Expert: Climate change offers opportunities to private sector

 

An electrical power plant in Dar es Salaam. Experts say one way of avoiding power cuts and reduce the dependence on the grid is by installing solar system. PHOTO| FILE

By Alex Nelson Malanga

Business journalis

Summary

·         Tanzanian companies should also adjust to how the country’s trading partners become more environmentally conscious.

Dar es Salaam. The government, civil society organisations, and the private sector need to take rapid mitigation and adaptation actions regarding climate change globally.

However, challenges often present opportunities, considering the fact that Tanzania has a high potential to develop solutions for climate change.

It is on those grounds that Dalberg Advisors partner, Devang Vussonji, believes that the private sector should capitalise on a range of under-explored climate opportunities.

These include cost savings from energy efficiency or lower electricity costs during power cuts, access to “green” financing or carbon credits, and increases in revenue from accessing profitable export markets.

“The private sector should not see climate change as a burden, but as an opportunity to tap into the new green economy,” Mr Vussonji, who doubles as the member of the CEOrt, told the media over the weekend.

He said becoming more energy efficient can reduce costs and make companies more sustainable.

Efficient operations and energy use, he added, lead to lower costs while also reducing greenhouse gas emissions

He said high-energy consuming companies in the manufacturing, transport or logistics sectors may benefit the most from becoming more energy efficient.

One way for these companies to optimise their energy use is through energy audits---an inspection survey and an analysis of energy flows for energy conservation in a building.

According to Mr Vussonji, experience from Tanzania, shows that energy audits followed up by efficiency measures can help save up to 30 percent of energy bills.

Still, these audits are under-utilised , as almost half of the respondents in a recent survey said they do not perform energy audits in their companies.

Relying less on the grid and on generators is another way for companies to reduce energy costs.

Going by official data, grid electricity costs less in Tanzania than in neighboring Rwanda, Kenya, or Uganda.

But the greater concern in Tanzania, said Mr Vussonji, was electricity reliability given the frequent outages.

These can cost businesses about 15 percent of annual sales, as businesses experience up to nine power outages per month.

However, this problem will in future be a thing of the past given that since the 1990's, Tanzania has endeavored to reform its electricity sector to attract greater levels of private participation.

Currently, as companies are scared away by the challenge of unstable power, they often rely on fuel-based generators, which are becoming increasingly expensive.

One solution for avoiding these costs and power cuts is installing solar systems to reduce the dependence on the grid.

Mr Mkarima Tarimo, the managing director of Tarimo Industries, a Tanzanian company producing ice cream, yoghurt and fruit juice for export to Europe, said with alternative to conventional electricity, they were now making more profits from returns.

Through tax cuts and other support, solar systems are becoming more affordable for businesses in Tanzania.

Again, accessing climate or “green” financing can bring benefits to companies in Tanzania, according to Dalberg Advisors’ Vussonji.

“The rise in green financing – financial flows created to ensure better environmental outcomes -creates promising, affordable financing opportunities for the private sector,” he asserted.

One recent example of green financing in Tanzania is in the agriculture sector.

Using concessional resources from the Green Climate Fund, CRDB Bank has launched a $200 million (about Sh478 billion) facility with three new financial products to support local agribusiness.

At a broader scale, Standard Chartered has pledged to mobilise $300 billion (about Sh717 trillion) in green finance by 2030 to aid the transition to net-zero in emerging markets.

Despite these future plans, Tanzania still needs to access more funding for climate action.

The country has recognised the need to improve its readiness to receive and use climate finance.

 In this light, the Financing Strategy of the National Five-Year Development Plan 2021/22-2025/26 has proposed creating a National Climate Change Financing Mechanism and the Climate Change Fund.

Opportunities for new business models using carbon credits are also available in Tanzania.

Carbon credits are increasingly important in Africa, due to the large potential for sustainable development projects on the continent.

Recent events such as the launch of the Africa Carbon Markets Initiative at COP27 also aim to expand Africa’s participation in voluntary carbon markets.

Still, opportunities around carbon markets remain under-realised in Tanzania.

Other African countries provide examples for business models that implement carbon credits.

In Nairobi, Kenya, Koko Networks is a clean cooking company replacing dirty cooking fuel with bioethanol.

Mr Greg Murray, co-founder and CEO of Koko Networks, the technology platform protecting tropical forest said in a statement availed to media: “We use the revenues to lower the consumer price of the Koko Cooker kit, and therefore accelerate uptake.”

In Lagos, Nigeria, EarthCare, a solid waste composting plant converting waste to organic fertiliser, is also earning carbon credits through the clean development mechanism.

According to a press release, there are similar opportunities for the Tanzanian private sector to expand the generation and use of carbon credits.

Other potential sectors besides clean cooking and waste management include agriculture like better practices for soil sequestration and manure management) or renewable energy like solar energy solutions. Again, the press release went further to point out, profitable export opportunities for environmentally responsible and climate-friendly products are also possible for the private sector.

Tanzania and other African countries can become leaders in sustainable trade and commerce, and in the process create a positive image for themselves.

Organic agriculture is one area already showing progress, as Tanzania has the sixth highest number of certified organic farmers globally, and the third highest in Africa, according to official data.

The strength of the organic agriculture sector in Tanzania comes partly from the enabling systems and institutions that make the organic farming system more accessible.

As a result, producers of major cash crops such as coffee, cotton, cocoa and tea are able to obtain organic certification and benefit from price premiums.

Tanzanian companies should also adjust to how the country’s trading partners become more environmentally conscious.

For example, the European Union’s recent Carbon Border Adjustment Mechanism will add a carbon tax on imports such as cement, iron, steel and aluminum.