How Patient Capital is Boosting Africa’s Renewable Energy Drive
Patient Capital is enhancing Africa's renewable energy sector with investment commitments from partners at the Mission 300 Africa Energy Summit in Tanzania.
Why does this matter: More than 600 million people in Africa lack electricity, and there is a significant shift towards providing renewable energy solutions, with the Mission 300 initiative aiming to connect 300 million Sub-Saharan African to electricity by 2030.
The contribution of patient capital from a diverse spectrum of investors, including development finance institutions, philanthropic organisations, and African governments, is crucial for providing stable financing and necessary support over an extended timeframe. This approach facilitates the development and profitability of these African renewable energy projects, in contrast to the shorter-term financial returns typically anticipated from conventional investments.
The World Bank Group and the African Development Bank Group have launched an investment company called Zafiri to support private-sector renewable mini-grids and solar system solutions, with anchor partners investing up to $300 million in the first phase.
A growing number of investors have made investment commitments to the Mission 300 initiative, such as the Rockefeller Foundation, which has committed $15.6 million; the Asian Infrastructure Investment Bank (AIIB), committing up to $1.5 billion; the Islamic Development Bank (IsDB) Group, contributing $2.65 billion; the OPEC Fund, offering $1 billion; the Agence Française de Développement (AFD), investing €1 billion; and the African Development Bank Group and World Bank Group, will jointly invest $48 billion.
The bottom line: Twelve African governments have signed on to this initiative, underscoring its importance to their economies. However, supportive governmental policies and regulatory frameworks are essential to instil confidence among these patient capital providers. There is an opportunity for African energy startups to provide innovative, scalable, country-specific, and affordable power solutions to meet urban and rural electricity needs while ensuring the profitability of the ventures and a return on investment.