Addis Ababa, 8 February 2021 (ECA) – Africa needs to at least double its energy supply from 250 gigawatts (GW) to 500GW by 2030 to build forward better from the COVID-19 pandemic and diversify its economies for sustainable development, said leaders from the continent’s innovation and trade development bodies, heads of policy advisory institutions, as well as private sector development champions, on Monday.
They were speaking during a high-level debate on on “Innovative financing in energy for economic diversification” as part of the 4th Africa Business Forum organised by the UN Economic Commission for Africa (ECA) on the fringes of the 34th African Union (AU) Summit.
“Africa needs to invest between US$230 billion and US$310 billion and an additional US$190 billion to US$215 billion from 2026 to 2030 to meet its New Deal for Energy for Africa to power its economic diversification including ICT-driven innovation,” said Antonio Pedro, Director of ECA’s Subregional Office for Central Africa, in reference to African Development Bank (AfDB) statistics, as he set the stage for the debate. Presently, the continent only mobilises about US$4 billion for this purpose.
“To break this cycle, we need innovation and smart policies to crowd-in investments,” he said, noting that it is about “one thing leading to another,” in well-calibrated sequences.
In reference to renewable energies, he suggested that Africa must make the most of its dominant position as a global producer of battery minerals such as coltan, manganese, graphite and copper to climb the ladder and localise the battery manufacturing and associated electric vehicle value chain on the continent, through well-integrated regional clusters. He observed that the Democratic Republic of the Congo (DRC) currently produces 70% of the cobalt used globally for battery manufacturing but only captures 3% of the value created in the sector because the country is only a supplier of raw materials.
By 2025, the global value of the combined battery and electric vehicle value chain will reach US$8.8 trillion. This should be a sufficient enough incentive for governments and captains of industry in Africa to take action and change the paradigm.
Benedict Oramah, President of Afreximbank re-echoed the idea of clustering as a means to reducing the cost of financing Africa’s economic diversification drive, including energy supply, as an enabler.
He said through Afreximbank’s “Create, connect and deliver strategy”, industrial parks and special economic zones are being created to bring together ventures belonging to specific value chains in order to reduce the cost of infrastructure that would have been otherwise incurred if they were dispersed.
He noted his institution is working to connect producers and buyers across the continent through the Pan African Payment and Settlement System (PAPSS), using African currencies.
“Our currencies need to become the means of exchange to infuse more liquidity into African financial markets,” and reduce the cost of investment and trade, he argued.
“We need economies of scale that can be gained by regional power integration to reduce the amount of investment needed to meet electricity demand in Africa,” posited the CEO of Africa50 – Alain Ebobissé, as he made a case for more investments in off-grid and mini-grid energy solutions which can reach more users at lower costs.
In an argument similar to Oramah’s point for using African currencies for intra-African trade, Ebobissé submitted that local currency financing was very important for developing energy and other infrastructure on the continent.
He said another innovative financing mechanism which African states could leverage is asset recycling. This is the monetization of existing public assets or concessions by selling or leasing them to private sector investors and reinvesting the proceeds in new public infrastructure or ventures.
He noted that there should be a just energy transition towards meeting the 100% swap to renewable energy by 2050 with natural gas constituting the transition energy of choice.
Rolake Akinkugbe-Filani, Chief Commercial Officer of Mixta Africa and Advisory Board Member of Africa Energy Chamber also argued for local content polices which favour the placement of local companies in energy and other value chains but raised a caveat.
“We don’t want a situation where we develop these local value chains and producers are forced to pass on high costs of local manufacturing to the consumers.”
Such policies therefore need to be “forward-thinking,” she argued.
She said localising the production of battery-component manufacturing in African countries which are home to battery minerals, would be a smart move to generate business and financing.
It would be crucial to “make it easier for local companies to achieve credit ratings so that local markets such as bond markets can be mobilized for access to finance,” she mooted.
“One of the best ways to achieve this, is to explore aggregating both customers and SMEs in the value chain, because the more scalable these projects are, the more attractive they would be from a portfolio perspective to investors.”
Bringing a totally different perspective to the debate, Bubacar Diallo, Founder and CEO of Benoo Energies, which supplies decentralized energy solutions using efficient equipment to rural and peri urban areas in Burkina Faso, Ghana and Togo, said while exploring innovative financing mechanisms for developing Africa’s energy towards economic diversification, we must pose the question: energy for who and for what?
From his experience, “People do not care about energy sources but about how they can benefit from any affordable energy source and appliance.”
He said in rural areas in West Africa, women and youths involved in agriculture or agribusiness are very important demographics for whom off-grid energy solutions should be targeted as a means of helping them access water, irrigate their farms, conserve goods in cold chains and , ultimately, increase their productive capacity and, in-turn, pay for energy consumption.
He therefore insisted on the need to build energy solutions which target agriculture ventures of rural women and youth since if well-supported the agriculture sector is amongst those generating most cash-flow in rural milieux.
In closing the first segment of the debate, the moderator, Amadou Ba, called for the establishment of an Africa Battery Alliance as a coalition of those willing to champion the deployment of renewable energy and the deepening of the battery and electric vehicle value chain in Africa.
Monday’s high-level dialogue rounded-off with the presentation of “Team-Energy Africa”– an informal coalition of like-minded African investors and institutions focused on investing in, and championing Africa’s energy transformation.
According to Linus Mofor, Senior Environmental Affairs Officer at ECA, Team-Energy Africa aims to serve as a catalyst for transformative private sector investments in clean energy under the SDG7 Initiative led by the Economic Commission for Africa.
“Team-Energy is going to be one of those renaissance initiatives which will help shape the African landscape,” in the coming years, said NJ. Ayuk, Executive Chairman of the African Energy Chamber and CEO of Centurion Law Group.
United Nations Under-Secretary General and Executive Secretary of ECA – Vera Songwe, closed the session on a note of hope, stating with satisfaction that the movement to champion innovative financing required to power Africa’s energy needs for economic diversification is already gathering steam.
The deliberations proved that “Africa for Africa’s energy is possible and is doable,” she concluded.
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