WEC hears how to unlock energy investments in Africa

The importance of energy investment in Africa is not up for debate. However, the question of how to convince the public and private sectors to invest does not lead to straightforward answers.

Africa may be the home of one-fifth of the global population, but the continent only receives 3% of the global energy investment.

At the 26th World Energy Congress in Rotterdam, this turned out to be a prominent talking point.

Monique Motty urged the audience to look at the problem from the perspective of developing countries, in this case, her country Congo.

Motty, who is the founder of Eco Solutions Consulting and a Future Energy Leader board member for the World Energy Council, identified two problems.

“Our priority is first resiliency. Before we can implement energy transition solutions, we first need to tackle the problem that is affecting our daily lives. First, we need investment for adaptation projects and projects that help us to be resilient and contribute to the energy transition.”

According to the World Bank, half of Africa’s population, around 600 million people, did not have electricity access in 2022.

Secondly, Motty highlighted the issue of high interest rates.

“It is extremely expensive to get a loan in our region. When you look at the cost of the transition and the priority of the resiliency to the effects of climate change, you see that there is a disconnect between what can be provided by the industry and what is needed by the communities. And that gap needs to be realigned for us to see less people not having access to energy.”

IPCC Chair Jim Ferguson Skea agreed that the high cost of capital is a huge barrier for developing countries.

“The question then, is how you use public funding in a clever way to reduce the risks for private investors. Because there is not enough public money in the world to solve our problems. We need to get private finance moving. The challenge here is to get the public sector to use its money in clever way to leverage the funding that is absolutely needed.”

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Blended financing

Sabrine Emran, a Future Energy Leader at the World Energy Council and an economist focusing on energy and commodities at the Policy Centre for the New South, believes blended financing is a solution.

“But the question is how can we incentivize the private sector a little more and make it safe to invest in green infrastructure projects in the African continent.”

Emran believes multilateral developments and private development banks can play a major role in creating more energy access across Africa, but that would require them to increase their risk appetite.

“I know that this is not something that we always want to hear, but it is a reality if you want to invest in making Africa have access to energy and making it clean,” said Emran.

Risk appetite

When asked if Rabobank would deploy to more risky countries, Els Kamphof, Member of the managing board for Rabobank Group in The Netherlands, said that to finance renewable energy projects, a bank would like to act within an environment where you can trust the legal system.

“So usually, you’re dependent on contracts. And that’s very often obviously, where the challenges are.”

Motty is aware of these requirements.

“Good governance is important everywhere. And Congo is not going to be spared from that view. And we’re working very hard to make sure that in all aspects of what we’re doing, and we’re considering sustainability. And so that requires major changes in the way that we look at problems and the way that our regulations or legislations were set in place.”

Critical materials

While other African countries might be struggling to get on the radar of international public and private investors, Congo does not have this problem. The country is home to vast amounts of the critical materials needed for the global energy transition and therefore countries around the world – with China taking the lead – are trying to secure a share.

“We see Congo as part of the solution,” said Motty. Besides Congo being part of the ‘lungs of the world’ because it is home to the Congo basin rainforest, the second biggest rainforest in the world, she says she is aware that Congo has the resources necessary for the energy transition.

“However, being the solution to others should not negate being the solution for ourselves first. (…) Because we have such a need to bring them up to speed of energy access in the country, we want to balance providing for others, while also making sure that we are benefitting.”

According to Emran, one needs to keep in mind that when elephants fight, it’s the grass that suffers. Referring to this African proverb, she illustrated to be careful that the weak can get hurt in conflicts between the powerful.

She believes the solution is to get more than just money flowing.

“Seventy per cent of the cobalt resources are in the DRC. Is the DRC, or any African country transforming this cobalt? The answer is no. It is being done by the Chinese. And increasing the dependency that we today know, energy can be very dangerous. So the question is, we need to let the money flow, but not we need to let something else flow. Don’t we need to let technology flow as well? Don’t we need developing countries and African countries have an independence in transforming their own resources?

“It is being done today, in terms of phosphate in Morocco, with OCP, being one of the top exporters of phosphate in the world. But can’t we imagine a scenario where Africa is transforming its own resources and becoming a competitive market in terms of supplying critical commercial?”

Incremental change

Both Emran and Motty emphasized that the world needs to be aware that the transition in Africa will be incremental.

“We will not go from not having electricity to hydrogen energy, we will not go from using coal to electric vehicles, that expectation for the rest of the world is just not realistic for us. If you go from charcoal to sustainable charcoal, that is an improvement. And that should be financed to the same degree as other incremental improvements elsewhere.”

Originally published on enlit.world