Africa is undergoing a major shift in its investment preferences. According to a recent report by the European Investment Bank (EIB), renewable energy accounted for 37 % of private equity investments in 2023. For the first time, the sector surpassed financial services, traditionally the dominant field. This change reflects a growing preference for green assets, viewed as strategic for sustainable development and resilience to climate challenges.
Favorable context for ecological transition
In the face of climate change effects, green infrastructure emerges as both an ecological necessity and an economic opportunity for Africa. A majority of African banks recognize this potential. According to the EIB report, nearly 67 % view it as a lever for opportunities, and 79 % set specific climate objectives. However, integrating climate risks into financial activities remains limited, particularly in vulnerable sectors like agriculture, which remains underfunded.
Despite this recognition, Africa’s ecological ambitions remain incomplete. Climate financing currently covers only 12 % of annual needs, leaving a significant gap for building necessary infrastructure. Furthermore, 90 % of resources come from public funds and 99 % from international organizations, while private sector involvement remains minimal.
Sectoral investment trends
Between 2022 and 2023, private equity investments in Africa dropped by 24 %, declining from 6.5 billion USD to 5 billion USD. Financial services, which led with 37 % of investment flows in 2022, saw their share shrink to 10 %. Meanwhile, sectors like agribusiness tripled their share to 8%. Consumer goods, industry, and information technology maintained stable levels, ranging between 10 % and 13 %.
Fossil fuels, once a priority, experienced a significant decline. In 2023, these non-renewable resources accounted for only 4 % of investments, reflecting waning interest. Conversely, green energy attracts investors with its sustainability and economic competitiveness.
Regional dynamics of investments
South Africa leads in private equity flows, capturing 47 % of investments in 2023. This dominance stems from favorable policies and a regulatory framework that attracts green projects. Kenya follows with 11 %, and Côte d’Ivoire with 7 %, driven by dynamic economies and green infrastructure potential. In contrast, Nigeria’s share decreased to 6 %, reflecting declining interest in FinTech, previously the primary driver of investments in the country.
Cost reductions and increased competitiveness
The decreasing costs of green energy production, enabled by competitive bidding processes, enhance the appeal of renewables. In Zambia and Senegal, solar projects have achieved some of the lowest global rates. These developments make energy more accessible at competitive prices, directly benefiting local populations.
For governments, renewable energy offers a dual opportunity: meeting growing energy demands and reducing reliance on imported fuels, which also stabilizes public finances. These projects play a key role in diversifying energy sources while fostering the transition to a more sustainable economic model.
Challenges and potential solutions
Despite these advancements, significant challenges persist. The lack of substantial private sector involvement hinders the growth of green infrastructure. Underdeveloped regulatory frameworks deter some investors, and limited local expertise in renewable energy poses additional barriers.
To address these issues, concrete measures are necessary. Strengthening public-private partnerships could mobilize more private funds. Improving regulatory and fiscal frameworks, combined with incentives for green projects, would create a more attractive environment. Finally, developing local skills would maximize the economic and social benefits of renewable energy investments.
Outlook for Africa’s Renewable Energy
The rise of renewable energy in Africa represents a strategic leap forward for the continent. While progress is encouraging, continued efforts are essential to overcome financial and structural challenges. An effective energy transition requires increased private sector participation, enhanced international cooperation, and optimized resource management.
With targeted initiatives and a shared commitment, Africa can not only meet its energy needs but also establish itself as a major player in renewable energy. The current momentum offers a unique opportunity to combine economic development, environmental sustainability, and climate resilience.
