How 4 Sub-Saharan African Countries Stack Up For Climate-Smart Investment Potential

By Dana Sanchez AFKI Original Published: November 30, 2016, 10:46 am
climate-smart investmentWind power, South Africa.Photo: Global Wind Energy Council

There’s a sense of urgency to accelerate investment in Africa, to make energy more accessible and infrastructure more resilient as climate change threatens to undermine developmental gains and stifle growth on the continent, according to Washington, D.C.-based International Finance Corporation.

A member of the World Bank Group, IFC is the largest global development institution focused exclusively on the private sector in developing countries.

Depreciation of several currencies and rising inflation have made investing in some parts of Africa more challenging, according to a recent IFC report,

The report, entitled “Climate Investment Opportunities In Emerging Markets,” identifies four African countries that IFC says have potential for climate-smart investment: Côte d’Ivoire, Kenya, Nigeria, and South Africa.

Why did IFC choose these countries?

It chose these countries because they “represent geographies where we have a track record of climate investment, but see the potential for much greater investment,” IFC spokesman Frederick Jones told AFKInsider. “Data availability was also a factor, as well as the specificity and quality of the country’s nationally determined contribution.”

All four countries featured below are IFC client countries, but they did not pay to be in the report, Jones said.

The estimated total investment potential for the climate-smart needs of Côte d’Ivoire, Kenya, Nigeria, and South Africa is expected to reach $783 billion by 2030, according to IFC research.

The sectors that will be most impacted by investment include renewable energy, transportation, commercial construction and agriculture. Here’s how the numbers could potentially break down:

  • Renewable energy generation: 16 percent  ($123 billion investment potential).
  • Transportation: more than 50 percent ($499 billion investment potential).
  • Commercial construction of low-carbon buildings: ($153 billion investment potential).
  • Opportunities for investment in climate-smart agriculture projects across Sub-Saharan Africa: no valid estimates exist for investment potential.

Adapting to climate change with resilient infrastructure

Sub-Saharan Africa faces heightened risks of extreme drought, crop failures, reduced yield, and flooding. By 2050, almost 60 percent of people (800 million) will live in cities, increasing demand for transport, building, and energy infrastructure.

“It is imperative to invest in resilient infrastructure, including water
management (irrigation, hydropower, water supply, or flood control),
roads, bridges, and other transport infrastructure. According to the
World Bank Africa Climate Plan, these investments amount to $5 billion
to $10 billion per year,” according to IFC.

Here are some opportunities in the four countries according to a synopsis by How We Made It In Africa:

 

Source: IFC report, Climate Investment Opportunities Emerging Markets

 

Côte d’Ivoire

Côte d’Ivoire’s $9.6 billion investment potential by 2020 is tiny compared to the other African countries listed here. Nonetheless, its government is committed to reducing greenhouse gas emissions by 28 percent by 2030 while providing electricity for everyone, making its renewable energy sector “well-placed for growth”.

Renewable energy

Cote d’Ivoire’s only significant renewable energy source is hydropower, which produces 30 percent of the country’s electricity. Natural gas accounts for the remaining 70 percent. There’s good potential for solar power in the north, IFC said. The total renewable energy investment potential is $2.7 billion.

Agriculture

Côte d’Ivoire is a notable agricultural producer, which means that biomass energy projects could make use of feed stock.

Urban infrastructure

Green buildings ($562 million), waste ($400 million) and transport ($1 billion) each need investment to cater to the country’s growing population.

Kenya

Kenya was the third most-improved country in the World Bank 2015 Ease of Doing Business ranking, landing at No. 108 out of 189 countries reviewed.

The east African country’s investment potential is $81 billion by 2030. Kenya established power-purchase agreements and a 20-year fixed tariff for most renewable energy in 2015. It has a target of 50 percent renewable energy capacity by 2033, making a strong argument for investment in the country.

Renewable energy

In 2015, geothermal energy accounted for 27 percent of Kenya’s installed power capacity. IFC describes Kenya’s solar PV potential as excellent, with 30 percent of Kenyans who aren’t linked to the grid already served by solar power.

Urban infrastructure

Most Kenyans still live in rural areas, but the country wants to reach upper-middle income status by 2030. The IFC sets the investment potential for green buildings at $762 million by 2020.

Agriculture

The Kenya National Agricultural Insurance Programme compensates farmers and livestock owners for climate-related shocks such as drought and flooding in a public-private partnership.

“Other private sector opportunities to enhance resilience include agricultural and livestock waste for energy generation, improved crop productivity, water resources and more use of sustainable fertilizers,” IFC reported.

Nigeria

Oil and gas-rich Nigeria relies heavily on fossil fuels. Its only grid-connected renewable energy plants are three hydropower stations.

Renewable energy

The Nigerian government said it wants to increase the use of renewables. With frequent power cuts and only 58 percent of the population hooked up to the grid, renewable energy has the potential to meet this need.

The Nigerian government has a set a target of 40 GW of installed energy capacity by 2020, including 10 percent renewable energy. Off-grid solar PV accounts for the total $13 billion climate-smart investment potential by 2020, according to IFC.

Agriculture

Nigeria imports most of its food, but wants to reduce carbon dioxide-equivalent emissions by 74 tonnes by 2030. It hopes to do this with energy-generating agro-livestock waste, increase the productivity of crops, improve the efficiency of water and energy use, and use sustainable fertilizers.

South Africa

South Africa’s renewable energy investments increased by 329 percent to $4.5 billion in 2015. The IFC estimates that the climate-smart investment potential in some sectors will be more than $588 billion by 2030. The country has a goal of more than doubling power capacity with renewables making up 20 percent of this. It is aiming for a 97 percent electrification rate by 2025.

Renewable energy

Ninety percent of the country’s electricity is currently from coal. South Africa’s Renewable Energy Independent Power Producer Procurement Programme has approved 79 renewable energy projects by independent power producers. The cost of wind and solar technology decreased more than 70 percent over the course of four bidding rounds, and it is now competitive with new-build coal and gas, IFC reported.

South Africa’s climate-smart investment potential in the power sector is $14 billion by 2020.

Urban infrastructure

The green investment potential in South Africa’s urban infrastructure is excpected to be $524 billion, according to the IFC. Most of will go to transport ($458 billion), followed by buildings ($80 billion) and waste ($4 billion). The government says it plans to integrate electric vehicles into the government fleet, increase efficient vehicles on the roads to 20 percent by 2030, and promote urban mobility through non-motorized transport.

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