The global pursuit to achieving net-zero emissions by 2050 is getting closer with each year, with new technologies, regulatory policies, funding opportunities and legislation set to expedite the transition from hydrocarbons to renewable energy resources. However, a just energy transition for Africa requires allowing the continent to utilize its natural resources – and capital from the development of its resources – to move towards cleaner sources of energy.
As such, a webinar panel discussion on Attracting Investment for the Realization of Energy Equity in Africa explored an overview of the current state of energy equity in the continent and key areas where investment is crucial to achieve a just energy transition. Featuring the participation of Executive Chairman of the African Energy Chamber NJ Ayuk; Director of the Africa Transaction Advisory at GreenMax Capital Group Ifechukwude Uwaje; and Regional Operations Manager at the African Development Bank Group Farai Kanonda, the webinar explored the major challenges and opportunities for investors to leverage global financing models to drive capital into Africa’s energy sector.
“We need to look at a healthy balance and be very careful about how we engage this discussion,” Ayuk stated, adding, “Over $800 billion in development aid has come into Africa, but we have not seen anything [done]. We should be looking at more market-driven solutions. Of course, the climate is a problem, but we also have to talk about a just energy transition by phasing out oil towards renewables. Where are we phasing out from, the dark to the dark? What we should be looking at is the need to drive energy growth first.”
During the session, it was noted that blended finance from the public and private sectors will be needed to support innovative investment vehicles for deploying capital to accelerate the deployment of renewable energy projects while phasing out natural resources. Natural gas was highlighted as a potential transition energy source for African nations to be able to monetize resources while driving energy security across the continent.
“The fundamental issue is access to finance for projects. The green aspect is an important aspect, but you need to make sure you can access these resources,” stated Kanonda, adding, “From a country perspective, one of the key issues is we need to make sure we eliminate any legislative obstacles to investments. We need to implement policies that support clean-cooking fuels, transmission and distributions to home and off-grid solutions. This then allows the private sector to participate.”
Meanwhile, it was highlighted that local banks and institutions have the potential to provide guidance to international investors by creating an ecosystem that enables the implementation of data management, resource allocation and local content. It was noted that, as long-term projects, infrastructure projects carry political risks in Africa, and it will be crucial to ensure clarity, reliability and predictability for potential investors.
“There are all sorts of ESG requirements for accessing finance, and recipients of such funds are committed to report such targets. For the blended finance capital we deploy, meeting those requirements is usually a very challenging hurdle for developers and, a number of times, we see that technical assistance needs to be provided so that capital can be unlocked,” stated Uwaje. The session ended with a call for African governments to leverage the continent’s natural resources to transition to climate-friendly solutions in a way that drives energy security and resource monetization. The panelists highlighted that strategies need to be put in place to balance current oil and gas resources to sustainability increase energy access and reliability without backsliding on the energy transition.
