One of the more interesting linkages highlighted in the United Nations Industrial Development Organisation’s (Unido’s) latest biennial Industrial Development Report, is the strong association between energy efficiency and firm-level competitiveness.

The 240-page report offers its usual global ranking of national industrial competitiveness, which saw South Africa slip to position 49 out of 118 countries, from 45 previously.

However, it also interrogates the theme of industrial energy efficiency and its role in sustainable wealth creation. An issue that is top of mind domestically, owing to South Africa’s serious energy constraints.

The study shows that South Africa has made some sound progress in lowering the energy intensity of its economy, measured as a ratio of the amount of energy used to produce $1 000, or a unit, of manufactured value added (MVA). While in 1990, South Africa consumed 1.2 toe (tons of oil equivalent) to produce a single unit of MVA, that ratio fell to 0.8 toe by 2008, a 33% improvement. However, it is still well above the global average of 0.35 toe.

However, the linkage Unido makes between competitiveness and energy efficiency is also quite helpful, especially for those companies in South Africa still grappling to cross that important mental threshold/

It shows that companies that invested in improving their energy efficiency are all rounders when it comes to competitiveness. They produce better quality products, have higher labour productivity, have better trained staff and are also more innovative.

In addition, the study estimates that manufacturing industry spends some $1-trillion a year on energy and that universal adoption of best practice technologies could yield annual savings in energy costs of $65-billion in developed economies and $165-billion in developing economies, corresponding to 23% of total energy costs and two percent of MVA.

The challenge for governments is to ensure the information and the incentives are aligned so as to nudge their businesses in the direction of greater industrial energy efficiency. And here too the report is unequivocal on the economic, social and environmental benefits of such policy interventions.

Using a World Bank enterprise survey form 24 developing countries the report demonstrates a strong inverse relationship between energy intensity and total factor productivity. The study also found a direct link between industrial energy-efficiency gains and employment. “By reducing resource use, cost-effective energy-efficiency improvements increase firm and industry productivity, which leads to an expansion in employment.” Moreover, the environmental gains are also material.

Notwithstanding these benefits, however, Unido argues that not enough is being done on the energy-efficiency front and the serious obstacles remain.

“Aversion to investment seems to stem from a combination of failures in the markets for energy-efficient goods and services and departures from the rational behaviour of orthodox economic theory,” Unido asserts. These forces overlap to create barriers to improving energy efficiency.

Given South Africa’s serious energy challenges, it is imperative that we move with purposeful dedication to remove any impediments that may still remain to ensuring a full-blown adoption of energy efficiency solutions across industry, government facilities and commercial enterprises. The benefits, which go well beyond keeping the lights on, are simply too large to ignore.