Since the 1960s to date, several African countries have made relatively significant inroads towards enabling access to energy for household and industrial consumption except for a few still lagging behind. Moreover, the advent of the Corona Virus Disease pandemic in 2019 (COVID 19) severely disrupted supply chains in Africa with a negative incidence on the energy sector and GDP growth within the span of two years (March 2020- December
2021) with timid recovery prospects in 2022. For instance, access to electricity in sub-Saharan Africa decreased in 2021. Some 597 million people did not have electricity connections in the region that year, while in 2020 electrical energy was inaccessible to 581 million Africans. This means that around five out of every 10 individuals below the Sahara lived in the dark. In rural areas, the situation was even worse: over 70 percent of the population lacked access to electricity.
Among Africa’s regions, Central and West Africa registered the most dramatic scenario, with electrification covering less than half of the population. Despite the threats posed by COVID19 within the energy supply chain, there are likely prospects to pull in additional domestic private sector investments and also Foreign Direct Investments (FDIs) into Africa for the next decade and beyond. Harnessing private equity, commercial loans and the use of specific Private Sector Instruments like Blended Financing (BF) could fast track energy production to enhance productive capacity and drive industrialization in Africa. Reforming energy policy in Africa to leverage additional private capital in the energy sector could likely be the game changer strategy for the next three decades in order to attain the performance markers articulated within the African Union Agenda 2063 and United Nations Agenda 2030.
To date, the private sector investors are rapidly driving innovations and economic growth in key tech sector with reliable cutting energy technologies within the renewable energy value chain. According to Forbes in 2021, the world’s top 10 billionaires have a combined net worth of 1,370 trillion United States Dollars far greater than the combined GDPs of 17 African countries. The GDPs of the 17 African countries including Kenya, Ghana, Ethiopia and 14 other countries stood at 1.071 trillion US dollars in 2021 according to Statista. Worthy to underscore is the fact that Africa is the most solar illuminated continent with immense potential to harness solar energy for enhanced productive capacity and industrial transformation. It will require consolidated energy policy reforms in order to harness Africa’s solar energy potential towards universal access in energy in Africa. In addition, the African Union member states should further liberalize the energy sector with sound financing and fiscal policy drivers to pull in additional private sector investors into the energy and agribusiness sectors. For instance the Blended Financing model which is currently transforming the Private Independent Power Producers (PIPPs) into power entrepreneurs is a best practice to replicate across Africa upon creating
specific Private Sector Instruments (PSIs) for the financing of energy projects.
Thus far, several countries in Africa have made substantial progress in developing big solar farms with capability to generate tens of hundreds of megawatts of energy to transform the agribusiness value chain and rural economy in general. For instance, African countries like Morocco, Kenya, Egypt and Nigeria have invested significant amount of funds in developing their renewable energy sector. With recent innovations in solar battery energy technologies, Africa could develop solar energy hubs and associated battery technologies in countries like Democratic Republic of Congo and Cameroon with huge mineral deposits as an alternative towards importing technology in the long-run.
To achieve universal access to energy, innovative mechanisms are needed to mobilize the necessary capital. Private equity can play an important role in catalyzing the green sector. Increasingly, venture capital funds are being used to spur entrepreneurship in the renewable energy sector. In order to catalyze this sector, policies, regulatory and institutional frameworks are required. Policies to promote renewable energy markets, in particular, measures for local content requirements that specify minimum sourcing and/or environmental requirements of a product or service, which can play an important role in
stimulating job creation and supporting industrialization (in particular infant industries) are also essential. Major constraints to wider adoption and scaling up of use of renewable energy (RE) in Africa are as follows:
(a) lack of awareness about renewable energy;
(b) high initial upfront costs in setting- up renewable energy systems;
(c) inadequate local research and development capabilities and end-user acceptability; (d) a dearth of demonstration projects to foster wide-spread interest among the private sector;
(e) inadequate assistance from the financial
institutions; and
(f) gaps in the policy and regulatory framework.
Relatedly, Africa to date has the biggest cultivable land of approximately 60 percent of Global arable land but still spends tens of millions of United States Dollars in the importation of rice and other cereals from abroad with an unfavorable trade balance. Rolling back this trend will require that African Union countries foster trans-border agribusiness trade as an alternative to importing foodstuffs from abroad. Failure to develop an adequate and reliable energy value chain in Africa will further stifle the goal of fast tracking African Continental Free Trade Area Agreement (AfCFTA). Furthermore, building inclusive marketplaces for Small and Medium Sized Enterprises (SMEs) and for rural economic actors within the agribusiness domain will require a blending of strategy that takes into consideration the energy, financing and technical capacity needs of these actors. Fueling intra African trade through a three pronged approach requires that we develop comprehensive strategy that seeks to provide affordable energy, adequate
export credits and capacity building towards SMEs and rural farmers within the agribusiness domain in Africa.
In a nutshell, building affordable energy grid networks and modern agriculture across borders in Africa will require that African Union member states develop a common energy and agribusiness policy that brings on board private sector actors as key partners in championing and strengthening productive capacity and industrialization drive in Africa. It’s in this spirit that The AU through the department of Economic Development, Trade, Tourism, Industry and Mining intends to create a platform and bring together both Public and Private Sector actors to devise new innovative approaches that harness the potential of Private sector practitioners to mobilize critical resources required to invest in Smart & Sustainable Energy and agribusiness through new technologies and a blend of alternative financial resources with the ultimate goal of up scaling productive capacities and industrialization drive in Africa.
This initiative goes in line with AU Executive Council Abuja Decision Number EX/CL/Dec.183 (VI), which institutionalized the African Union Private Sector Forum as a key instrument of dialogue and partnership between the African Union policy makers and the private sector actors. The Forum also acts as a vehicle for empowering the African Private Sector through advocacy, sharing business and market information and skills.
In this connection, the African Union commission in collaboration with Africa Business Council plans to organize the 13th African Private Sector Forum from 23-25 July 2022 in Lusaka Zambia, under the Theme: “The Role of Private Sector towards Increasing Investment in Energy and Agribusiness to Upscale Productive Capacities and Industrialization Drive in Africa”.
