Africa: Investment to Make Africa a World Leader in Renewables
Africa, where close to half of its 1.2 billion people have access to electricity, is set to become a world leader in renewable energy. As global business and development leaders met in Johannesburg, South Africa, to attend the Africa Investment Forum (AIF), held Nov. 11 to 13, one of the key focuses of the deals being discussed was around sustainable, renewable energy.
Organised by the African Development Bank (AfDB) and its various partners, the forum is expected to see $67 billion in deals closed over the next few days.
In attendance where heads of state from South Africa, Ghana, Rwanda and Mozambique. At an invitation-only discussion among the leaders, Rwanda’s President Paul Kagame said there was a lot of progress in Africa as a whole.
“I have always thought it was Africa’s time. We African’s have let ourselves down, we are now realising it has always been our time. And we are now seize every opportunity and be where we should be by now,” Kagame said.
Kagame was the driver of the African Continental Free Trade Agreement (AfCFTA) during his time as chair of the African Union in 2018. The agreement had not been in existence during the first AIF last year.
Established in March 2019, the AfCFTA has now been signed by 54 of the 55 African member states.
Alain Ebobisse, CEO of Africa 50, the Pan-African infrastructure investment platform capitalised by the AfDB, said that there was a consensus from African leaders that they needed to do whatever they could to attract more private investment. He said that the AIF attendance showed that there was a changing narrative for investment on the continent.
Earlier figures had been revealed by the South African premier of Gauteng Province, David Makhura, that over 2,000 delegates were in attendance from 109 countries. Of this, only 40 percent where from Africa with the majority of investors attending from Asia, Europe and the Americas.
Gauteng is South Africa’s wealthiest province and includes the financial centres of Johannesburg and Sandton, as well as the seat of government in Pretoria.
Ebobisse said that a lot was already happening on the continent and while the media focused on the challenges there were huge success stories too — like the 1.5 GW Benban Solar Park in Egypt, which is the world’s largest solar photovoltaic plant.
“I’m sure that people are not talking enough about this major achievement which is the Benban Solar Programmer, 1.5 GW of solar that was invested mostly by the private sector in a record time,” he said.
Africa 50 invested in 400 MW in that project and completed it from design to commercial operations in two and a half years.
Ebobisse went on to highlight Kenya’s opening this July of the Lake Turkana Wind Power project, which at a generation capacity of 300 MW makes it the largest wind power project on the continent.
“It was funded by the private sector,” Ebobisse told the media. He also looked towards Senegal which was implementing many independent power producers or IPPs in the solar sector.
“So there is a lot that is happening. We need to also widely understand the challenges and understand what is happening on the ground. And people are actually making good money in this investment. And there is nothing wrong about that. Let’s celebrate those successes,” he said.
A few weeks ago, the Governors of the AfDB met in Cote d’Ivoire’s capital Abidjan, approving a historic $115 billion increase to the bank’s authorised capital base to $208 billion. “This is the highest capital increase in the history of the bank since its establishment in 1964,” AfDB president Akinwumi Adesina said today.
During the October announcement Adesina had said that a significant portion of funding would be invested in climate change.
Today, in response to a question from IPS, Adesina further explained that the bank had doubled its investment in climate finance from $12 billion to $25 billion by 2020.
“Almost 50 percent of our finance will be going to climate adaptation as opposed to climate mitigation. So we are the first multilateral development bank to actually reach that balance in terms of adaptation and mitigation,” he said.
Climate mitigation is the actions taken to reduce or curb greenhouse gases, thereby addressing the causes of climate change to prevent future warming. However, climate adaptation addresses how to live with the impacts of climate change.
“I believe that coal is the past. I believe that renewable energy is the future and we as a bank are investing in not in the past, but in the future in making sure that we are investing in solar energy, in hydro energy, in wind, all types of renewable energy that Africa needs,” Adesina said.
“We want Africa to lead in renewable energy.”
He said one of the projects was the AfDB’s Green Baseload Facility, which according to the bank, aims “to accelerate the transition towards more sustainable baseload power generation options and prevent countries from locking themselves into environmentally damaging and potentially economically costly technologies”.
“It’s a $500-million facility that we have set up to support countries that want to shift out of fuel-based energy into renewable energy and providing access to finance at a cheaper rate to be able to make that transition,” Adesina said.
The bank’s biggest investment is the Desert to Power project, which was announced in December at the United Nations’ Climate Conference in Katowice, Poland.
The initiative plans to supply 10 GW of solar energy by 2025 to 250 million people across 11 Sahelian countries.
“That would make it the largest solar zone in the world,” Adesina stated. The bank will work in partnership with various investors to also establish plants on the continent that will manufacture the solar panels for the project.
The AfDB has always stated “a lack of energy remains a significant impediment to Africa’s economic and social development”.
According to AfDB, energy poverty in Africa is estimated to cost the continent 2 to 4 percent GDP annually.
The continent is facing climate change impact with rising temperatures and reduced rainfall.
The Sahel, which lies between The Sahara and the Sudanian Savanna, offers a blaze of sunlight with little rain as it is the region where temperatures are rising faster than anywhere else on Earth, according to the Great Green Wall initiative, a project that aims to reverse desertification and land degradation in the area.
Last month, IPS reported that as The Sahara desert continues to expand, it tears apart families, forces migration from rural areas to cities and has contributed to conflict for precious resources of water, land and food.
In July, IPS reported that the parts of Kenya had already warmed to above 1.5˚C — a figure deemed acceptable by global leaders during the 2015 Paris Agreement. But at such high temperatures a study found that over the last four decades livestock some Kenyan counties had decline by almost a quarter because of the temperature increase over time.
During the U.N. Framework Convention on Climate Change in Paris in 2015, all countries committed under the Paris Agreement to “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C”.
But last year the U.N.’s Intergovernmental Panel on Climate Change released a special report warning that the world would face the risk of extreme heat, drought, floods and poverty at a temperature rise of 1.5°C.
However, the forum showed that there remain a number of investors looking to provide funding for renewables and other development project on the continent.
Siby Diabira, regional head for Southern Africa and the Indian Ocean for PROPARCO, a subsidiary of Agence Française de Développement (AFD) focused on private sector development, told IPS that last year the group did $1.76 billion in investment deals, half of which was in Africa. The AIF was still in its early stages to make a pronouncement on the success of the deals, Diabira said, but “so far so good”.
Diabira said the French development agencies aimed to be 100 percent compliant with the Paris Agreement and hence were investing heavily in renewable energy.
She explained that PROPARCO was involved in “all types of renewable energy from hydro to solar to wind”, adding that there was a need for a mix of both traditional and renewable energy generation.
“I have been attending some of the boardroom [discussions]. It is a quite interesting gathering to have for the second year and to have so many different types of investors and projects that are raising funds for these types of events,” she said.
“We have been present in financing the first few rounds of renewable energy projects in South Africa and our idea is also as a [Development Financial Institution] DFI to be able to contribute to create this market for the commercial banks to come with us on those types of projects,” Diabira said.
Admassu Tadesse, President of the Trade and Development Bank, also pointed out that partnership agreements among the various banks and partners had strengthen their position in deals.
“If you have smart partnerships you can scale up collectively. With the African Development Bank we have signed a risk participation agreement to the tune of $300 million, which will allow us to move speedily into fields and have partners coming into deals alongside us.”
He said they expected to soon sign a deal with the European Investment Bank (EIB) that will again strengthen their position.
EIB vice president Ambroise Fayolle said they were attending this year with great intentions to develop transactions. He said it came on the back of their 2018 record year of investments in the continent, which amounted to some $3.6 billion — more than 50 percent of which was in the private sector. The bank signed 3 partnerships already, he said, none of which would have been possible without the AIF.
And as Adesina stated in a video message at the start of the forum, “Let the deals begin”.