In Africa lives about a fifth of the world’s population. Yet, to date, only 3% of global energy investments are made there. Or 76 billion dollars in 2023 (nearly 71 billion euros), according to figures from the International Energy Agency (IEA), which deplores such asymmetry.
In a continent where 600 million inhabitants are still waiting to benefit from access to electricity (43% of its population in 2022), the challenge is twofold. This would be more than doubling the level of investment by 2030, while scaling it back otherwise. That is to say, mostly towards renewable energies (solar and wind), now, rather than for the extraction and export of fossil fuels (oil and gas), harmful to the climate.
On Wednesday, September 6, the IEA released a report aimed at boosting financing for “clean energy” on the continent, at the close of the first African Climate Summit in Kenya. The institution is based in Paris and attached to the Organization for Economic Co-operation and Development (OECD), of which no member state is African.
Cost of capital
The weakness of investments is explained in particular by the cost of capital, and therefore by the borrowing rate. This cost can be two to three times higher in Africa, compared to Europe, North America, or even China. Depending on the macroeconomic or political situation, “many investors have the impression that projects in Africa are much more risky, while there may be a difference between the real risk and the anticipated risk”, recalls Emma Gordon, co-author of the report. for the IEA.
“We must reduce the cost of capital,” insists Akinwumi Adesina, President of the African Development Bank, in the preamble to the document. According to him, the solution requires “targeted support and help from international and multilateral financial institutions”. This would result, for example, in loans at favorable rates.
“The need for increased investment comes as public finances in many African countries are under pressure,” Ms. Gordon recalls. Debt service for these states in 2021 – the amount they must pay each year for repayment – was around $70 billion. This is more than double the expenditure observed by the IEA in “clean energy” on the continent, knowing that this term also includes heat pumps or energy efficiency devices.
By 2030, the private sector is called upon to finance more than half of energy investments in Africa, according to an IEA scenario – compared to just over 40% in 2023. By this horizon, in addition to significant resources hydroelectric, more than a quarter of the continent’s electricity production could come from solar and wind power. Eight times more than in 2020.