The effects of climate have become the lived reality of many Africans; in my home country, Kenya, we are expecting heavy rains due to El Niño. Undoubtedly, climate change poses a significant threat to Africa’s development, as funds and resources that could have gone to development are increasingly diverted to mitigate climate-related issues and emergencies. The impacts are further compounded by other challenges such as unemployment, financing gaps, and the increasing debt burden.
But there is a silver lining, which is that Africa has the resources that are both critical for global decarbonization and capable of accelerating its sustainable growth.
Africa has about 65% of the world’s remaining uncultivated arable land, making it a crucial global food producer. Africa also has the leading deposits of critical minerals required for energy transition. Africa is a powerhouse of renewable energy—with 60% of the best solar energy resources globally, and vast potential for wind, hydropower, and geothermal energy. Most critically, Africa is the world’s youngest continent with a young population expected to grow to 2.5 billion by 2050. Coupled with the fact that Africa accounts for only about 3% of the global GHG emissions, these important factors of production make Africa an attractive destination for investments in this climate change era.
Africa is resource-rich and ready for green investments for the global good. This was the message at the just-concluded Africa Climate Summit in Nairobi, which saw African leaders align on a unified position outlined in the Nairobi declaration. This was a testament to the rising agency among African leaders to ensure Africa does not miss out on the unique competitive advantage presented by the climate crisis.
It is time to action and translate plans and ideas into results.
It is not good enough to praise Africa for its resources and opportunities; investments are required. Confluence Philanthropy’s webinar, Challenges and Opportunities for Investing in Africa’s Climate Solutions, offered a conversation on how we can make those investments.
Quickly dismissing Africa as a high-risk investment, as has been the dominant narrative, means lost value. Instead, investors must look at facts and context-specifics and seek to understand the specific types of risks and their driving factors, particularly from the perspectives of existing investors, entrepreneurs, and key ecosystem actors in the African market. Such learnings will help to finally debunk investing in Africa and enable proper mitigation of the real risks identified. Importantly, sustainable investments must consider the local context in addressing the market need and seek to benefit the communities in which they operate.
Opportune sectors for climate-positive investments in Africa are fast growing, have a high potential to benefit a large portion of the population, are suffering disproportionate effects of climate change, and/or come with increased co-benefits, hence increased potential for impact and profit making. Our bets are on five sectors:
- Renewable energy and green industries: There exists abundant renewable energy resources with limited competitive use, creating opportunities in new green industries and giving the region a competitive advantage in low-carbon sectors.
- Natural capital: Africa captures only a portion of potential revenue from natural capital, providing an opportunity for further harnessing while restoring and protecting it, especially with the developing carbon markets.
- Food systems and agriculture: Africa’s massive arable land needs to be cultivated in a climate-smart manner to reduce emissions and maintain food security for its growing population.
- Cities, infrastructure, and mobility: By 2050, Africa’s cities and towns will contain nearly 60% of the region’s projected population which will need to be housed in climate-resilient habitable urban areas.
The business case for investing in climate-positive activities in Africa is evident, and there are already a growing number of enterprises taking advantage of opportunities emerging in these sectors and creating a myriad of social, economic, and climate-positive impacts. One example is Koko Networks, a carbon-enabled business driving clean cooking in SSA that started in Kenya and is scaling at the rate of over 10,000 households per week.
We can all agree: the planet urgently needs these climate-positive investments.
Fridah Kiboori, Associate Partner, Dalberg Advisors
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