Scale the Key to Investment in African Renewables
Blended finance, public-private partnerships and regulatory reform have a vital role in making renewable energy infrastructure investable.
Africa’s clean energy needs are immense. Yet, compared to other developing regions of the world, sustainability-focused investors have been slow to commit funds to where they are most needed.
Worried about weak governance, regulatory inconsistencies and project scalability, asset owners and managers could well look to Latin America or Asia instead. This needs to change if countries on the continent are to meet their 2050 net zero goals, mitigating and adapting to the impacts of climate change.
The International Energy Agency (IEA) has estimated that the continent requires annual investments of more than US$200 billion to achieve its energy- and climate-related goals by 2030.
Africa has the lowest electrification rate of all inhabited continents. Around 600 million Africans still lack access to electricity, accounting for more than 80% of the global electricity access gap – and demand is still rising. This is despite large parts of the continent having huge potential for solar, wind and hydropower projects, according to the IEA.
The IEA’s Electricity 2025 report, published last month, found that electricity demand in Africa grew by an estimated 3.4% in 2024, up from just under 2% in 2023, and is predicted to grow by 5% per year between 2025 and 2027.
Demand for electricity is expected to accelerate as the continent’s population continues to grow. The IEA expects demand to double by 2040, and even triple in some regions. Africa’s overall population is projected to hit 2.5 billion in 2050, up from 1.5 billion currently, while its urban populations are forecast to increase by 350 million people by 2030.
“The biggest hurdle to realising Africa’s renewable energy potential is infrastructure,” Jon-Pierre Fourie, Senior Director of Strategy and Investors Relations at infrastructure bank Africa50, tells ESG Investor. “Expanding renewable energy across Africa requires both retrofitting existing systems and developing new transmission and distribution networks.”
Africa50’s funded projects have a total aggregated value of more than US$8 billion.
“Without sufficient investment in transmission and distribution, the continent risks being unable to fully harness its abundant renewable resources, slowing economic and social progress,” he adds. “However, less than 1% of global energy investments over the past decade have been directed toward transmission, creating a major bottleneck for renewable energy expansion.”
Indeed, investment in Africa’s renewables infrastructure remains insufficient. The African Development Bank has estimated that between US$130 billion and US$170 billion is needed for infrastructure development every year, leaving a financing gap of US$68 billion to US$108 billion.
The IEA’s Clean Energy Investment for Development in Africa report, published in June, also stated that from 2023 to 2030 around US$22 billion per year is required to connect all African homes and businesses to electricity.
“The latent demand for electricity is enormous, but it’s a very different proposition to investing in electricity utilities in, say, the UK and Europe,” says Geoff Sinclair, Managing Director at climate and impact fund manager Camco. “In Africa, it’s about coming up with reliable ways of addressing massive demand in a continent that has the most rapidly growing economies and urbanizing populations in the world, which is creating enormous infrastructure bottlenecks and opportunities.
“There’s a lot of sovereign risk in various African countries, and several other risks that investors wouldn’t have to deal with much in developed markets,” he adds. “Investors have lost money in the past because of the complexity and that’s why they’re wary. At the moment, despite it being a good opportunity, there isn’t a lot of institutional investment going into African renewables infrastructure.”
Investors’ infrastructure impediments
Prominent obstacles holding institutional investors from investing in Africa’s renewables infrastructure include fragmented regulation between nations, pervasive political instability in some regions, and the economy of scale for projects.
“Certain trends are, unfortunately, still preventing private capital from flowing,” says Tidiane Doucoure, Director of Emerging Market Alternative Credit at asset manager Ninety One. “There is still a huge effort that is required to have a level playing field in regulatory frameworks, which can differ even between neighbouring countries.”
Last March, research by the World Bank found that of the 54 countries in Africa, 42 have to date enacted legislation on public-private partnerships (PPPs), a long-term arrangement between a government and private sector institutions to provide capital financing.
These 42 countries diverge on their PPP laws are enforced, with 24 using civil law tradition, 13 a common law legal system, and five a mixed system. Western and Central Africa have the highest percentage of economies that have enacted specific PPP laws, while Eastern and Southern Africa have enacted the least-specific PPP laws. These differences can heighten the confusion faced by investors when considering or actively investing in the region.
Countries such as Egypt, Ethiopia, Gabon, Ghana, Kenya, Morocco, Namibia and South Africa are seen as continent’s leaders on renewables infrastructure. These nations have worked to create supportive policy conditions for investment, easing access for and boosting the confidence of institutional investors and drawing in blended finance.
Doucoure adds that political stability has presented a problem for investors. “We have seen parts of Africa falling into some instability, including regions where the Emerging Africa & Asia Infrastructure Fund (EAAIF) has made investments in the past, for instance the Democratic Republic of Congo, where there has been conflict.”
Ninety One manages the EAAIF, which was previously known as the Emerging Africa Infrastructure Fund, before changing its name in October to reflect its expanded focus on Asia focus last year.
Established in 2001, the EAAIF has provided more than US$2.5 billion in debt capital for a diversified portfolio of infrastructure projects in Africa and Asia, with the vast majority invested in the former. EAAIF is part of the Private Infrastructure Development Group, and infrastructure project developer and investor which mobilises private investment in sustainable and inclusive infrastructure in sub-Saharan Africa.
“We need to see continuing progress continuing on the regulatory framework and on stability from a political point of view, but we are seeing huge opportunities in countries that have made such reforms,” says Doucoure. “Egypt, for example, we’ve seen come back from significant stress with a huge renewable energy program, and gigawatts of projects being awarded to international investors.”
Ninety One has supported an Egyptian company that has invested in the 1.1 gigawatt Suez Wind Project, an onshore with farm project set to become one of the largest in the Middle East and North Africa region.
Scaling up
One crucial element standing in the way of greater investment in renewables infrastructure is scale. The size of projects is just too small to attract the necessary interest.
“Some of these projects, even if they are meaningful, remain too small to attract the interest of large private investors,” says Doucoure. “So far just a few countries, like Egypt, have understood that by tabling some of the largest scale projects, not just in Africa, but across the world.”
Blended finance, PPPs, and having the right regulation in place can all play vital roles in boosting scale.
“Scalability in renewable energy projects in Africa will attract more interest from private investors and lay the foundations for more competition, which will ultimately benefit the African governments,” he says. “To achieve scalability, it is important to harmonise the regulatory, policy, and legal frameworks and allow governments to join forces and combine relatively small projects into larger ones.
“This could also create synergies and allow certain countries with smaller utilities to benefit from better credit rating or proven payments track-record of other utilities,” Doucoure adds. “Multilateral development banks could also play a key role in offering credit enhancement tools that will mitigate the residual risks for private investors.”
He adds that coordination between countries to reach a “certain economy of scale” can unlock further investment from large investors, such as Ninety One, to address the continent’s renewable infrastructure challenges.
African governments have tried to coordinate action and thinking to catalyse investment in aging grid infrastructure and expand modern energy access.
A January summit organised by Mission 300 saw 12 countries present national energy compacts with detailed targets to scale up electricity access through renewable energy, as well as strategies to boost regional integration and attract private sector investment.
Launched last April, Mission 300 is an initiative created by the African Development Bank and the World Bank with the objective of providing electricity to 300 million energy-poor Africans by 2030, primarily by connecting them to national grids or local mini-grids powered by renewables such as solar.
At the meeting, its two founding institutions committed US$48 million to support Mission 2030. Meanwhile, Agence Française de Développement committed €1 billion (US$1.1 billion), the Asian Infrastructure Investment Bank up to US$1.5 billion, and the Islamic Development Bank Group US$2.7 billion.
Last week’s Africa Energy Indaba 2025 similarly convened global leaders, investors and innovators to tackle Africa’s renewables infrastructure needs.
Broadening blended finance
Themes explored at Mission 300’s January summit included blended finance, co-financing opportunities, and private sector mobilisation. Blended finance and public-private partnerships are widely regarded as essential in mobilising private capital and institutional investment for renewables infrastructure in Africa and closing the financing gap for infrastructure development.
Africa50’s Fourie says that blended finance plays a “critical role as a catalyst for infrastructure investment”, highlighting Alliance for Green Infrastructure in Africa (AGIA), an African-led solution aiming to raise US$500 million in blended finance to unlock US$10 billion in private investments for green infrastructure.
Last month, the European Investment Bank (EIB) committed to supporting the Africa Finance Corporation in financing a US$750 million Infrastructure Climate Resilient Fund, which looks to accelerate climate adaptation and sustainable infrastructure across the continent. EIB will invest US$52.5 million through a blended finance structure, prioritising low-carbon solutions across transport and logistics, clean energy, digital infrastructure, and industrial development to ensure sustainable growth.
“International institutional investors will be increasingly important for the energy transition,” says Holger Rothenbusch, Managing Director and Head of Infrastructure at impact investor British International Investment (BII), the UK’s development finance institution. “We are seeing an increasing number of very large renewables projects on the continent which individual development finance institutions or even consortia cannot fund by themselves. Ultimately, we need to find a way to tap deep pools of long-term capital such as insurers and pension funds.”
BII’s Africa portfolio stands at US$5.6 billion, having invested more than US$1 billion across 50 sub-Saharan African renewables infrastructure projects since 2017, including renewable power generation, transmission, storage and distributed renewable energy solutions such as mini grids.
IEA’s Electricity 2025 report also noted that the growth of the continent’s energy consumption is hampered by a lack of supply, particularly in sub-Saharan Africa, while Algeria, Egypt, and South Africa alone consume over half of all electricity in Africa.
“Going forward, we think African renewable energy in certain markets, such as Egypt, Morocco, South Africa and Namibia, can play a role in supporting the global energy transition via exports of clean power or low-carbon hydrogen,” says Rothenbusch.
“However, unlocking renewable energy is even more important for the people of Africa,” he adds. “Reliable infrastructure is the foundation of sustainable and inclusive economic growth, and access to clean, low-cost, and reliable power is critical to growing African industries and creating jobs on the continent.”
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