By Msizi Khoza: Head of ESG, Absa CIB and Shirley Webber: Coverage Head – Resources and Energy, Absa CIB
The global shift to cleaner energy technologies provides Africa with a unique opportunity to accelerate its development and enhance its prosperity – though there are risks as well that must be carefully managed.
The world is racing to reduce its reliance on fossil fuels to avoid catastrophic climate change and take advantage of newer, more affordable greener alternatives. Of the $3 trillion worth of investments in energy in 2024, two-thirds will go towards clean technologies, according to the International Energy Agency’s estimates. The switch in favour of hybrid and electric vehicles, renewables and other green solutions is expected to accelerate in the years and decades ahead.
Africa could capitalise on this by leveraging its almost unparalleled natural resources to position itself as a key player in global clean energy supply chains. Doing so would boost the continent’s mining and manufacturing sectors, lift export revenues and economic growth, and close Africa’s energy poverty gap.
As such, we believe that embracing sustainability – rather than swimming against the global decarbonisation tide – offers a compelling pathway towards inclusive growth in Africa.
There are three main opportunity sets when it comes to facilitating the global energy transition. The first is to become a major supplier of the goods that enable the transition, including minerals such as copper, rare earths, lithium and graphite as well as products that are higher up the value chain, such as fuel cells, batteries and electric vehicles.
The second is to make ‘green’ versions of products that currently have high carbon footprints. As an example, the market demand for low-carbon steel – where non-renewable energy sources are substituted by hydrogen and renewable electricity – is set to surge as carmakers and other multinationals seek to decarbonise their supply chains.
And the third is to export Africa’s green expertise abroad. Just as the continent established itself as a hub of innovation in mobile telecommunication services and fintech, it is also yielding similar innovations in cleantech, such as pay-as-you-go solar systems and ‘smart’ stoves that slash energy consumption and save households money.
Meanwhile, the huge advancements in green energy over the past decade gives Africa an opportunity to utilise its rich wind and solar resources and ensure that all communities have access to affordable electricity. Solar mini-grids are already playing a significant role in tackling energy poverty, particularly in rural areas, while large-scale projects are delivering low-cost power into national grids.
But the energy transition brings risks as well, which can only be mitigated through meticulous planning. A disorderly shift to clean energy could exacerbate inequalities and social tensions – a scenario that Africa can ill afford. In this regard, effective and sustainable partnerships between governments, private companies, civil society groups, and host communities are essential.
Renewable energy project developers and their funding partners must foster genuine and deep partnerships with the communities in which they operate, with a view to leaving a lasting legacy.
Similarly, financial services groups need to ensure that, in addition to their corporate clients, small business customers are also able to access low-cost clean energy so that they can enhance their competitiveness and growth. Proactively sharing information with SMEs about the benefits of renewable energy, while also providing them with tailored and affordable financing instruments will be important.
At the same time, all stakeholders must collaborate to safeguard livelihoods in communities that are currently reliant on non-renewable energy sources. Failure to do so would worsen inequalities and risk a backlash to the transition. Yet these risks, which can be addressed through comprehensive planning processes that include communities from the outset, should not deter us from the sizeable opportunity at hand.
Africa has long been at the forefront of technological leapfrogging, and the energy transition affords it an opportunity to skip straight to decentralised, flexible, and modern power systems while also benefiting from surging global demand for green goods and services.
The real measure of success will be whether the concept of sustainable development is truly embedded in our communities, rather than being confined to boardrooms and government departments.
For its part, the private sector must catalyse those conversations in host communities, while regulators and policymakers should create enabling frameworks to ensure that the benefits are widely spread, and no one is left behind.
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