DR Congo leads in June energy investments

From the newsletter

The African renewables sector received $5.8 billion in funding commitments last month, which was a third of the amount in May. DR Congo was the largest recipient with $2.3 billion, almost half of the total raised. This follows a recent peace deal that encouraged investments in the energy sector to ensure various stakeholders benefit from natural resources.

• Rwanda and the DR Congo signed the peace agreement mediated by the US. The deal opens up their mineral and energy sectors to US private investors. Two deals have so far been secured: one for a hydropower plant and another for a power line.

• South Africa continued its investment streak, securing $1.8 billion in commitments, mainly from the World Bank, which pledged $1.5 billion for energy and freight transport infrastructure improvement.

More details

• June saw 40 deals across 14 African countries in the renewable energy sector, attracting a total of $5.8 billion in funding and commitments. Central Africa led the regional distribution with $2.3 billion, followed by Southern Africa with $1.8 billion, North Africa with $589 million, West Africa with $564 million, and East Africa receiving $194 million. Funding committed to Africa-wide and regional investments totalled $394 million.

• This was the second consecutive month we saw heavy investments in the DR Congo, which received $1 billion in commitments from the World Bank last month. The country's abundant hydropower and mineral resources are making it a major investment attraction. Furthermore, if the recent peace deal holds, it is expected to unlock even more private investments, particularly from US-led companies.

• Africa's renewable energy sector continues to attract significant funding, but a worrying trend is that this funding is disproportionately directed towards only a handful of countries. Egypt, South Africa, Morocco, and Nigeria collectively account for at least 70% of the funding received since the start of the year. Despite this concentration, we have also seen promising traction in other countries less frequently mentioned in the renewables race, such as Togo, Somalia, and Cabo Verde.

• In this month's funding, the leading countries were spread across the regions. The Democratic Republic of Congo led with financial commitments, reaching $2.3 billion. South Africa followed with $1.8 billion, Egypt attracted $589 million, while Nigeria received $456 million. Kenya came fifth, representing East Africa with $169 million.

• The grid infrastructure, which has long received less investment, recently secured at least $2 billion, specifically directed to the DR Congo and South Africa. This infrastructure holds immense relevance, especially in this era of interconnected grids and a growing reliance on renewables. Countries will increasingly need baseload power to supplement their grids for stability, and building this infrastructure early will therefore be vital for the functioning of interconnected markets.

• Foreign companies and dedicated funds have not been left behind. Octopus Energy, a UK-based company, launched its first Africa-focused renewables fund—the Octopus Energy Power Africa Fund (OEPA)—starting with $60 million and targeting $250 million over three years. The fund will support projects in rooftop solar, battery storage, electric vehicle charging, and grid upgrades across Sub-Saharan Africa. This follows the launch of other funds like Evolution III, Airnergize Capital Fund I, and the Emerging Africa & Asia Infrastructure Fund (EAAIF).

Our take

• There is a pressing need for African countries to collaborate on energy projects and ensure that those with the best resources are left to generate power cheaply and sell it to those without.

• African nations need to streamline their policies and offer de-risking mechanisms to attract the increasing number of Africa-focused funds into their energy sectors.

• Although there's increased investment in grid infrastructure, it's crucial to improve planning for these projects. They must integrate into regional development plans and consider future demand to ensure they don't face capacity limitations down the line.