Green Finance, much needed for Africa

Over 640 million Africans have no access to energy, and Africa hosts almost 75 percent of the world's population without access to electricity. Affordable energy for all Africans is an immediate and urgent priority. However, Africa's energy access is not only crucial for meeting the basic needs of its population but also essential for driving industrial growth and economic transformation.

While the assessments may differ on the exact amount of money needed to finance the energy gap, it is widely recognized that substantial investments are required to improve access to energy in Africa.

As we stand on the brink of a significant energy transition, it is crucial that we emphasize the need for green finance to drive sustainable development in African countries. The future of our planet and the well-being of future generations depend on our ability to shift towards renewable energy sources and embrace environmentally-friendly practices.

The future of finance regarding fossil fuels is undergoing a profound transformation as the world embraces a more sustainable and low-carbon energy future. Investors, financial institutions, and policymakers are increasingly recognizing the risks and opportunities associated with fossil fuel investments and are reevaluating their strategies to align with environmental and social priorities, despite the fact that, Oil and Coal continue to be developed around the world, to promote energy security.

This global shift towards renewables leaves Africa, who is responsible of only 3-4% of greenhouse gas emissions, in a constrained situation. While we all agree that greenhouse gas emissions need to be curtailed, the true is that the West advanced economies and recently the Emerging Markets and Developing Economies, mostly from Asia, were able to develop their economies on carbon emissions.

At this junctions, it is important for African countries to explore a balanced approach that considers both short-term development needs and long-term sustainability goals. This could involve a mix of fossil fuels, renewable energy sources, and energy efficiency measures to ensure reliable energy access while mitigating environmental harm. For instance, by taking in consideration the recent discoveries in Africa, of more than 5 000 billion cubic meters (bcm) of natural gas resources (Africa Energy Outlook 2022), 'these resources could provide an additional 90 bcm of gas a year by 2030, which may well be vital for the fertilizer, steel, cement and other core industries', with massive positive spillover effects.

Africa, with its abundant natural resources and growing energy demands, holds immense potential for renewable energy projects that can not only mitigate climate change but also foster economic growth and social development.

Africa can be an active player in the value chain of renewable industry inputs. However, it is essential to focus on strategic planning, investment in key sectors, and capacity building initiatives. Among the strategies I do point out the need to

a) Leverage Africa's abundant renewable energy resources, such as solar, wind, hydroelectric, and geothermal, to establish a strong foundation for renewable energy production and attract investments in clean energy projects.

b) Encourage the local manufacturing of renewable energy components, such as solar panels, wind turbines, batteries, and inverters, to capture more value in the production process and create job opportunities in the renewable energy value chain.

c) Enhance skills and capabilities of the workforce through training programs, vocational education, and technical skills development initiatives to meet the growing demand for skilled labor in the renewable energy sector.

d) Foster collaboration between governments, private sector companies, and development partners to mobilize investments, facilitate technology transfer, and create a conducive policy environment for the growth of the renewable energy industry in Africa.

e) Invest in energy infrastructure, such as transmission lines, grid connectivity, and storage facilities, to support the integration of renewable energy sources into the power system and enhance energy access in underserved communities.

f) Implement supportive policies, incentives, and regulatory frameworks to attract investments, promote technology transfer, and stimulate innovation in the renewable energy sector, creating an enabling environment for sustainable growth and development, and last not least,

g) Capitalize on African Continental Free Trade Area (AfCFTA) by promoting trade facilitation measures, harmonize regulatory frameworks, and strengthen market linkages to enable African renewable energy producers to access regional and international markets and participate in global value chains.

To unlock this potential and accelerate the transition to a low-carbon economy, adequate funding and investment mechanisms are essential.

Green finance, which encompasses investments in renewable energy, energy efficiency, sustainable infrastructure, and climate resilience projects, plays a pivotal role in supporting the energy transition in African countries. By channeling funds towards clean energy initiatives, we can reduce carbon emissions, create green jobs, improve energy access, and enhance the resilience of communities to climate change impacts.

It is imperative that we mobilize stakeholders across the public and private space, as well as international development partners, to prioritize green finance and integrate sustainability considerations into investment decisions. By leveraging innovative financing models, promoting green bonds, fostering partnerships, and incentivizing sustainable practices, we can accelerate the transition towards a greener, cleaner, and more prosperous future for Africa.

Together, we have the opportunity to drive positive change, combat climate change, and build a more sustainable and resilient future for all.

Let us work collaboratively together now.

Let us work to harness the power of green finance and pave the way for a greener and more prosperous Africa.

Armando Manuel

Chairman of the Board of Directors

ANGOLA SOVEREIGN WEALTH FUND (FSDEA)