Private sector leads May funding

From the newsletter

May funding was dominated by the private sector, which accounted for more than 90% of the total. Chinese companies invested $460 million in solar cell manufacturing in Ethiopia. Meanwhile, development banks like the World Bank and AfDB, alongside commercial banks such as Standard Bank, contributed substantial funds for the third consecutive month.

• The analysis is based on data collected by Renewables Rising. Energy companies TAQA Morocco and Nareva are collaborating with the Mohammed VI Investment Fund and the UAE government in a public-private partnership to invest $14 billion in energy and water in Morocco.

• A private equity fund, The Emerging Africa and Asia Fund, raised $325 million, bringing their total assets to $620 million. It was mainly funded by Allianz Global Investors, South Africa's Absa Group, and Standard Bank Group.

More details

• The African Development Bank (AfDB), a significant financier in Africa's energy sector, saw its contributions decrease in May. After providing over $330 million in March and $416 million in April, its May funding amounted to just over $73 million, with Mozambique receiving $43.6 million and Togo $30 million in loans.

• The World Bank, which together with AfDB is leading the Mission 300 initiative, contributed $350 million in grants. This was the highest grant amount awarded this year so far. April's contributions were in loans and amounted to only $65 million, but March remains the highest monthly funding overall.

• Private investment space in Africa's energy sector continues to mature, marked by the launch of several private equity funds. The Emerging Africa and Asia Fund (EAAIF) recently joined others, such as Evolution III, which raised $238 million. These funds are successfully attracting capital from various financial institutions, including the International Finance Corporation (IFC), FMO, Swedfund International, and EIB.

• Norwegian development finance institution, Norfund, extended its support to emerging companies, this time backing Konexa for the next phases of its renewable energy expansion in Nigeria. Together with Climate Fund Managers, Norfund raised $3.6 million, which is set to catalyse $80 million in investments. Norfund also funded CrossBoundary Energy with $45 million in April.

• The IFC and Stanbic IBTC Bank Ltd funded Sunking Nigeria with a $80 million local currency loan. This loan will be repaid in Naira, cushioning the company from any expected currency depreciation issues.

• Additionally, All On, established by Shell as an independent non-profit organisation, provided $1.3 million to Salpha Energy, a solar company offering a range of products, including solar home systems and solar-powered appliances like refrigerators.

Our take

• It's quite encouraging to see increased private sector involvement. However, many African countries' renewable energy markets present significant risks in currency depreciation. Development finance institutions should provide support in technical areas to de-risk private investments.

• Looking ahead, the next financial year might prove challenging for the AfDB, given that some of its major funders have reportedly exited or reduced their commitments. This could create a funding gap. 

• However, there is growing hope from the increased demand for renewables from the Middle East and European countries, particularly for green hydrogen production. These countries are likely to increase their support for African renewables, driven by their own strategic energy needs.