South Africa’s economy and society have been hit hard by COVID-19. GDP contracted by 8% in 2020, and further COVID-19 waves and the Beta variant have curbed economic recovery in 2021. In July the IMF projected 2021 annual growth to be 4%. South Africa’s economic stimulus spending in response to COVID-19 has been relatively low, and thus far has done little to alter its carbon-intensive development pattern. However, South Africa currently has excellent opportunities to implement green stimulus measures. These investments will provide short-term economic benefits in terms of employment and growth, while also enabling South Africa to transition to a low-carbon economy, in line with its national goals.

Policies South Africa could pursue to deliver economic returns and a more environmentally sustainable future are grouped into three core areas namely:

Renewable energy: The South African energy system is heavily reliant on coal, which generates 90% of its electricity. Investing in renewable energy will kickstart decarbonisation, improve energy security, reduce air pollution and create jobs. Investing in solar photovoltaic (PV) energy and onshore wind is projected to generate 43 and 35 job years per million USD respectively, compared to 25 job years from traditional energy expenditure.

Electric vehicles: South Africa’s Automotive Masterplan aims to double automotive sector employment and increase domestic electric vehicle (EV) production to 20%. The Government could accelerate progress towards these targets through purchasing electric buses and deploying EV charging infrastructure. This would deliver positive environmental and economic impacts. Investment in EV infrastructure, for example, creates an estimated 40 job years per million USD, versus 25 job years from traditional transport expenditure.

Natural capital investment: Nature based interventions include habitat restoration, agroforestry and urban greening. These measures will increase resilience to climate change, improve biodiversity and generate high economic returns in the short- and long-term, due to their labour-intensive nature. Investments in ecosystem restoration, reforestation and agroforestry are estimated to create 70-120 job years per million USD, and between $1.1 to $1.2 GVA per $1 invested, over a 20-year horizon. Traditional water investments, in contrast, generate just 25 job years per million USD and $1 GVA per $1 invested.

Green stimulus measures have been shown to provide both short term economic gains and build national wealth in the long term compared to business-as-usual stimulus measures, and could be an option pursued by South Africa. These measures could bring governments a hat-trick of wins: capturing economic stimulus effects in the short term, securing new growth pathways in the medium term, and mitigating environmental degradation in the long term.

vivideconomics.com