Natural capital explained—and why it matters for Africa
By Philip Mwangangi
When African Development Bank President Akinwumi Adesina addressed leaders at COP29 in November 2024, he presented a stark numerical contrast. Africa’s GDP stood at approximately KES 325 trillion (USD 2.5 trillion) in 2018, yet the continent’s natural capital was valued at KES 806 trillion (USD 6.2 trillion). The message was clear: Africa is, in his words, “green rich but cash poor.”
This disparity highlights a fundamental accounting problem. Natural capital, the world’s stock of natural resources including water, soil, air, minerals, and all living organisms, underpins economic activity across the continent, yet remains largely invisible in conventional economic measurements. Understanding this concept has become central to debates about Africa’s economic future and its path towards the Sustainable Development Goals (SDGs), particularly SDG 8 (decent work and economic growth) and SDG 15 (life on land).
Defining Natural Capital
Natural capital extends beyond the economic notion of traditional capital to encompass the goods and services provided by the natural environment. The term, first introduced by economist E.F. Schumacher in his 1973 book Small Is Beautiful, treats nature as a stock that yields a flow of valuable ecosystem goods or services over time. These services include tangible resources like timber, water, and minerals, as well as less visible processes such as pollination, climate regulation, water purification, and flood control.
The System of Environmental and Economic Accounting (SEEA), adopted by the UN Statistical Commission in 2012, provides an internationally agreed framework for measuring natural capital. This standard enables countries to account for material natural resources systematically, though the challenge lies in comprehensive implementation. Natural capital accounting integrates natural resources, economic valuation, and analysis to provide a more complete picture of development progress than GDP alone.
Africa’s dependence on nature
The numbers are difficult to ignore. According to a 2023 report by the African Natural Capital Alliance, 62% of African GDP depends on nature services. In sub-Saharan Africa, 70% of communities rely on forests and woodlands for their livelihoods. The UN Environment Programme reports that in most African countries, natural capital accounts for between 30% and 50% of total wealth.
The African Development Bank estimates that Africa holds 30% of global mineral reserves and could capture over 10% of the projected KES 2.08 quadrillion (USD 16 trillion) in revenues from key green minerals by 2030. The continent possesses 40% of the world’s gold, up to 90% of its chromium and platinum, 65% of the world’s arable land, and 10% of the planet’s internal renewable fresh water sources.
Yet this resource abundance comes with significant risk. The World Economic Forum estimates that KES 25.35 trillion (USD 195 billion) of natural capital is lost annually in Africa through illicit financial flows, illegal mining, illegal logging, wildlife trafficking, unregulated fishing, and environmental degradation. If current policies persist, some African countries may face substantial nature-related physical risks, particularly in agriculture.
Kenya as case study
Kenya demonstrates this dependence clearly. The country’s biodiversity and natural capital directly underpin its economic growth. Tourism, built largely on wildlife and coastal ecosystems, generated approximately KES 351 billion (USD 2.7 billion) in 2023 from international arrivals, accounting for a substantial share of foreign exchange earnings. The sector is projected to represent 7.4% of Kenya’s GDP by 2034, according to the World Travel & Tourism Council.
Agriculture, another nature-dependent sector, accounted for 21.3% of Kenya’s GDP in 2023, contributing approximately KES 617 billion (USD 4.75 billion). Despite only 8% of land being used for crop and feed production, agriculture supplies raw materials to manufacturing, generates tax revenue, and creates employment for a large portion of the workforce. Tea and fresh flowers serve as key foreign exchange earners, while coastal tourism accounts for 60% of total tourism revenues.
Kenya’s small-scale fisheries employ 12,000 people and supply 95% of the country’s total marine catch, generating an estimated KES 416 million (USD 3.2 million) annually. The 200 nautical mile Exclusive Economic Zone has the potential to produce between 150,000 to 300,000 metric tonnes of fish per year, though this remains underexploited due to infrastructure constraints.
The global context: Natural capital and development
Natural capital accounting has emerged as a tool for countries seeking to meet both climate and biodiversity commitments whilst pursuing economic growth. The World Bank reported in 2020 that approximately KES 5.72 quadrillion (USD 44 trillion) of economic value generation—roughly half of the world’s GDP in 2022—is either moderately or highly dependent on natural capital stocks and services.
The implications for development are substantial. The World Bank estimates that the global economy could lose KES 351 trillion (USD 2.7 trillion) by 2030 if certain ecosystem services collapse, including pollination, carbon sequestration, and fisheries provision. In low-income countries, GDP could decline 10% annually on average, with higher losses in countries particularly dependent on ecosystem services.
Rwanda provides an instructive example. The country has developed comprehensive natural capital accounts covering forests, water, and wildlife protected areas. These accounts support Rwanda’s nature-based tourism sector, which has accounted for as much as 6% of GDP. In 2024, the country saw record domestic and international tourism spending and employment. Uganda and Zambia have similarly applied integrated economic-environmental modelling to simulate the impacts of green investments, demonstrating how targeted investments in agriculture, forestry, and related land uses could lift thousands from poverty whilst avoiding hundreds of millions of tonnes of COâ‚‚ emissions by 2050.
The measurement challenge
Despite these advances, natural capital rarely appears in national income accounts. GDP captures the domestic production of market goods and services but fails to account for productive activities dependent on nature, such as breathable air, clean water, weather regulation, and recreation. It also ignores the hidden costs of economic production in terms of resource degradation, environmental pollution, and human health impacts.
The African Development Bank’s 2024 report, “Measuring the Green Wealth of Nations: Natural Capital and Economic Productivity in Africa,” argues for mandatory natural capital accounting. The report sets out actions to value and integrate natural capital in Africa’s GDP measurements. As Adesina noted, Africa contributes significantly to global public goods for tackling climate change through its vast natural capital resources, yet this contribution remains undervalued.
At COP29, African leaders adopted a communiqué calling for the continent’s natural capital to be included in GDP measurements. They emphasised the contribution of Africa’s forests to carbon sequestration and pollution control, arguing that the world should pay for services that provide tremendous value to all. President Paul Kagame of Rwanda stated plainly: “We are not asking for handouts but for the world to pay for something that has tremendous value for all of us.”
Economic and financial sector implications
The exposure of African economies to nature-related risks extends throughout the financial system. A nature stress testing exercise conducted across Ghana, Mauritius, Morocco, Rwanda, and Zambia revealed that African banking sectors face significant exposure to nature-related risks, particularly in agriculture. If current policies and business practices persist, some countries may face substantial physical risks from ecosystem degradation.
This exposure matters because more than half of global production depends on nature. When unpriced natural capital, exploitation of nature without accountability, is factored into companies’ balance sheets, most industries would not be profitable. The World Economic Forum predicts that protecting nature and biodiversity could generate KES 1.3 quadrillion (USD 10 trillion) annually and hundreds of millions of jobs in sectors including farming, fashion, and consumer goods.
The challenge lies in addressing market failures. When businesses use natural capital, they often create externalities – costs imposed on society that exceed those borne by the individual user. Manufacturing firms that create air pollution impose societal health and cleanup costs. Without accounting for these costs, firms will overproduce and over-pollute compared to scenarios where full costs are internalised.
Sustainable Development Goals and Natural Capital
Natural capital directly links to multiple SDGs. SDG 8, which promotes sustained, inclusive, and sustainable economic growth, full employment, and decent work, cannot be achieved without sustainable management of natural capital. SDG 15, which aims to protect, restore, and promote sustainable use of terrestrial ecosystems, manage forests sustainably, combat desertification, and halt land degradation and biodiversity loss, explicitly addresses natural capital conservation.
Africa began implementing the SDGs in 2015, emphasising sustainable management and effective use of natural capital to spur economic growth through Goals 12, 14, and 15. However, progress remains uneven. Halfway through the SDG timeline, only 17% of targets are on track globally, with Africa following a similar pattern. Food insecurity increased by 78% across Africa between 2015 and 2023, from 132 million to 236 million people. If current trends continue to 2030, hundreds of millions will lack access to basic needs including secondary education, sanitation, safe drinking water, and electricity.
The 2025 African Economic Outlook emphasises that natural capital accounting should become mandatory and that domestic value retention should be enforced through beneficiation requirements. The report advocates improving tax administration, broadening national tax bases, and tapping institutional savings to finance development. With the right policies, Africa could mobilise an additional KES 186 trillion (USD 1.43 trillion) in domestic resources through efficiency gains alone.
A roadmap
Natural capital underpins African economies and will remain vital for achieving inclusive and sustainable prosperity. Several African countries are pioneering natural capital accounting. Ethiopia, where renewable natural capital comprises 28% of national wealth, has made natural capital accounts foundational to its climate resilience and sustainable land management work. The country’s accounts inform strategies for balancing ecotourism, agriculture, livelihoods, and ecosystem services like flood protection and groundwater recharge.
The measurement of natural capital is no longer purely academic. It has become a practical necessity for economic planning and risk management. As African Development Bank’s 2025 Economic Outlook notes, the continent hosts extraordinary but underutilised resources. The median age of 19 represents a demographic dividend that could add KES 6.11 trillion (USD 47 billion) to Africa’s GDP through improved workforce participation. Pension fund assets have grown to KES 143 trillion (USD 1.1 trillion), whilst formal remittances could reach KES 65 trillion (USD 500 billion) by 2035 if transfer costs are reduced.
Coordinated efforts to improve tax efficiency, creative financing mechanisms for sustainable development, and strengthened implementation systems that bridge government, science, civil society, and the private sector are required. These systems have been successfully deployed in health domains but must be extended to other areas if Africa’s sustainable development is to accelerate.
The question is not whether natural capital matters to Africa’s economy – the evidence is clear that it does. The question is whether economic systems can evolve quickly enough to properly value, account for, and protect the natural assets upon which current and future prosperity depends. As the gap between Africa’s actual GDP and the value of its natural capital demonstrates, the continent’s economic future may depend less on exploiting resources and more on properly valuing and sustainably managing them.
