The number of sustainability goals and targets set out by Africa grows year after year along with countries' commitments, calling for an unprecedented deployment of expertise and capitals. Nevertheless, the resources needed abundantly exceed the already stretched public finances of many African countries.

That is why the role of the private sector is so pivotal: particularly, catalysing Foreign Direct Investments (FDIs) could breathe new life into Africa's renewable markets, stimulating their full development, and favouring access to energy for millions of people. Just to give an idea, between 2009 and 2018 FDIs accounted for 50% of total RE investments in Africa, while they represented only 6% in the rest of the world (Connecting the Dots: why only 2% of global RE in Africa?).

 Nevertheless, the inflow of RES investment in Africa's clean energy sector remains slight, even in the most promising areas. Let's consider the instance of the MENA region: despite boasting a greater amount of investment in comparison to Sub-Saharan countries, the region would need an average of $16 billion per year (till 2050),   to meet the IRENA 1.5°/2°C Pathway, the double of the current expenditure.

Such a mismatch hampers the full development of clean energy technologies and the consequent beneficial effects on African societies. One of the main reasons of this deadlock is the high investment risks characterising Africa's renewable energy sector, whether they be real or perception by the investors.

A perceived high-risk environment is one of the main causes of a weak investment appetite, and it sinks its roots in a set of different factors. The first of them is political and institutional stability. Unsecure political frameworks often discourage foreign private investors, who, on the contrary, are willing to deploy their finances in countries able to offer a steady and receptive institutional environment. This cluster of factors ranges from the perception of a high political risk (considered the biggest factor of uncertainty by 72% of the respondents to Assessing Investment Risk in Renewable Energy), to fully-fledged regional conflicts (Mozambique).

Another family of perceived risks is the one related to macroeconomic conditions. Where national governments implemented successful economic and financial reforms, investors are more willing to allocate their capitals for the development of RE solutions. A case in point is the one of Senegal and Egypt, which managed to stabilise their macroeconomic frameworks through dedicated policies, such as the Plan Senegal Emergent (PSE), or Egypt's 2017 Investment Law (RES4Africa's Investor Survey on Sub Saharan Africa and Assessing Investment Risk in Renewable Energy). On the other side of the spectrum, multiple African countries are still struggling to provide a safe and sound macroeconomic framework, as they experience criticalities such as maintaining trust in their national currencies, providing encouraging sovereign credit rates, and guaranteeing tax regimes that can be advantageous both for the investors and the national public finances.

The third and final group consists of the lack of transparency, clarity, and readiness of the regulatory frameworks dedicated to renewable energy. The national sectorial regulations should guarantee smooth and fair market access for foreign IPPs, speedy permitting and licensing procedures, and transparent property and concession rights. A success story is the one of Kenya: with constant improvements to its regulatory framework, its position on the World Bank's Ease of Doing Business Index increased by 52 positions in the last 5 years; such a shift has been accompanied by an ever-growing increase of FDIs. On the contrary, Algeria's RE regulatory framework fails to reassure international private investors, with dispute resolution and the ability to secure property rights being the most critical areas (Assessing investment risk in renewable energy). These issues are confirmed by Algeria's low performance on the aforementioned index: the country ranks on 113th position out of 190.

Neutralising the risks (or their perception) and restoring the investor's trust appears, therefore, as one of the preconditions of Africa's energy transition.

Establishing effective and comprehensive de-risking instruments is surely a priority, as the already existing ones often do not cover all the implementation phases of a renewable energy project. For instance, risks related to tender processes are addressed by only 18% of the de-risking tools analysed in renewAfrica Initiative: Advancing European commitment to Africa’s clean energy access. Further manoeuvres consist in enhancing reform processes to ensure political stability, creating Independent Regulators to stimulate market fairness and transparency, focusing on efficient organisation and management of auctions, and promoting other relevant actions such as developing a clear and realistic REs masterplan, and regulating PPAs between power producers and bulk users.

Finally, we must acknowledge a consistent risk perception gap between the public and the private sector: the former expressed deeper concern about financing availability, counterparty/sovereign credit risk, and hazards related to inflation and currency; the latter, instead, is more attentive and less optimistic, and deems political risk, transparency and fairness of the market and sovereign credit risk as the biggest hindrances to their investments (Investor Survey on Sub Saharan Africa). Such a divergence calls for a more systematic business-to-government dialogue and cooperation, in order to depower the negative perception of private investors, and to provide a trustworthy depiction of the real investment risks in Africa's renewable energy markets.