Sub-Saharan Africa needs significant investment to bridge energy access gap

Dele Kuti, Standard Bank Head of Energy, and Infrastructure says: “We don’t have to normalise the fact that forty per cent of Africans lack access to electricity; we must take action to address this power supply crisis. In doing so, we must acknowledge that Africa also has a major need for more energy for the purposes of mobility and industrial development”.

Although home to an abundance of natural and renewable energy resources, the continent still lags behind others in terms of energy investment, access, and wider security. To address this gap, African governments, businesses, and financial institutions must work together – with our international technology and financing partners – to create an enabling environment that fosters investment and drives growth.

According to United Nations / Energy Institute estimates, Africa accounts for less than 4% of global emissions (whether measured as energy emissions or in total), yet it may suffer the worst effects of rising global temperatures.  Moreover, around 600 million Africans lack access to electricity, and 900 million lack access to clean cooking technologies. To bridge this energy access gap, Africa requires significant investment in all areas of energy, including renewable energy projects.

Kuti highlighted the investment case for energy in Africa, citing the continent’s abundance of resources and the need for significant investment to bridge the energy access gap.

“According to the International Energy Agency (IEA) an estimated 1.1 to 1.3 trillion dollars is required to support Africa’s energy transition - the continent presents a vast opportunity for investors. We need to develop bankable projects, implement supportive policies and regulations, invest in infrastructure development, to unlock Africa’s energy potential’’. 

Separate to this, Kuti also argues, “In line with the likes of Europe, North America and Asia-Pacific, it is important to see natural gas as a crucial transition fuel.  Natural gas is 50% cleaner than burning coal in terms of its emissions and 25% cleaner than burning diesel.  If is a crucial feedstock that can supply energy for power generation, industry, transportation and heating purposes. We are encouraged by the global growth of LNG and SSLNG and look forward to Africa playing its part in this trend’’.

The building blocks for the next African investment case are starting to be put in place. For the world to move towards the global energy transition, a major percentage of the critical minerals required (e.g., 40%) are in Africa. For them to be extracted and transported, massive new energy and infrastructure investments will be required, especially in land-locked countries and new value chains created, that will need to contribute to Africa’s development too.

However, Africa has traditionally been underfunded, underexplored, and (except in areas of natural resources), often lacks bankable projects. 

Standard Bank contends that Governments must create an enabling environment by implementing policies and regulations that support energy investment, including in renewable energy.  South Africa’s successful renewable energy investment program being a case in point, with Government tendered projects gradually moving into competitive electricity markets and wider participation across all levels of business.  As part of this, Standard Bank has committed to facilitating between 250 to 300 billion Rand of investment into renewable energy projects, demonstrating the bank's commitment to supporting Africa's energy transition.

Kuti states that the continent also must prioritise energy security.  Recent regional droughts (potentially linked to El Nino) in Zambia/Zimbabwe illustrate the deep impact that a lack of alternative electricity supply options can have on African markets. 

"By working together, we can overcome these challenges and create a sustainable future for generations to come. It's about using technologies the world uses, pragmatism as it were, and using whatever it takes to get out of this energy crisis.  It is unjust and unfair for development to not occur due to limited options being considered”.

He concludes, “Over forty per cent of the inhabitants on the continent have no access to electricity. This situation should not be normalised.  Insufficient electricity access means that industrial development cannot occur.  This was learned by the Emerging Asia-Pacific markets decades ago.  It’s what we can do as a bank to drive progress, working with entrepreneurs, corporate clients and financial institutions. That’s how we move towards Africa’s increased development and just transition.”