Promoting the Sustainable Use of Renewable Natural Resources for Fostering Socio-Economic Transformation in Africa

When policies, schemes, articles, or papers  examine the adoption of renewable natural resources, for instance in the energy and power sectors, emphasis is laid mostly on its environmental or the macro-economic benefits. But consider: does the average human being wake up in the morning thinking about climate change or what new jobs will be created before he/she makes the buying decision of either a KJV generator or a solar kit?

The discontinuous availability of renewable natural resources, besides the relative high cost compared to their non-renewable alternatives, is one of the reasons for its limited adoption. Consumers favour non-renewable natural resources for the twin reason that they are dependable and cost-efficient. Hence, substituting renewables for non-renewables would need a recognition of these two elements. But the critical questions to ask are: how easily can this substitution happen? Are we prepared to finance the required growth of this reproducible capital by trading off short-term economic gains? What investment choices should be considered in promoting its sustainable use? 

First, we need to recognize the sustainability factor that the substitution of renewable natural resource source must happen but not at the expense of per-capita consumption today. This explains why some high-cost renewable energy projects have unintended consequences on the poor: the government blends the full cost for the renewable resource into market prices thus reducing purchasing power of consumers, or subsidies are given to consumers which reduces government’s revenue and subsequently expenditure in critical areas of the economy that benefit mostly the poor. Therefore, there needs to be a safety net in place. Secondly, another recognition needs to be given to the population factor as it affects the sustainability of renewable natural resources. For the per-capita consumption not to decrease as population increases, the non-exhaustible, non-depreciative factor of production for renewable technologies—knowledge—must increase at a faster rate. Put differently, human capital development is a sine qua non for sustainable renewable natural resource development. 

For ease of substitution of extractive resources with renewable natural resources, rural areas are the best target location at the moment. This is true not only because they have excess renewable natural resources, they also have the space which urban centres do not have. Also is because it is the best test for the sustainability element highlighted in the previous paragraphs, since rural areas are categorized by low-income households. And as is with most interventions in rural areas, the support of intermediate institutions with presence in these communities and the involvement of a large number of stakeholders is needed for putting this to work. For instance, local tertiary education institutions whose aim seek to provide alternative frameworks for rural development could be recruited as development partners in providing the human capital resource for the project, giving the faculties the opportunity for self-learning that is deep enough to spark interest into embarking on a similar development research project, whilst also increasing the share of local skills and expertise that benefit from the project. This would be particularly easy in Nigeria, now that some Nigerian universities are going off the national power grid to power themselves using renewable energy sources like solar. Definitive stakeholders like the government need not set overambitious targets that may lead to misallocation of scarce resources that do not bear any measurable impact on the economy.

For example, concession on investment in renewable natural resources is only beneficial if it is applicable to (in terms of innovation) relatively stable or mature renewable technologies that are less susceptible to innovation. Disruptive technologies come with marginal costs of transaction and distribution which inadvertently increases the overall cost of energy, thus reducing its social acceptance. Instead, the role of the government, I posit, is to throw in all the support it can towards these national and state educational institutions for research and development (R&D) benefits. Once a renewable natural resource utility model has been produced or can be replicated, they do not need to worry about the commercialization of the product or service, as investors, venture capitalists, entrepreneurs, and anyone who wants to make money would aggregate and inadvertently set up the structure required to scale the product or service.

A sustainable financing of the use of renewable natural resource is one of, if not, the biggest obstacle to its adoption because you want to meet the needs of the present without compromising the ability of future generations to meet their own needs and vice versa. Particularly for resource-extraction countries, I would suggest, from the Hartwick Rule of Weak Sustainability, that the net revenue from resource extraction be entirely invested into the development of renewable resource technologies than used for consumption purposes. But taking into account monolithic African economies who depend almost entirely on extraction resources for their national revenue, I would revise this and advise, instead, that at least the excess of the expected revenue from resource extraction be entirely invested into the development of renewable resource technologies. Norway is one of a few energy-exporting countries that have benefited immensely from this rule: starting in 1990 to set aside its revenue from oil & gas sales into the Norwegian Government Pension Fund, it grew its assets in the Fund to $1.09 trillion in July 2019, delivering the strongest ever return of 9.1% in first quarter 2019, crediting only the returns on the investment to the public purse till today.

If African economies applied the same, we would not just have funding for development of renewable technologies, we would also have grown our capital markets to a size large enough to compete well in global capital markets for investment opportunities [in renewable natural resources]. It is unfortunate to know some African businesses in Africa are valued more than others with higher asset base in the same continent just because they were listed on stock exchanges outside Africa. If we properly account for the accompaniment of other long-term benefits—like the potential for critical areas of the economy like education, healthcare, infrastructure—to develop because of this policy option, we may be able to surmount what political pressures may come our way.

To promote the sustainable use of renewable natural resources, the local economic benefits to the consumers need to be embedded in the inclusion or substitution strategy. I am currently serving as a research intern in the Social Performance department of a player in the upstream oil and gas industry in Nigeria, and one of my experiences here teaches me that managing the expectations of host communities is critical to the success of the business even though their expectation singly considered does not interfere with the operations of the business. Perhaps a peculiar case, it is not without a learning which is that consumers want to know what is in it for them before the whys—what the national or international policies has to say. Put differently, a demand needs to be met—and if it is not present, needs to be created in the consumers and met—otherwise the common incentive-driven approach towards specialization in renewable resources technologies may just be the only reason why the current deployment levels are where they are.

An approach could be integrating the deployment of renewable natural resource technologies with financial services. There is an opportunity here for telecommunication companies in Nigeria to leverage the existing policy by Nigeria’s apex bank, the Central Bank of Nigeria, to allow telecom companies to offer banking services. For instance, in the recent wave of the award of a financial services license to a subsidiary of MTN Nigeria Communications Plc, a partnership between the giant telecom company and companies deploying solar technologies could be modelled such that the lower of consumption amount and generation-consumption differential amount is converted to mobile money for the benefit of energy consumers. The money could be used for service requests like maintenance and repairs or for reducing the debt or cost of acquiring the technology, thus making the technology cheaper to sell. And if the renewable resource is dependable, like relatively mature technology like biomass energy, then, for rural areas, one can concentrate first on fully meeting the needs of the community before connecting to a grid for additional revenue stream. 

Finally, forward and backward integration of renewable natural resources with various sectors of the economy instead of the old approach of deploying only to the agriculture sector should be developed. While it may be difficult to assess the socio-economic impact of the renewable natural resources in clear terms, one or two variables in many of such linkages may satisfy that requirement. But one thing is clear: Africa has bright minds who would give deep introspection about these complexities. Acknowledging the human capacity [think-tank] of Africa is the first step towards the success of any development project in Africa.