent players to enter the market and provide cheaper electricity to clients willing to make the transition to renewable energy. As the industry grows, for example, more incentives will avail themselves for financing large scale green industry projects.
There’s fiscal space to include economy-wide carbon taxes combined with a ‘carbon border tax’ on imported manufactured goods to raise more revenue for green infrastructure projects. Government must start to price carbon emissions, polluting industries and perhaps lower the amount of fuel subsidies in order to raise revenues for new innovations.
This will help reboot the economy and create jobs, by accelerating the rollout of investments in clean and resilient infrastructure and stimulating low-carbon industries across the country.
Smart cities initiative
The country’s growing population presents overwhelming governance and other challenges. It also presents outstanding lessons for what not to do when it comes to city and town planning for hotspots of social and economic activity like Gaborone.
The traffic problems combined with negative spillovers into national productivity could be solved with an ambitious investment plan for smart city and smart mobility initiatives. There’s a dire need to reduce dependence on cars and car use, and make the shift to smarter, environmentally-friendly alternatives that can invigorate even more economic activity.
This will require a well-funded innovation space to enable bike and car sharing startups, build extended walkways, set up efficient public transportation, build bike-friendly infrastructure such as cycling lanes and safe-locking docks.
A green new power plan
As we recover from the corona pandemic, we must address the ambush that Botswana Power Corporation (BPC) imposed on the public in the midst of a global crisis with its 22% tariff hike.
One of the great challenges facing Botswana is the future of its strategic power and energy sector. The operational challenges at BPC are proving a heavy burden on the country’s middle and lower income classes.
BPC’s unsustainable operational costs and debt levels will continue to drain the treasury. The increasing electricity costs and the already existing power supply challenges will cripple national productivity and negatively affect economic industrial activity.
A rapid, phased and carefully planned transition to a renewable-energy-powered zero-carbon economy, providing clean, safe and affordable energy isn’t just an existential question for BPC, but a strategic move for the entire country to improve cheaper access to power.
Financing the recovery
This will be a tough period financially for the country’s fiscal and monetary muscle, as the MFED is already struggling to finance the recovery. There are other unexplored avenues for replenishing the country’s coffers in order to finance the next phase of economic development. Green bonds are worthy of consideration as an important financial mechanism to support ‘green’ economic recovery and to mobilise more funding. T
he capital raised from green bonds can be funnelled to investing in climate smart infrastructure. The European Union and South Korea are currently placing their ‘Green New Deals’ at the centre of their economic recovery after the coronavirus COVID-19 pandemic. Funding through national government coffers isn’t the only alternative. Government can also mobilise private finance for investments in paradigm shifting green innovations and activities. The private sector should be brought along, and government can leverage support for business with their commitments to the environment
Climate related finance by the world’s largest multilateral development banks in developing countries and emerging economies rose to an all-time high of $43.1 billion in 2018.
Any new investment strategy is always risky but governments cannot be limited by this cold fact. That’s where private and multilateral finance steps in. De-risking development projects with significant nationwide climate-friendly benefits is easy with the overflowing multilateral finance mechanisms available through the World Bank, the Green Climate Fund, the Adaptation Fund, the Global Environment Facility etc.
This all must also come with an unparalleled commitment to liberalise the energy sector and allow private renewable energy companies to enter the sector and compete. Free, open and fair competition will incentivise more private entities to invest. Private capital is often sceptical of investing in a sector they’re not allowed to compete in or with stringent market entry requirements.
A successful economic recovery plan will demand President Mokgweetsi Masisi’s government to systematically deal with corruption. The growing culture of corruption and patronage in Botswana will negatively affect any and every prospect of utilising public funds and attracting private investment for sustainable development.
*Bakang Ntshingane is a Political Economist. He was a 2019 summer intern at the Green Climate Fund (the world’s largest multilateral climate dedicated fund)