Africa provides a fertile ground for investments in clean energy

Climate change is two-sided. It’s a threat to our existence, but also offers humanity a chance to get things right for future generations. Attempts to address the climate crisis are producing an ever-increasing pipeline of climate-related investment opportunities.

Nowhere promises bigger opportunities than in Africa, where new value chains – from sustainable agribusiness to renewable energy – are taking root, as the continent’s industrial mix extends beyond extractives and other traditional sectors. A young and rapidly-growing population is equally increasingly keen to tackle big challenges, besides creating a market.

Finding solutions to the continent’s energy and water needs would open a market for investors – while improving people’s wellbeing. No wonder relatively new business models have sprouted in recent years, including the pay-as-you-go solar system, and mini-grids that are lighting up thousands of rural homes and businesses across sub-Saharan Africa.

Africa would need around $133bn every year in clean energy investment to meet its energy and climate goals between 2026 and 2030, according to the International Energy Agency (IEA).

But there’s much more to Africa than just needs to be met. Africa’s rich reserves of minerals— such as lithium, cobalt and copper – that are critical for clean energy technologies, position the continent as a key player in the global energy transition.

While there has generally been a steady increase in the flow of climate investments in recent years, it’s still considered a trickle compared to the required volumes. According to a recent study by analysts at the Climate Policy Initiative (CPI) (see box), annual climate finance flows in Africa – domestic and international – hit $30bn in 2020, just about the size of Senegal’s GDP.

While the figure has grown over the years, it represents just 11% of the $277bn Africa needs every year to meet the 2030 climate goals. This shines a light on the existing deep financing gap.

The amount of “green” capital needed is set to grow even further in coming years, fuelled by Africa’s rapidly-growing population, urbanisation and growing food, energy and water needs – all against the backdrop of climate change. This confluence of factors opens the window wider for investment opportunities.

Source: African Business

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