2022 in Focus: Covid-19 and The Climate Change Agenda

2022

In many ways, 2022 will be similar to 2021; with renewed hope for economic recovery across the world as countries continue to reduce Covid-19 restrictions. At the global arena, we expect two main agenda to dominate decision making by executives in the private sector and policy makers in the public sector: Covid-19 and the climate change agenda.

Covid-19 Lingers On

The pandemic might be behind us, but Covid-19 is far from being wiped out of the world, or at least reduced to a controllable level. With new variants coming up every so often from different parts of the world; it is still unclear how the disease will evolve in the coming months. This creates suspense for decision makers who have to review all their strategies in light of a possible lockdown if infection and death rates from Covid-19 go back up. Financial markets must have priced in this risk already; but for business executives running their operations daily while looking out for an unseen enemy, it still remains to be a daunting task.

From public sector point of view, we expect governments to keep on with the mass vaccination campaigns that began in 2021. This however will be met with more resistance as more people consume misinformation and push back on the mandatory vaccination drives. There will be need for continuous civic education on Covid-19 and the benefits of vaccination to individuals from a social perspective and to the overall economy. Until herd immunity is achieved, this will be a continuous public engagement by governments across the world.

Discourse on vaccine apartheid   will continue being part of mainstream news as African leaders continue pushing for access to the Covid-19 vaccines intellectual property (IP) rights; in order to manufacture the vaccines locally. If achieved, this will lower the cost of producing the vaccines and ensure large doses are produced closer to the users for faster distribution to the masses in order to curb the spread of the virus.

The Green Recovery Agenda

Coming on the heels of COP26 which was held in Glasgow in 2021, 2022 will be the year when both private and public sector will have their eyes set on climate change; juxtaposed with Covid-19 to push the green recovery agenda. We expect the declarations and promises made at COP26 to be followed on and initial actions to be taken. Key among the action points will be climate change funding by both governments and private sector investors. We expect to see more green bonds being launched in the developed economies and the same being replicated in the developing economies; albeit on a smaller scale.

We also expect more corporations to add the climate change agenda into the corporate social responsibility plans for 2022, in order to be in sync with global trends and build a “green” reputation for themselves. On the other hands, investors globally will double down on their focus on climate change in their investment strategies. We expect this to take the form of investors increasing their dry powder allocation to climate change related initiatives; while also reducing their capital injection to companies and projects that are contributing negatively to climate change. Eventually, both investors and the businesses they fund will be aligned on the need to reduce carbon emissions and the ESG investing model will be mainstreamed.

In Africa, the big winners from the green recovery agenda will be renewable energy and e-mobility sectors. Kenya has already introduced a 50% investment tax allowance for mini-grid power generators in order to incentivize them to lower tariffs for their customers and increase the adoption of clean and renewable energy in the country. We expect such fiscal measures to be replicated in most countries across the continent in 2022 going forward.

On the e-mobility front, we expect the push for transition to electric vehicles to continue and sales from pioneers in the industry to grow in double digit percentages in 2022. In Africa e-mobility is still in its nascent days, but we expect a spike in interest and investment in the sector in tandem with the mainstreaming of the green recovery agenda.

Last year, Rwanda led the way in Africa by offering a preferential corporate tax of 15% for investors operating in e-mobility. This is meant to attract more investors into the sector, in line with the Rwandan government policy of reducing carbon emissions from the transport sector. This is a policy initiative that we expect other countries in Africa with car manufacturing sectors will follow; since international funding for the same will be readily available as investors court the green recovery agenda.

In our view, 2022 will be the year business executives and policy makers will zoom in on healing the people from Covid-19 and healing the earth from pollution by greenhouse gases.

 

Author: Jeremy Riro

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