Placing Economic Value on Africa’s Natural Resources – UNEP

African Ministers and Experts Spotlight Efforts to Incorporate Natural Wealth Accounting in Development Planning.

Wealth accounting and the valuation of ecosystem services are critical to Africa’s future growth, as the continent undergoes unprecedented development.

Projections point, for example, to broad-based acceleration in growth in Sub-Saharan Africa to around 5.5 per cent in 2013-2014, reflecting robust domestic demand and increased investment in export-oriented sectors as the main economic drivers, according to the IMF World Outlook 2013.

Achieving long term development and poverty alleviation in Africa relies on the sustainable and optimal management of the natural resource base.

Natural capital is a critical asset, especially for low-income countries, where it makes up around 36 per cent of total wealth, according to recent World Bank estimates.  

The international conference on “Valuation and Accounting of Natural Capital for Green Economy (VANTAGE)” in Africa – taking place in Nairobi on 3 and 4 December 2013 – brings together African ministers,  renowned economists, scientists and development experts to review and recommend policy action towards incorporating the valuation of natural resources and ecosystems services in development planning and accounting.

UN Under-Secretary General and UNEP Executive Director, Achim Steiner, said, “Natural accounting and valuation is not a fringe activity, but a cornerstone of the wealth of nations upon which sustainable, equitable and prosperous societies will be built.”

“Africa stands to be a key player in the framing of a landscape of more intelligent management of the natural world – because Africa still has many of the resources that elsewhere in the world are increasingly in short supply. Sustainably managed resources can benefit and grow Africa domestically and globally while becoming a beacon of profiting from its rich and abundant nature-based assets,” said Mr. Steiner.

“The time has now come to ensure that by 2015 – when the UN’s Millennium Development Goals transcend into the Sustainable Development Goals – the global community has the strategies and the policies in place to ensure that nature is fully integrated into economies everywhere in a convincing way that leaves no margin of doubt in the minds of governments, business and wider society that a transition towards an inclusive Green Economy is not just about reforming and retooling energy infrastructure to new patterns of mobility – but is predicated on a new and fundamental relationship between economy and the ‘soft infrastructure’ of nature and its true wealth and value to us all”, he added.

As of 2005, half of Africa’s most biologically rich terrestrial areas lost more than 50 per cent of their area due to cultivation, degradation or urbanisation.

In Kenya, for example, deforestation stripped the country’s economy of an estimated US $68 million in 2010, dwarfing the economic benefits gained from industries such as forestry and logging.

According to the World Bank, Africa’s population is expected to increase by approximately 800 million people by 2040.

This projected increase will put even more pressure on the continent’s natural resources.

“This year marked the celebration of the 50th Anniversary of the Organization of African Unity predecessor to the African Union with a new vision, Africa’s ‘Agenda 2063’ which charts the continent’s trajectory to prosperity,” said  Tumusiime Rhoda Peace, Commissioner of the Department of Rural Economy and Agriculture of the African Union Commission.

She added: “Natural resources are a critical asset to many African communities and nations who depend almost entirely on ecosystems for their survival and economic development. Knowing the value of our natural capital does not only contribute to the optimal use of our resources but also makes it possible to resolve trade offs across time and space. The VANTAGE initiative is exactly what we need in this continent. This will pave the path for effective and efficient use of natural capital.”

Innovative wealth indicators

Recent years have seen a growing recognition that a new system of resource valuation and accounting is urgently needed, in particular to help countries more accurately assess the wealth and wellbeing of their populations.

In May 2012, 10 African countries, along with various public and private organizations, adopted the Gaborone Declaration, which outlines a set of concrete principles and development goals that include valuing natural capital in the development planning process.  

One month later, the Rio+20 Summit outcome document, The Future We Want – endorsed by more than 190 countries – called for broader measures of progress to complement conventional indices, such as GDP.

Released alongside the Rio conference, the Inclusive Wealth Report 2012 – published jointly by UNEP and the United Nations University’s International Human Dimensions Programme on Global Environmental Change (UHU-IHDP) – provided a rethink of traditional economic and development yardsticks. It introduced a new indicator, known as the Inclusive Wealth Index (IWI), which is aimed at revealing the true state of a nation’s wealth and the sustainability of its growth, beyond GDP.

For example, if measured by GDP, the economies of China, the United States, Brazil and South Africa grew by 422 percent, 37 percent, 31 percent, and 24 percent respectively between 1990 and 2008. However, when assessed by the IWI, the Chinese and Brazilian economies only increased by 45 percent and 18 percent. The United States’ grew by just 13 percent, while South Africa’s actually decreased by 1 percent.

In fact, a full 25 percent of the countries studied by the report showed a positive trend when measured by GDP per capita and by the Human Development Index (HDI) were found to have a negative IWI per capita. The primary driver of this difference in performance was those countries’ declines in natural capital.

Valuing ecosystems

Other recent studies have also explored the benefits of placing a value on critical natural resources.

A 2011 UNEP report entitled, Putting Ecosystem Management in the Vision of Africa’s Development, focuses specifically on ecosystems and ecosystem services – which include the multitude of resources and processes that are supplied by ecosystems, from the production of food and water, to the control of climate and disease, to water cycling and crop pollination.

According to the report, growth accounting without explicit valuation of ecosystem services is an incomplete analytical framework

It finds that there is an urgent need to increase national awareness of the role of ecosystem services in the development process and to work towards relevant legislation and institutional reforms.

Ecosystems serve a myriad of purposes in both the earth’s natural processes and in human life, and contribute significantly to a nation’s wealth. Without full valuation of less-tangible benefits from ecosystems, their exploitation will remain unsustainable and degradation inevitable.

Some examples of the potential economic value of ecosystems are:

·        Forestry in Tanzania is officially close to 2.3 percent of GDP, however research suggests that if the wider benefits are factored in, the real contribution is over 4 percent of GDP.

·        Emerging research suggests that the contribution of the value of forests to the GDP of Uganda is around US $136 million, which amounts to about 4 percent of GDP.

An estimated 486,000 work opportunities were created in South Africa in environmental rehabilitation programmes since 1995. In addition, 85,000 jobs were created through formal conservation of protected areas in game ranching and ecotourism. “Decoupling” resource consumption and economic growth

Placing a value on natural resources also demands a rethink of the traditional links between resource use and economic prosperity – separating environmental “bads” from economic “goods”.

By 2050, humanity could devour an estimated 140 billion tonnes of minerals, ores, fossil fuels and biomass per year – three times its current appetite – unless the economic growth rate is “decoupled” from the rate of natural resource consumption.

According to a UNEP report entitled, Decoupling natural resource use and environmental impacts from economic growth, technologies that have helped humanity extract ever-greater quantities of natural resources must be redirected to more efficient ways of using them.

Some improvements have been seen. Over the past century, pollution controls and other measures have reduced the environmental impacts of economic growth. And, thanks to innovations in manufacturing, product design and energy use – aided by the rising number of people living more efficient lifestyles in cities – the global economy has grown faster than resource consumption growth.

However, the report notes that those improvements have been relative. In absolute terms, total resource use grew eight-fold, from 6 billion tonnes in 1900 to 49 billion tonnes in 2000. It stresses that more remains to be done to reduce resource consumption while meeting the development needs of an equitable and sustainable society.

Deforestation in Kenya: a case study in natural resource accounting

In Kenya, recent economic valuations of the country’s forests have catalyzed a response to conserve and rehabilitate that vast natural resource.

Deforestation deprived Kenya’s economy of an estimated 5.8 billion shillings (US $68 million) in 2010, far outstripping the roughly 1.3 billion shillings injected from forestry and logging each year, according to a joint report by the Kenya Forest Service (KFS) and UNEP.

The Role and Contribution of Montane Forests and Related Ecosystem Services to the Kenyan Economy, released in 2012,  points out that the contribution of forests is undervalued by some 2.5 per cent, putting the estimate of its annual contribution to GDP at around 3.6 percent.

Between 2000 and 2010, deforestation of the country’s water towers amounted to an estimated 50,000 hectares, leading to a reduced water availability of approximately 62 million cubic metres per year. This has also affected Kenya’s economy, which is vulnerable to inflation spikes during periods of drought.

In response, the Kenyan government is now working to rehabilitate the water towers, in particular the Mau Forest Complex. Between 2011 and late 2012, more than 21,000 hectares of forestland were repossessed and some 10,000 hectares were rehabilitated. A number of programmes and activities also were launched to improve the livelihoods of communities living in and adjacent to the forests.