Sustainable Growth

September 30, 2023 Mary

The key to Africa’s energy transition is connecting investors to the opportunities in the continent’s emerging renewables sector. Foreign direct investment can be the secret to our success.

Developing a new global energy mix requires partnerships – at every level. These partnerships can take several forms. They can be interpersonal – forming grassroots organisations to meet community needs at a local level; or even global, like the JETP international climate pact.

This latter agreement, the Just Energy Transition Partnership (JETP), sees the International Partners Group (IPG), which includes the UK, US, France, Germany and the EU, working with financial institutions to help South Africa decarbonise its economy and move to a renewables-based energy sector.

This is a complex arrangement, which involves around $8.5bn in initial financing, to be disbursed through various mechanisms over five years, through grants, concessional loans, investments and risk-sharing instruments.

The funding will go towards coal-plant de-commissioning; alternative employment in coal mining areas; accelerated deployment of renewable energy and investments in new sectors of the green economy.

This kind of partnership is among the most sophisticated forms of global collaboration, which attempts to find multilateral solutions to one of the greatest challenges to face humanity: climate change.

Sophisticated and complex it may be, but the JETP partnership acknowledges the mutual interrelation of all human communities. Climate challenges affect all of us.

Different stakeholders have different assets to contribute. In the case of a JETP partnership, international institutions contribute financing and expertise. Local partners – many from the public sector – contribute practical local knowledge, domestic infrastructure and enabling regulation.

This partnerships principle applies across the emerging renewables economy, regardless of scale. What all of these partnerships have in common, though, are innovation and funding.

Solving our planet’s climate challenges will require many new ideas, and much creative thinking. Ensuring that those ideas come to fruition and make a real difference requires funding.

Domestically, this is often the terrain of fiscal budget allocations, and venture capital. On a global level, it’s about foreign direct investment.

The challenge, ultimately, is about connecting entrepreneurs with investors; founders with backers.

One initiative aimed at doing this in the renewables space is the Energy Investment Village at the forthcoming Green Energy Africa Summit, where founders of clean-tech starts-ups get to pitch to groups of international investors.

The event has drawn entries from a range of exciting small businesses, looking to revolutionise the energy landscape and promote sustainable development in Africa. Projects are geared to unlocking the potential of technologies such as solar, wind, clean cooking, water treatment and waste-to-energy.

Initiatives like these acknowledge the critical role that funding plays in enabling a good idea to reach its full potential.

In Africa, the importance of fresh, new ideas to address current realities is beyond dispute – especially in the realm of energy.

Africa suffers from critical levels of energy poverty. The International Energy Agency notes that 600 million African people – about 43% of the continent’s population – have no access to electricity.

At the same time, every nation on the continent has committed to cutting greenhouse-gas emissions and adapting their economies in a way that will mitigate global temperature increases, in terms of the Paris agreement.

There are enormous renewables opportunities that will help Africa achieve this, thanks to its abundant wind and sunshine – and the creativity of its people. That makes the continent an attractive investment destination for the global renewables sector.

This form of foreign direct investment is invaluable for African economies, but also for the planetary environment as a whole. Where projects can be effectively enabled, and start-ups partnered with investors, the continent can start to map a path to sustainable development for its 600 million.

One example of how Africa might sustainably advance development would be in the area of clean cooking fuels. The IEA reports that Africa needs to move 130 million Africans from using carbon-heavy firewood for cooking. This could be achieved through electrification, LP gas, cleaner cooking stoves, biogas, or ethanol. All of these solutions require innovation, entrepreneurship, and direct investment,

Enabling that is one of the most exciting aspects of Africa’s emerging energy transition. In Bangladesh – one of our fellow emerging nations – a project to build a “solar home system” sector created 115 000 direct jobs and 50 000 indirect jobs.

There is enormous potential for Africa to emulate this level of economically and environmentally sustainable renewables transformation.

The continent’s energy transition will see unprecedented collaboration. The key to its success lies in enabling that collaboration – at government, policymaking and private-capital level. But the essence of this collaboration is at the human level – where people form partnerships, so everyone can benefit.