African countries commit $100 billion to power industries with renewables

From the newsletter

The push for green industries in Africa has gained momentum with $100 billion in funding commitments from leading financial institutions announced at the ongoing Africa Climate Summit in Ethiopia. The funds aim to speed up renewable adoption in industries set to become the backbone of Africa’s economy and a key source of jobs for its growing youth workforce.

• African leaders are meeting for the second time to develop homegrown financing solutions for climate goals, as the continent currently receives less than 4% of global climate funding, far below its needs.

• With many commercial and industrial clients still locked into expensive fossil fuels, and with looming carbon taxes on exports, Africa needs a lever to drive not only industrial growth but also an expansion of export markets.

More details

• The fund will operate under the Africa Green Industrialisation Initiative (AGII), which seeks to transform Africa’s renewable energy, natural resources, and industries into a climate-smart growth engine. It is backed by the AfDB, Afrexim Bank, Africa50, AFC, leading commercial banks, and the AfCFTA Secretariat. The initiative will prioritise mobilising African capital first, while de-risking projects and aligning policies to attract global investment.

• Africa is not short of climate initiatives with ambitious visions. From the Africa Renewable Energy Initiative launched at COP21 in Paris, to the Desert-to-Power programme, and countless national electrification plans, the continent has produced bold strategies that generated excitement but often stumbled at the implementation stage. Policy inconsistency, weak institutional capacity, limited financing frameworks, and slow regulatory approvals have repeatedly slowed progress.

• Meanwhile, the fossil fuel industry has continued to enjoy large subsidies, allowing it to compete with renewables unfairly. Change is happening slowly, however, with global lenders such as the World Bank and the IMF making the removal of subsidies a condition for new loans. Many countries, including Kenya, Nigeria, and Egypt, have started implementing reforms. Nigeria has gone the furthest, completely eliminating subsidies and even proposing a 5% surcharge on fuel purchases. Others have just done it partially.

• The consequences of these reforms are already being felt in the energy market. Removing subsidies has pushed grid electricity costs sharply upward, cutting into manufacturers’ profit margins and squeezing household budgets. A study by the Nigerian Institute of Social and Economic Research found that firms now spend 82% of their monthly turnover on production costs, largely due to higher tariffs, while residential consumers have seen bills nearly double. In response, many businesses are investing in solar power for backup supply, and some are shifting entirely to self-generation with battery storage.

• Despite this momentum, access to affordable financing remains a significant obstacle. While African-led banks like Afrexim Bank and the AfDB are actively working to fill this gap through concessional loans and grants, commercial banks have been much less involved outside of South Africa. The two development institutions have already committed at least $2 billion to the energy sector since early 2025, supporting a wide range of projects from small off-grid programmes to major transmission infrastructure.

• Targeting the industrial sector is crucial for the success of these efforts. Industries are the largest energy consumers and are key to reshaping Africa's growth model. Currently, the continent exports most of its natural resources in their raw form, missing out on the value and jobs created by further processing. By powering industries with renewable energy, the AGII could lower production costs, expand manufacturing capacity, and make African exports more competitive in global markets, especially as worldwide supply chains continue to prioritise low-carbon standards.

Our take

• With many previous initiatives failing to deliver, the next step for this new fund is to turn pledges into bankable projects with clear timelines. Without this, the fund risks becoming another high-profile but underdelivered promise.

• As fossil fuel subsidies are phased out, Africa should redirect those savings into renewable energy deployment. This would create a level playing field for clean energy while protecting industries and households from sharp tariff shocks through targeted subsidies for renewables instead of fossil fuels.

• To deliver inclusive growth, the fund should integrate job creation and skills development strategies. This is to ensure that it readies the workforce for the expected increase in demand.