climate finance
Image: Narong Rotjanaporn©

By Hasnaine Yavarhoussen, CEO of Groupe Filatex, Madagascar

Consider the farmer who pumps water, arranges finance, buys fertiliser and sells his crops on a mobile phone – all made possible thanks to electricity.

It is evident that access to energy should not be considered a luxury, but a necessity – in fact, a human right. Energy comes in many forms, from fuel to power cars and trucks, gas for cooking and of course electricity.

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It is the unseen power that keeps the lights on at schools, and keeps them on at home, allowing children the opportunity to learn and read for longer. In hospitals, offices, factories and shops it keeps the machines running, be that life support equipment, heating, computers and portable devices.

However, Africa suffers from a severe lack of energy access, especially electricity. Today, according to the International Energy Agency, 75% of the sub-Saharan African population have no access to electricity.

If we don’t do something about it now, the problems will only exacerbate: with rapid urbanisation and the world’s highest birth rate, Africa’s population is expected to double by 2050 and reach 2.5 billion.

It’s not all doom and gloom – there are solutions to Africa’s energy crisis, but only if we make the effort to implement them, starting now.

A key element to overcoming this is ‘climate finance’: investing public and private funds into climate change mitigation and adaptation projects.

Climate finance on the uptake

There has been impressive progress in climate finance in Africa recently: in 2019, climate finance allocated by the African Development Bank (AfDB) increased from 32% to 35%, committing $3.5 billion across Africa: the main sectors being renewable energy and resilient agriculture.  

But there is still significant work to be done, and COVID-19 has unfortunately set things back: the Paris Agreement set a collected climate finance goal of mobilising $100 billion per year by the end of 2020, but has fallen short due to the pandemic.

Climate finance can fund sustainable strategies such as renewable energy projects: encouraging a mass shift away from fossil fuels. Renewables are a better option than traditional energy sources, as they are considerate of both current and future generations.

Renewables do not only help tackle the pressing needs of energy poverty, but also have a positive effect on the global environment, are cheaper long-term, and build resilience to future global shocks such as the current pandemic.

It is important that we leverage smart climate finance from both public and private investment, in order to direct capital flows into the renewable energy sector and make sustainable improvements across African communities.

Call on governments to be proactive

While public climate financing is key to driving green growth, the pandemic has constrained fiscal capacities of African states and put pressure on public finances.

Despite this, I call on governments to increase green financing where possible. In addition to the finance side, governments have further powers to make positive changes for the industry.

Governments can assess their trade and tax frameworks; implement more transparent fiscal regimes; ensure local policies benefit the renewable energy industry, and ensure legislation requires contracts to be respected.

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Ultimately, these actions will make renewable investing in Africa more attractive and enhance broad low-carbon development. Moreover, I anticipate that the upcoming African Continental Free Trade Area will reinforce such policies, building upon Africa’s domestic capacity, as well as strengthening collaboration between renewable energy project partners.

With constraints on public finances, the private sector – which is arguably better at delivering projects efficiently, and on time – must now step up and influence the transition to renewable energy through climate financing.

Africa already has an attractive investment profile, with its abundance of natural resources, favourable demographics, an expanding middle class and a suite of dynamic entrepreneurs.

It is time for the venture capitalists, commercial banks and angel investors to engage in the climate emergency and invest their resources wisely. Their private climate financing can be invested into various initiatives, start-ups and SMEs in the clean-tech sector, which are important in developing innovative, resource-efficient renewable technologies.

Or, they can invest into skills training and technical knowledge, empowering Africans to thrive in the ever-evolving renewable industry. Improving the expertise of local communities will lead to job creation, eliminate the reliance on aid or on foreign companies, and help to close Africa’s dire energy gap.

A private investment case study: Madagascar

In Madagascar, only 15% of the population has electricity access, which falls to 5% in rural areas. But this shortfall offers a compelling investment case for serious growth.

There are some promising developments: Groupe Filatex for example, a renewable energy provider on the island, is investing in innovative renewable projects and partnerships to improve the country’s electricity shortage.

This year, the company developed a number of local solar energy projects, including a fully mobile and portable solar unit, the largest solar rooftop project in Africa at 150,000m2, to service the local Malagasy communities.

Africa and the rest of the world have strived to overcome one crisis in 2020, but we mustn’t forget the next. In the face of the climate emergency, we must think and act ambitiously in order to provide a more prosperous and resilient economy for the next generation, and, a cleaner planet for all. ESI