Conducive regulatory policies needed to attract private sector investment in Africa’s energy transition

Conducive regulatory policies needed to attract private sector investment in Africa’s energy transition

New York, 11 July 2023 (ECA) - Africa needs a conducive policy and business environment to attract the private sector in renewable energy investment to drive its economic and social development.

Economic Commission for Africa (ECA) Acting Director, Private Sector Development and Finance Division, Robert Lisinge, said Africa needs to rapidly scale up investment in clean and renewable energy to seize much of the 8,000 GW of added clean energy sources expected globally by 2030 but needs the right framework to attract private sector financing.

Increasing investments in sustainable energy

“We must address the critical challenge of our policy and regulatory environment that often inhibit scaled investment and effective private sector participation,” Mr. Lisinge said in opening  an event on Advancing Regulatory Improvements to Accelerate Private Sector Investment to Meet SDG7 and Energy Transition Goals in Africa on the sidelines of the High-Level Political Forum of the United Nations which opened in New York this week.

“We must close the energy access gap that has left more than 600 million people in Africa without access to electricity,” Mr. LIsinge said, noting that the climate goal of 1.5 0C warming calls for significant changes in how energy is produced and consumed globally and in Africa.

The High Level Political Forum is this year being under the theme “accelerating the recovery from coronavirus disease and the full implementation of the 2030 agenda for sustainable development at all levels”. Recovery from the impacts of COVID-19 and increasing momentum towards achieving SDG goals are essential to remain on track towards the 2030 goals.

The side event focused on the crucial area of private sector investment participation in accelerating electricity access and renewable energy development in Africa, accelerating energy transition and building further resilience in addressing the negative impacts of COVID-19 on SDG7 in Africa.

Mr. Lisinge noted that the crises of COVID-19, the Ukraine war, energy and macroeconomic stability, and climate change have pushed African economies to the edge and increased vulnerability. He said the challenges must be confronted without “losing sight of required investments for sustainable development, economic and social transformation and long-term prosperity”.

Regulatory and policy reforms to attract private sector

The investment requirement for electricity in Africa is huge,Mr. Lisinge said, underscoring that

Public Private Partnerships were key to attracting the private sector and promoting innovative financing in sustainable energy development.

Giving an assessment of Africa’s SDG#7 status and challenges, ECA Economic Affairs Officer, Anthony Monganeli Mehlwana, highlighted that 43 percent of Africa’s population is still without access to electricity and 170 million Africans need clean cooking technologies.

Africa should update its legislative and regulatory systems as well as put incentives to attract private sector investment in cutting edge power sector projects, said Mr. Mehlwana.

“We need to  raise the profile of clean cooking in Africa as we have done with solar energy,” he said.

There is immense need for investment in Africa’s  electricity sector, said Mr. Andrea Renzulli, Head of Policy and Regulation at the RES4Africa Foundation, in a presentation on a project encouraging electricity sector reform in 16 African countries.

According to the African Development Bank, Africa’s power sector needs an annual investment of $90 billion until 2030 if the continent is to meet key energy demands.

Africa-s electricity demand represents 2 percent of global electricity demand and this is expected to quadruple by 2040, yet the continent has received the least investment in electricity sector as regulatory frameworks in many African countries do not allow private sector participation in some parts of the electricity value chain, Mr. Renzulli said.

Contributing the discussion on Secretary General of RES4Africa Foundation, Mr. Roberto Vigotti, emphasized that Africa needs bankable clean energy projects, robust investment frameworks and mechanisms to de-risk investment on the continent.

“We need to decrease the cost of capital, sometimes if you do a solar project in Italy it costs seven times less than doing the same in Uganda. This is because the perspective of risk is high. We need to decrease the cost of capital by mobilizing green bonds and de-risking investment,” Mr. Vigotti said.

Downloas the Press Release

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Africa is a continent in continuous transformation, with a sustained economic and population growth, a fast-paced urbanization and a young generation of talents who is leading its business revolution. This transformation requires energy and will require it even more in the next decades.
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