A mixed energy approach to secure Africa's future growth

Across the continent, energy security, energy transition and the sources of the energy have often been the subject of great debates. As concerns around the impacts of securing a sustainable future have permeated, we have seen energy security and energy transition feature more prominently at international dialogues and conferences.

Most recently, I had the honour of moderating a panel discussion which explored the topic of financing the future of energy at the annual Bonds, Loans and ESG Africa conference (Bonds & Loans).

South Africa usually draws a fair share of international interlocutors to our set-piece gatherings, but this year is especially notable in that we hold the G20 Presidency and the associated Business 20 (B20). The latter was launched in February and is adding ballast to strategic business initiatives such as energy diversification and security.

This was evident during my panel discussion. Participants were drawn from multinational fund managers, alternative energy sector and development finance institution representatives. As you can expect, the nature of the discussion was robust, enthralling, and insightful.

Although we had differing views on some matters, we all agreed on the current access to energy situation across the continent. According to the International Energy Agency (IEA) approximately 600 million Sub-Saharan inhabitants do not have access to electricity, making up 80% of the world’s population that do not have such access. 

In addition to this stark statistic, the IEA also highlights that although Africa constitutes 18% of the world’s population, the continent only consumes 6% of the world’s energy output. Excluding South Africa, the per capita electricity consumption in Africa is 180 kWH when compared to 6 600kWH in Europe and 13 000kWH in USA, according to the African Development Bank (AFDB).

The scale of the challenges are clear and sobering. They seem daunting at first sight, but they present an exciting opportunity for Africa to leapfrog its current inadequate energy access by seeking innovative solutions.   

The development and economic growth of the continent, as with any geography, is inextricably linked to the need for broader access to energy and stability in accessing it.

Fortunately, the continent is rich in diverse energy sources. Among viable resources are geothermal, hydro-power, solar, wind, natural gas, and coal.

The last two resources are often included in contentious debates related to climate impacts. The unvarnished truth is that Africa has a reliance on old forms of energy generation.

According to the Institute for Security Studies, in 2023 only 1.7% of Africa’s energy production came from “other renewables” (essentially wind and solar). The continent’s energy production landscape is thus largely dependent on old forms of energy with oil usage for energy at 46.6%, gas at 31.2% and coal at 17.6%.

As much as we are transitioning in use of energy sources, we are clear-eyed in our understanding of the landscape in which we are operating in. This is all to say that a sudden change in the means of garnering energy across the continent is not within the bounds of reality. Such a doctrine would be unfeasible and could have longer term adverse economic and societal impacts if mismanaged.

All carbon emissions should concern us, but in the global context our continent’s contribution to this is smaller than the entire developed world’s carbon emissions. Africa has contributed between 3.2% and 3.9% of global carbon emissions according to the IEA. Not withstanding this, Africa must play a meaningful role in carbon emissions abatement and adaptation due to its vulnerability to weather, climate, and water related incidents, which has caused the deaths of 733 585 Africans between 1970 and 2023. 

Multilateral and institutional organisations also have a key role to play in driving systemic and behavioural changes. Funding for energy projects in Africa has often been fragmented and narrowly focused on specific installations, whether utility-scale or off-grid. While these projects are essential, they do not represent the comprehensive structural change needed to revolutionise the continent’s energy landscape.

According to the International Renewable Energy Agency, it is estimated that only around 2% of global investments in renewable energy in the last two decades have been made in Africa. And while international funding commitments like those seen during last year’s COP29 demonstrate that there is momentum building towards closing the infrastructure gap, Africa needs so much more by way of investments that are carefully engineered to create sustainable, long-term impact.

The good news is that the work has begun and is gathering pace. For our part, Standard Bank recently updated our group sustainable finance targets and aims to mobilise more than R450-billion by 2028 for energy and infrastructure development on the continent. This builds on our previous sustainable finance target of R250-billion by 2026 and adds to the R177-billion financed since 2022, with R50.6-billion in sustainable finance mobilised in 2023 and R74.3-billion in 2024. We are matching our words to actions.

Africa stands on the cusp of exponential growth, it is within our grasp to take advantage of the opportunity. This being the year of the G20 Presidency and B20, we have a unique opportunity to both leverage the global attention for our strategic aims and demonstrate our resilient ability to find solutions for challenges.

At Standard Bank we often reiterate our purpose, Africa is our home, we drive her growth. We say it because we mean it, and we look forward to working with similar-minded partners as we advance the journey to securing the continent’s sustainable growth.