How realistic is the green economy?

18th June 2010 By: Saliem Fakir

The idea of a green economy has gained great popularity of late but the proof will be in implementation. During the last year, particularly, green economy issues have gained ascendancy, receiving a boost through fiscal stimulus measures in many countries where the recession has resulted in significant job losses within the more traditional sectors.

The idea that an economy will simply become ‘green’ as a result of a strident investment criteria imposed in terms of fiscal stimulus measures is more of an ideal than an immediate reality. Truly green economies will, of necessity, be characterised by a major shift in the economic paradigm itself. If a country is going to go green, this will not be achieved purely through short-term fiscal stimulus measures.

In the long term, a more robust policy environment needs to be created if we want to argue for the conception of a green economy that is not just a fad but is a real attempt to shift the South African economy onto a more sustainable footing. This will impose on us significant trade-offs when we consider a move away from our current dirty industries to cleaner industries and sectors.

Nevertheless, three key areas of intervention are available to kick-start our fledgling green economy.

The refurbishment of ailing infrastructure vital to the supply of clean drinking water is a prime example. About R23-billion will be needed to fix collapsed infrastructure and the wear and tear built up over the last 30 years.
Secondly, there are opportunities in energy efficiency and electricity demand-side management options, such as solar water heating. These options are labour intensive and localising manufacturing and installation services should be easy enough.

Finally, there are areas for innovation, such as the development of high-quality designer products from recycled waste, which can boost the recycling industry and greatly enhance its economic viability.

For two years, South Africa has been talking about a green economy. So far, we have seen little action. Other countries have implemented fiscal stimulus measures rapidly, relying on existing government structures and systems to stimulate the development of a green economy. By now, we should have been able to create employment for people who have lost their jobs in other sectors of the economy.

The first problem is a lack of strategic focus. The green economy tends to be a sector in which everything that has not received the attention of the public sector in the past is lumped together. This is best described as the ‘kitchen sink syndrome’.

Many things do make sense, but not everything deserves to receive public or private support. Not everything green is strategic or will necessarily be a boon for the South African economy. We have to choose those things that make sense and are most feasible, meet South Africa’s comparative advantage and can make us competitive in that sector.

The second problem is that, given the nature of the beast, public-sector coordination is vital. If the roll-out of solar water heaters (SWHs) is anything to go by, then we may as well give up on the dream. The SWH programme is definitely the low-hanging fruit. The targets laid out by government demand that around 200 000 new SWHs be installed every year for the next five years. A long-term SWH industry can be sustained.

However, like all other green-economy issues, a significant level of policy and regulatory clarity is required, as is good coordination between the public and private sectors. The challenge for the public sector is to ensure greater clarity around responsibilities with respect to the SWH programme. There have been at least three launches of the programme to date. A year ago, power utility Eskom boldly indicated it intended to roll out one-million SWHs in three years.

To date, only about 3 000 SWHs have been installed through the Eskom demand-side management fund. Earlier this year, the Minister of Energy, Dipuo Peters, announced the repackaging of the roll-out of SWHs and announced the same target of one-million units over five years. Just last month, President Jacob Zuma reaffirmed government’s intentions by hosting a launch in the Winterveldt.

Talking about going green is fine, but poor coordination can lead to a lack of public-sector efficiency, which can delay and prevent the desired outcome. The first problem is that, at the recent launches by the Department of Energy and the Presidency, the role of Eskom was not made clear.

There is talk of the development of a separate agency to assist the public- sector drive at both provincial and local level. What role will Eskom play in this and who will be responsible for what? Who do people go to for answers and to secure a subsidy? This all needs to be clarified.

Secondly, there must be consistency in the implementation of subsidies. A certain subsidy was offered when the Eskom programme was launched. After a time, the subsidy was doubled. People who had taken on the initial subsidy received a lesser benefit than those who took the more recent subsidy. This leads to confusion, frustration and irritation.

Private investment in the sector will not be forthcoming if public-sector confusion and a lack of role clarity owing to policy and implementation uncertainty add to the financial risk.

Then there is the irony – the solar water heating programme launched in the Winterveldt by the President involves imported SWHs, despite all the talk about localisation.

The linkages between a roll-out that has sizeable economies of scale and industrial development should be more tightly knitted together. There is little point in rolling out one-million SWHs if it is cheaper to import the technology than to stimulate local manufacture. We must use opportunities in the green economy to expand the platform for job creation, but these must be done with both the short-term view and the long-term view in mind.