Many energy schemes across Africa wither because of the absence of effective financing structures. However, both development finance institutions and commercial lenders are committed to finding solutions that could transform the continent's prospects. James Gavin reports.
The race is on to find new ways of catalysing finance for projects that provide electricity to all Africans. As things stand, about half of the continent's population do not have access to a reliable electricity supply.
This is because too many viable energy projects fail to make the transition from pipe dream to bankability, leaving the continent lagging behind its energy access targets.
The problem is not so much a lack of finance; the missing key ingredient tends to be the regulatory frameworks that banks and other financial institutions require.
As Mahama Kappiah, Executive Director of the Economic Community of West African States' Centre for Renewable Energy and Energy Efficiency has noted, poor project management remains a major barrier to private investment in Africa.
"The money is not the problem," he told an energy access forum held by the African Development Bank (AfDB) and a number of other agencies in Cote d'Ivoire in March.
"The way that projects in the energy sector are prepared for financing is the problem."
Institutional and regulatory issues in the energy sector need to be addressed so that Africa can attract more private investment, he said. He added that focusing on these issues could encourage a wider range of financiers to back energy projects.
MULTILATERALS PLAY KEY ROLE
Large multilateral institutions are primed to play a leading role in transforming the financial outlook for Africa's energy sector. The AfDB has said that to achieve universal access by 2025, innovative mechanisms are required to mobilise an additional $30bn to $55bn annually in both domestic and international capital. This is a significant increase on the $22.5bn invested in the sector in 2015.
To achieve this, the AfDB said that all stakeholders must take collective action to create conditions conducive to financial flows, develop bankable projects, reform utilities and enhance African countries' absorptive capacities.
The AfDB said it will ramp up its investments to provide finance and guarantees, co-financing and syndication. Between 2016 and 2020, it has pledged to invest approximately $12bn and leverage about $50bn in public and private financing for investments in the energy...