Chapter 3

Investing in renewable
energies for Southern
Africa’s sustainable
development
This chapter examines the development of sustainable
investments with a focus on the renewable energy
sector in Southern Africa (Angola, Botswana, Eswatini,
Lesotho, Malawi, Mozambique, Namibia, South Africa,
Zambia and Zimbabwe). The first section shows that
multiple global crises have exacerbated sustainable
investment needs, while the region’s sources of
finance offer untapped potential to spur sustainable
growth. The second section explores how investments
in the region’s renewable energy sector can generate
social, economic and environmental development
gains. It identifies major constraints hampering
the investments that are needed to achieve energy
security and a just energy transition. The third section
proposes policy priorities to catalyse investments in
Southern Africa’s renewable energy sector.
 3. Investing in renewable energies for Southern Africa’s sustainable development

IN BRIEF The slow pace of public and private investments

has contributed to sluggish gross domestic product
(GDP) growth in Southern Africa, while global crises
have exacerbated the region’s investment needs.
Southern Africa’s domestic sources of finance
hold untapped potential to catalyse sustainable
investment. The regional pension fund market
is the largest on the continent, and South African
multinationals represent 75% of turnover and
market capitalisation of Africa’s listed companies.
Despite available resources, investment is taking
place, neither at the required scale, nor in sectors
critical for sustainable development.
Energy is a case in point. Investments in
renewable energy can help improve energy security,
overcome energy poverty and generate sustainable
development gains in Southern Africa. Renewable
energies can significantly lower carbon dioxide
(CO2) emissions and generate positive social and
economic returns on investments. For example, solar
energy creates twice as many jobs in operations and
maintenance as fossil fuels. Despite recent global
shocks, the renewable energy sector has grown, but
the investments needed to achieve universal clean
energy access remain large. South Africa’s energy
transition alone will demand about USD 250 billion
in the next three decades. In 2016-20, 79% of the
Southern African population in urban areas had
access to electricity compared to only 26% in rural
areas. Improving access to affordable energy and
accelerating the region’s just energy transition will
require mobilising public and private finance for
renewable energy projects.
This chapter identifies three priorities for
policy makers in Southern Africa to catalyse
investments in renewable energies: strengthening
regional co-operation to harmonise regulatory
frameworks and scale up investments in renewable
energy infrastructures; de-risking private sector
investments in renewable energy projects,
including through public-private partnerships
and development finance; and adopting dedicated
policies and financing solutions to increase clean
energy access in rural areas.

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 3. Investing in renewable energies for Southern Africa’s sustainable development

Southern Africa

Decreasing investment low growth Domestic sources of finance untapped potential

Annual GDP growth percentage points Total turnover Pension funds as % of GDP
and market capitalisation
of Africa’s listed companies
102%
25% 92%
-0.2 47%
-0.3 South African Rest of Africa
multinationals 75%
Namibia South Botswana
2017-19 2020-22 Africa

Renewable energy has potential for sustainable development

Southern Africa's share of the continent's
installed electricity capacity:

60% 40% 33% Solar energy

creates twice
as many jobs
in operations
and maintenance
as fossil fuels

Solar energy Wind power Hydropower

More investments can achieve energy security

and universal clean energy access

Access to electricity
(% of population), 2016-20

79% 26%
Electricity blackouts
in South Africa’s
coal-based energy
system are estimated
to drag growth
by 2 percentage
points in 2023

Urban Rural

Harmonise regulatory frameworks and accelerate

regional initiatives on renewable energy infrastructures

Enhance public-private alliances and development

What's next? finance based on national energy priorities

Adopt targeted policy solutions to scale up off-grid

renewable energy projects in rural areas

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3. Investing in renewable energies for Southern Africa’s sustainable development

Southern Africa regional profile

Figure 3.1. Components of economic growth and sources of financing in Southern Africa
A. Components of three-year change in GDP, by expenditure, 2011-22 B. Sources of financing for Southern Africa compared with Afrique de l'Oue
Final consumption Gross fixed capital formation government and private investment flows, 2010-21
Inventories Foreign balance Government revenues Capital inflows
Remittances Net official development assistance
Real GDP growth Government investment Private investment
Percentage points of GDP USD billion
8 250
7
6
5 200
4
3
2 150
1
0
-1 100
-2
-3
2011-13
2014-16
2017-19
2020-22
2011-13
2014-16
2017-19
2020-22
2011-13
2014-16
2017-19
2020-22
2011-13
2014-16
2017-19
2020-22
2011-13
2014-16
2017-19
2020-22

50

Southern Africa Africa Latin America and Asia (no high- High-income
the Caribbean income countries) countries 0
(excluding LAC) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Note: The components of GDP growth are calculated on an annual basis by using real annual GDP growth to estimate the
increase in real US dollars. Aggregate figures are calculated by taking the average of the national figures weighted by GDP
in purchasing-power-parity dollars. The components of GDP growth over three-year periods were calculated by taking
the difference between the geometric average of the annual real GDP growth over the period and the real GDP growth
when setting each component to zero for individual years. Foreign balance is the difference between imports and exports.
Imports contribute negatively to GDP. “High-income countries” refers to countries classified as “high-income” according to
the World Bank Country and Lending Groups outside of Latin America and the Caribbean. Government revenues include
all tax and non-tax government revenues minus debt service and grants received. Capital inflows include foreign direct
investment (FDI), portfolio investment and other investment inflows reported by the International Monetary Fund under
asset/liability accounting. Figures for capital inflows should be interpreted with some caution as some figures for 2021 and
for portfolio inflows are missing.
Sources: Authors’ calculations based on IMF (2022a), World Economic Outlook Database, www.imf.org/en/Publications/WEO/
weo-database/2022/October; OECD (2022a), OECD Development Assistance Committee (database), https://stats-1.oecd.org/
Index.aspx?DataSetCode=TABLE2A; World Bank (2022a), World Development Indicators (database), https://data.worldbank.org/
products/wdi; IMF (2022b), Balance of Payments and International Investment Position Statistics (BOP/IIP) (database), https://data.
imf.org/?sk=7A51304B-6426-40C0-83DD-CA473CA1FD52; IMF (2022c), Investment and Capital Stock Dataset (ICSD) (database),
https://data.imf.org/?sk=1CE8A55F-CFA7-4BC0-BCE2-256EE65AC0E4; and World Bank-KNOMAD (2022), Remittances (database),
www.knomad.org/data/remittances.
12 https://stat.link/0fkbli

Figure 3.2. Greenfield foreign direct investment flows into Southern Africa, by activity,
source and destination, 2017-22
A. By business activity B. By source country C. By destination country
Rest of world Rest of Southern Africa
Other activities USD 3 billion (3%) Zambia USD 4 billion (4%)
USD 12 billion (13%) United Kingdom USD 6 billion (6%)
USD 9 billion (10%)
Namibia
Manufacturing Europe, unspecified
USD 6 billion (7%)
Logistics and transportation USD 30 billion (31%) USD 28 billion (29%)
Italy
USD 9 billion (9%) USD 10 billion (10%) South Africa
Zimbabwe USD 37 billion (39%)
USD 11 billion (11%)
Extraction Africa, unspecified
USD 13 billion (13%) USD 10 billion (11%)

China Angola
Asia, unspecified USD 13 billion (14%) USD 14 billion (14%)
Electricity USD 11 billion (11%)
ICT
USD 19 billion (20%)
USD 14 billion (14%) United States Mozambique
USD 13 billion (13%) USD 18 billion (19%)

Note: The fDi Markets database is used only for comparative analysis. Actual investment amounts should not be inferred,
as fDi Markets data are based on upfront announcements of investment projects, including a share of projects that do not
actually materialise. ICT = information and communications technology.
Source: Authors’ calculations based on fDi Intelligence (2022), fDi Markets (database), www.fdiintelligence.com/fdi-markets.
12 https://stat.link/029wqf

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 3. Investing in renewable energies for Southern Africa’s sustainable development

Southern Africa needs to mobilise more and better investments for sustainable
development
Current global crises are exacerbating Southern Africa’s investment needs
In recent years, decreasing investments have contributed to sluggish GDP growth in
Southern Africa. The average GDP growth1 for Southern Africa over the 2020-22 period
was the lowest in Africa (0.3%, compared to 2.3% for Africa as a whole). Mostly driven
by South Africa, which made up 68% of the region’s GDP in 2021, the regional annual
GDP growth stagnated around 1% over 2017-19 and plummeted to -5.7% in 2020 during
the COVID-19 pandemic. Decreasing investment reduced Southern Africa’s annual GDP
growth by 0.2 percentage points over the 2017-19 period, and 0.3 percentage points over
the 2020-22 period (Figure 3.1, Panel A). During the pandemic – between 2019 and 2020 –
gross fixed capital formation in the region dropped by 23%, reaching its lowest level since
2006, mostly due to lower investments in South Africa (64%), Zambia (14%) and Angola
(13%). The projected real GDP growth for Southern Africa is 1.4% for 2023 and 2.4% for 2024
(IMF, 2023a).
The COVID-19 pandemic further lowered investment flows and heightened sovereign
debt risk. Public and private investments were already on a downward trend before the
COVID-19 pandemic (Figure 3.1, Panel B). In 2020-21, South Africa, the region’s largest
recipient of foreign direct investment (FDI) (receiving 48% of total FDI to the region
in 2015-19),2 witnessed large capital outflows. Due to rising global risk aversion (see
Chapter 1), net sales of local currency-denominated sovereign bonds by non-residents
drove down portfolio investment flows; FDI decreased by 39% in 2020, but rose to a
record high in 2021, mirroring developments in domestic growth (Goel and Miyajima,
2021; UNCTAD 2022a, 2021). Further, the region attracted higher official development
assistance (ODA) and remittance flows during the pandemic: in 2020, ODA increased by
27% on an annual basis, mostly due to higher flows to Malawi, Mozambique and South
Africa, while higher remittances mostly benefited Zimbabwe. Government revenues
rebounded in 2021 and averaged 25% of GDP in 2020-21, in line with the pre-pandemic
period. However, rising government expenditures to address the effects of the pandemic
contributed to an increase of 13 percentage points in the average debt-to-GDP ratio of
the region between 2019 and 2020. According to the International Monetary Fund, as of
February 2023, four of the eight African countries in debt distress are in Southern Africa
(i.e. Malawi, Mozambique, Zambia and Zimbabwe) (IMF, 2023b).
The ramifications of international conflicts exacerbate the vulnerability of some
countries to external shocks. International conflicts have contributed to rising global
food and energy prices, which has in turn created deep economic uncertainty across the
region: net imports of food and fuel account for over 5% of GDP in Botswana, Lesotho
and Zimbabwe (IEA, 2022a) while Malawi, Mozambique, Namibia and South Africa import
more than 30% of their wheat directly from Russia and Ukraine (UNCTAD, 2022b). Even in
Angola, the region’s largest oil exporter, increased public revenues due to rising global oil
prices have been partly offset by the country’s dependency on imported refined petroleum
and high costs of fuel subsidies (Kozul-Wright, 2023; Ver Angola, 2023).
Investments in climate change adaptation and mitigation and in clean energy access
are needed to improve resilience. Malawi, Mozambique and Zimbabwe ranked among the
five countries in the world most affected by extreme weather events in 2019 (Eckstein,
Künzel and Schäfer, 2021). South Africa’s coal-based economy is the leading CO2 emitter
on the continent: in 2020 the country accounted for 4.8% of the African population, 11% of
African GDP and 32.7% of continental CO2 emissions (IEA, 2022a). Estimates show that the
economic costs associated with frequent electricity outages have reduced South Africa’s
GDP by 1% to 1.3% annually since 2007 (Gbadamosi, 2023).

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3. Investing in renewable energies for Southern Africa’s sustainable development

Foreign and domestic sources of finance can be better allocated to support

sustainable development
South Africa’s information and communications technology (ICT) sector is highly
attractive to foreign investors, but more productive investments across the region are
needed to drive sustainable growth. In 2017-22, Angola, Mozambique and South Africa
attracted more than 70% of the region’s greenfield FDI capital expenditures (Figure 3.2,
Panel C). ICT received the largest share of FDI to South Africa, while most of the FDI flows
in Angola and Mozambique went to manufacturing, energy and extraction. On average,
foreign investment into manufacturing showed the highest job creation potential in the
region, with more than two jobs created for every USD 1 million invested (Figure 3.3).
However, this ratio is about three times lower than in East Africa and two times lower
than in North Africa. The automotive sector in South Africa shows high potential for
creating jobs, thanks to its important linkages with neighbouring countries (AUC/OECD,
2022, Chapter 3). Investments in other countries (such as Angola, Mozambique and
Zimbabwe) mostly target the processing of coal, oil and gas, and chemicals, resulting in
lower job creation and a higher environmental footprint (see also Chapter 1).

Figure 3.3. Greenfield foreign direct investment to Southern Africa, capital expenditures
and job creation, by business activity, 2017-21

Capital expenditures Jobs/capital expenditures ratio (right-hand side)

USD million
30 000 3

25 000 2.5

20 000 2

15 000 1.5

10 000 1

5 000 0.5

0 0
Manufacturing Electricity Extraction ICT and Internet Construction
Infrastructure
Note: ICT = information and communications technology. The figure shows the top five business activities by capital
expenditure in 2017-21.
Source: Authors’ calculations based on fDi Intelligence (2022), fDi Markets (database), www.fdiintelligence.com/fdi-markets.
12 https://stat.link/zneswf

ODA can support social sustainability, but its capacity to mobilise private finance in
the most vulnerable countries remains limited. In 2020, during the COVID-19 pandemic,
75% of ODA flows to the region targeted social infrastructure and services (such as health
and education), and ODA registered a 58% increase compared to 2019.3 However, between
2012 and 2020, ODA mobilised the largest share of private finance in Southern Africa’s
infrastructure and productive sectors (Figure 3.4). In 2018-20, Mozambique was the only
Least Developed Country among the top 20 recipients of mobilised private finance; in
2020, the largest volumes of the country’s private finance mobilised through ODA were
concentrated in a few large-scale liquefied natural gas projects (Bartz-Zuccala et al., 2022).
Today, only around 30% of ODA reaches the 20 countries with the highest electricity access
deficit; thus, aligning ODA with climate action would require increased efforts towards
clean energy projects in low-income countries (Moreira Da Silva, 2021; OECD, 2019).

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 3. Investing in renewable energies for Southern Africa’s sustainable development

Figure 3.4. Private finance mobilised through official development assistance

in Southern Africa, 2012-20, USD million
A. By country B. By sector

Mozambique
Production
South Africa

Angola

Zambia Economic infrastructure

and services
Malawi

Botswana
Social infrastructure
Zimbabwe and services

Namibia

Eswatini Multi-sector and

cross-cutting
Lesotho

0 2 000 4 000 6 000 8 000 10 000 12 000 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000
USD million USD million
Source: Authors’ calculations based on OECD (2022b), “Mobilisation”, OECD.Stat (dataset), https://stats.oecd.org/Index.
aspx?DataSetCode=DV_DCD_MOBILISATION.
12 https://stat.link/oink6m

Impact investing4 is highly concentrated in South Africa, and the country has
introduced enabling environmental, social and governance (ESG) policies. According to
the latest available data (GIIN, 2016), nearly three-quarters of all impact capital invested in
the region has been disbursed to South Africa (mostly in energy and finance), amounting
to USD 29.1 billion (of which more than USD 24.2 billion originated from development
finance institutions). This is close to 15 times the amount deployed in Zambia, which ranks
second in the region in terms of impact capital disbursed. South Africa has implemented
substantial enabling policies over the past decade to encourage institutional investors to
incorporate ESG factors into their investment strategies (GIIN, 2020).
Large domestic institutional investors such as pension funds offer untapped potential
for impact investing in the region. The regional pension fund market is the largest on
the continent, with total assets in retirement savings plans accounting for 102% of GDP
in Namibia (2020), 92% in South Africa (2018) and 47% in Botswana (2019).5 However,
regulatory and market barriers hold back institutional investors, including in the most
developed markets. A recent survey of 139 pension funds in South Africa, representing
74% of assets under management in the country, shows that most pension funds identify
a lack of both impact investing products and an impact investment pipeline as a top
constraint in directing investments to green and climate-focused assets, followed by
difficulty in monitoring and reporting on impacts of investments (IFC, 2020a).

Intra-regional investment is limited, but South African multinationals can

catalyse investments at scale
Most FDI in the region comes from high-income countries, while intra-regional FDI flows
are limited. In 2017-21, high-income countries represent the largest share of greenfield FDI
inflows to the region, mostly targeting South Africa, Angola and Mozambique (in that order).
In line with continental figures, only 11% of greenfield FDI capital expenditures to Southern
Africa comes from other African countries, which includes 5% from countries in the region.6
South Africa-based company groups active in finance, ICT and retail have the potential
to drive sustainable investments at regional and continental scale. In terms of greenfield
FDI outflows, South Africa is the largest African investor both on the continent (USD 9 billion
and 31% of intra-African FDI in 2017-21) and outside the continent (USD 7 billion and 58% of
African FDI outside the continent in 2017-21) thanks to the internationalisation activities

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3. Investing in renewable energies for Southern Africa’s sustainable development

of its large company groups. In many cases, their FDI capital expenditures expand across
other African countries, mostly in Southern and West Africa (Figure 3.5). South Africa-
based companies represent 75% of the turnover and market capitalisation of listed
companies on the continent7 and are mostly active in finance, ICT and retail (Figure 3.6).

Figure 3.5. Greenfield foreign direct investment outflows from Southern African countries,
by destination regions, 2017-21, USD million
ORIGIN DESTINATION
Developing Asia 447
Rest of the world
1 538

East Africa 1 374

High-income
countries 4 094

South Africa
16 144
LAC 1 343

Southern Africa
4 176

West Africa
Angola 627 4 463
Namibia 314
Other countries 351

Note: “Other countries” includes Botswana (USD 282 million), Zimbabwe (USD 66 million) and Zambia (USD 3.5 million) while
“Rest of the world” includes countries in Central Africa (USD 94 million), North Africa (USD 82 million) and other regions not
specified in the chart (USD 1 362 million).
Source: Authors’ calculations based on fDi Intelligence (2022), fDi Markets (database), www.fdiintelligence.com/fdi-markets.
12 https://stat.link/xo32zs

Figure 3.6. The ten Southern African companies with the highest market capitalisation

Finance and insurance ICT Manufacturing Wholesale and retail

A. Market capitalisation (USD billion) B. Total assets (USD billion) C. Number of employees

Naspers

FirstRand

Standard Bank Group

Sasol

Sanlam

MTN Group

Nedbank Group

Absa Group

Capitec Bank Holdings

Shoprite Holdings

0 20 40 60 80 100 0 50 100 150 200 0 50 000 100 000 150 000

Note: ICT = Information and communications technology. Companies listed here are the ten publicly listed private companies
with the highest market capitalisation reported within the Orbis database that are based within the region.
Source: Authors’ calculations based on data from Bureau van Dijk (2022), Orbis (database), www.bvdinfo.com/en-gb/our-
products/data/international/orbis. 12 https://stat.link/s6jf3l

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 3. Investing in renewable energies for Southern Africa’s sustainable development

Investments in Southern Africa’s renewable energy potential can generate

inclusive and sustainable development

Investments in renewable energy can generate economic, social and environmental

development gains in Southern Africa
Southern Africa’s renewable energy market is growing fast and holds high potential.
Southern Africa accounts for about 60% of Africa’s installed solar energy capacity, 40% of
the continent’s installed wind power and 33% of its renewable hydropower capacity. In
2021, the total renewable electricity installed capacity in the region reached 21.4 gigawatts
(GW), representing a 37% increase since 2017.8 South Africa is leading the region’s energy
transition with large investments in solar, wind and green hydrogen, which will help
reduce the country’s high reliance on coal. Mozambique and Zambia are boosting
their hydropower capacity. Namibia is investing in the solar, wind and green hydrogen
industries. Botswana and Angola are starting solar deployments. The International
Renewable Energy Agency estimates technical installable capacities in the region of 908 GW
for solar and 53 GW for wind, assuming a 1% land-utilisation factor (IRENA/AfDB, 2022).
The renewable energy sector can become an important source of job creation. In 2021,
the renewable energy sector in Southern Africa accounted for about 19% of total renewable
energy jobs in Africa.9 In South Africa, renewable energy technologies provide more jobs
in operations and maintenance than fossil fuels (Figure 3.7). Following the country’s
Renewable Energy Independent Power Producer Procurement Programme, renewable
energy jobs doubled from 31 207 in 2016-17 to 63 291 in 2021. However, 75% of these jobs
were in the construction sector, which typically provides short-term employment, while
only 25% were in more permanent operations and maintenance occupations (IRENA/ILO,
2022; AUC/OECD, 2022). Due to its linkages to other productive sectors, renewable energy
investment can create jobs across several industrial sectors (such as the steel, fibreglass
and electrical equipment industries) and support services (such as legal, financial
and engineering design). According to a recent study, an injection of USD 4 billion into
renewable energy production in South Africa can create more than 30 000 jobs by 2030
across the energy value chain (GreenCape, 2021).

Figure 3.7. Operations and maintenance jobs created per gigawatt hour by energy source
in South Africa
Jobs/GWh
0.30

0.25

0.20

0.15

0.10

0.05

0.00
Hydropower Coal Gas Diesel Nuclear Onshore wind Geothermal Biomass Solar Solar thermal
photovoltaic
Source: COBENEFITS (2019), Future Skills and Job Creation through Renewable Energy in South Africa: Assessing the Co-benefits of
Decarbonising the Power Sector, https://www.cobenefits.info/wp-content/uploads/2019/03/COBENEFITS-Study-South-Africa-
Employment.pdf.
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3. Investing in renewable energies for Southern Africa’s sustainable development

Southern Africa’s energy sector is a major contributor to continental carbon emissions.

Greenhouse gas emissions per capita in Southern Africa (2.5 tonnes of CO2-equivalent per
capita) are higher than in Africa as a whole (0.9) and Latin America and the Caribbean (2.1)
but lower than in developing Asia (3.6) and high-income countries (9.2) (Figure 3.8).
Relative to other African regions, Southern Africa has the largest share of CO2-equivalent
emissions in the energy sector (58.3%) and in electricity and heating (51.3%). Other
energy-reliant sectors – such as commercial and public services (49.0%), manufacturing
and construction (37.9%), and agriculture and forestry (37.8%) – are also major emitters at
the continental level.10

Figure 3.8. Southern Africa’s greenhouse gas emissions, tonnes of CO2-equivalent

per capita, 2020
Electricity and heat production Energy industry own use
Manufacturing industries and construction Transport
Residential Commercial and public services
Agriculture and forestry Fishing
Final consumption not elsewhere specified
Tonne/capita
10
9
8
7
6
5
4
3
2
1
0
Southern Africa Africa Latin America and the Asia (no high-income High-income countries
Caribbean countries) (no LAC)
Note: LAC = Latin America and the Caribbean.
Source: OECD (2022c), “GHG Emissions from fuel combustion (summary)”, IEA CO2 Emissions from Fuel Combustion
Statistics: Greenhouse Gas Emissions from Energy (database), https://doi.org/10.1787/445ec5dd-en.
12 https://stat.link/1pcdkw

Renewable energy use in the region is associated with lower CO2 emissions.
Researchers estimate that, in South Africa, a 1% increase in hydroelectricity consumption
brings about a 0.52% reduction in CO2 emissions (Udeagha and Ngepah, 2021). The Kangnas
Wind Farm in the Northern Cape (South Africa) generates 513 gigawatt hours per year,
which is sufficient to meet the energy consumption of 155 000 South African homes,
saving 550 000 tonnes of carbon emissions annually (GWEC, 2022).
The development of non-combustion renewable energies and sustainable biofuels
technologies must accelerate to significantly reduce carbon emissions, particularly in
South Africa. The average share of non-combustion energy in renewable energy production
in Southern Africa (21%) for the period 2010-20 is only second to that of East Africa (35%).
However, despite experiencing an upward trend since 2010, the non-combustion energy
share in total energy production was only 2% in 2020. That is slightly above the share
for Africa as a whole (1.9%) but much lower than in Latin America and the Caribbean
(10%) and developing Asia (6.3%).11 Investments in non-combustion energy sources must
be accompanied by the development of sustainable biofuels technologies to significantly
reduce carbon emissions (Stafford et al., 2019).
Renewable energy can underpin economic growth through positive returns on
investments and resilience to economic shocks. Espoir, Sunge and Bannor (2023)

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 3. Investing in renewable energies for Southern Africa’s sustainable development

find that a 1% increase in renewable energy consumption in the Southern Africa

Development Community (SADC) leads to a bigger impact (0.55%) on economic growth
than a 1% increase in non-renewable energy consumption (0.47%). According to Wang
et al. (2018), renewable energy’s effect on economic growth is positive in countries
with lower overall risks and more stable economic environments. Relatedly, a recent
report shows higher long-term portfolio returns for renewable energy compared
with non-renewable energy in emerging and developing economies, but large return
differentials exist vis-à-vis advanced economies (IEA/CCFI, 2021). Investments
in renewable energy were also far less impacted by the economic shocks due to
COVID-19. For example, while total greenfield FDI capital expenditures to South Africa
decreased by 19% between 2018-19 and 2020-21, they increased by 72% in the renewable
energy sector.12

Unlocking public and private finance in renewable energy can improve energy
security
South Africa is driving renewable energy investments in the region, but the
country’s inefficient coal-based energy system continues to cause socio-economic
harm for the most vulnerable. Between 2012 and 2021, the renewable energy share
in Southern Africa’s total electricity capacity increased from 14.7% to 28.6%, above
Africa’s average (23%) (Figure 3.9). Southern Africa was the main recipient of renewable
energy investment in Africa, having attracted over 40% (USD 22.4 billion) of total flows
over the 2010-20 decade. Solar energy projects accounted for 60% of that investment
(USD 13.5 billion) followed by wind at 35% (USD 7.8 billion). South Africa, through its
Renewable Energy Independent Power Producer Procurement Programme, attracted
85% of the region’s renewable energy investment between 2010 and 2020. In 2020, with
5.9 GW, the country represented 57% of Africa’s installed solar generation capacity
(IRENA/AfDB, 2022). Nonetheless, the country’s outdated and mismanaged coal-based
energy system continues to generate prolonged electricity blackouts, which are estimated
to reduce South Africa’s growth by 2 percentage points in 2023, with severe socio-
economic consequences for the most vulnerable (Bhargav, Gumbi and Winning, 2023;
De Jonghe, 2022).

Figure 3.9. Installed electricity capacity in Southern Africa, by energy source, 2000-21
Coal and peat Renewable hydropower
Oil Solar
Wind Pumped storage
Nuclear Natural gas
Fossil fuels not elsewhere specified Bionergy
% renewable energy in Southern Africa (RHS) % renewable energy in Africa (RHS)
Megawatts %
80 000 35
70 000 30
60 000
25
50 000
20
40 000
15
30 000
10
20 000
10 000 5

0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Note: RHS = right-hand side.
Source: Authors’ calculations based on IRENA (2022a), IRENASTAT (database), https://pxweb.irena.org/pxweb/en/IRENASTAT/
IRENASTAT__Power%20Capacity%20and%20Generation/RECAP_2022_cycle2.px/.
12 https://stat.link/loub3s

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Public funds could be better allocated to accelerate Southern Africa’s clean energy
development. In the last decade, non-renewable energy has received more public funds
than renewable energy, despite rising investments in solar energy production. Cumulative
public investment flows into total energy production amounted to USD 23.9 billion, of
which 44% went to the oil sector (in Angola) and only 28% to renewable energy across the
region (mostly in hydropower and solar) (Figure 3.10). If Angola invested in its high potential
in hydropower, solar and wind energy production, it would achieve its 60% electrification
target by 2025 (Ayukegba, 2022). Sonangol – the former Angolan fuel concessionaire –
seeks to diversify its energy sources as part of its new Energy Transition strategy, making
the transition from an oil and gas company to an energy company (ITA, 2022).
The decreasing costs of renewable energy technologies represent an opportunity to
reduce the region’s reliance on hydropower and increase resilience to external shocks.
The low diversification of public investments into renewables has contributed to a narrow
energy technology mix in the region (Figure 3.10). Hydropower has been used in Africa for
many decades owing to the presence of the continent’s large rivers; the Zambezi River, for
example, provides hydropower to Mozambique, South Africa, Zambia and Zimbabwe. In
2021, hydropower represented 15% of Southern Africa’s total electricity capacity and 52%
of its renewable electricity capacity. In Malawi, Mozambique and Zambia, hydropower’s
share in electricity generation exceeds 80% (IRENA/AfDB, 2022). Hydropower is increasingly
vulnerable to climate shocks, which calls for comprehensive cost-benefit analyses of
new and existing facilities (IEA, 2020). At the same time, the falling installation costs of
alternative energy technologies such as wind and solar can be an opportunity to invest
in diversifying the current renewable energy mix (Figure 3.11). For example, according to
the International Energy Agency, “[w]ith further cost declines, Africa has the potential
to produce 5 000 megatonnes of hydrogen per year at less than USD 2 per kilogramme –
equivalent to global total energy supply today” (IEA, 2022a). Namibia’s government recently
launched a new strategy aimed at delivering up to 12 tonnes of green hydrogen annually
by 2050 and making the country the first green hydrogen provider on the continent.
The initiative will require up to USD 190 billion in investments and is expected to create
600 000 jobs by 2040 (Rust and Ossenbrink, 2022).

Figure 3.10. Cumulative public investment flows into renewable

and non-renewable energy in Southern Africa, 2001-20, USD million

2001-10 2011-20
USD million
12 000

10 000

8 000

6 000

4 000

2 000

0
Oil Coal and peat Other non-renewable Renewable hydropower Solar Other renewable
energies energies
Non-renewable energy Renewable energy
Source: Authors’ calculations based on IRENA (2022a), IRENASTAT (database), https://pxweb.irena.org/pxweb/en/IRENASTAT/
IRENASTAT__Power%20Capacity%20and%20Generation/RECAP_2022_cycle2.px/.
12 https://stat.link/3b8ric

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Figure 3.11. Global weighted average total installed costs by energy source, 2010-20
A. Solar B. Wind C. Other renewable energies

Solar photovoltaic Concentrating solar power Offshore wind Onshore wind Biomass Geothermal Hydropower

USD 2020/kilowatt
12 000

10 000

8 000

6 000

4 000

2 000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: IRENA (2021), Renewable Power Generation Costs in 2020, www.irena.org/-/media/Files/IRENA/Agency/Publication/2021/

Jun/IRENA_Power_Generation_Costs_2020.pdf?rev=c9e8dfcd1b2048e2b4d30fef671a5b84.
12 https://stat.link/kfc7jy

High risks and inefficient public utilities discourage private investment in many
countries in the region. Public investment through state-owned enterprises plays a
larger role in energy sector investment in Africa than in other world regions, as most of
its projects are not able to attract private capital owing to political, legal and economic
risks (IEA, 2022a; IRENA/AfDB, 2022; see also Chapters 1 and 5). Estimated operating
losses among all African utilities exceeded USD 150 billion in 2020. Attracting private
investment requires strengthening the capacity of local energy authorities through better
governance, transparent regulations and effective incentives (IEA, 2022a).
A lack of capital market instruments and rigid regulations inhibit investments from
large institutional investors based in the region. A recent survey shows that Africa-
based institutional investors represent 3.6% of global institutional investors with direct
investments in renewable energy projects compared to close to 0% of those with indirect
investments in renewable energy funds. Capital market instruments needed for indirect
portfolio investments (such as renewable energy funds or green bonds) are less available
in African markets (IRENA, 2020). Moreover, rigid regulatory regimes are often identified
as major obstacles to pension funds’ investment in infrastructure. Botswana, Namibia
and South Africa are Africa’s largest pension fund markets as a share of GDP (see above
and Chapter 1). South Africa’s pension system is more advanced in terms of infrastructure
finance, while Botswana and Namibia invest less in infrastructure, in part because of
more constraining regulations (Sy, 2017).

Scaling up investments in off-grid renewable energy solutions can help reduce

the rural-urban divide in energy access
Off-grid renewable energy solutions can increase electricity access in rural areas
and create opportunities for small-scale entrepreneurship. On average, 53% of Southern
Africa’s population had access to electricity over the period 2016-20 compared to 41%
in 2001-05, but large differences persist between urban (79%) and rural areas (26%)
(Figure 3.12). Significant investments in small-scale and portable off-grid renewable
energy solutions can help increase clean energy access in rural areas while creating
opportunities for small-scale investors and entrepreneurs. For example, off-grid solutions
can enable a shift away from wood and charcoal to cleaner energy sources for cooking
(CCA, 2021), with large benefits in terms of reduced air pollution, fewer premature deaths
and opportunities for small entrepreneurs (Box 3.1).

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Figure 3.12. Access to electricity in Southern Africa,

five-year average share of population by location

Urban Rural Total Linear trend (urban) Linear trend (rural) Linear trend (total)
%
90
80
70
60
50
40
30
20
10
0
2001-05 2006-10 2011-15 2016-20
Source: Authors’ compilation from World Bank (2022a), World Development Indicators (database), https://data.worldbank.org/
products/wdi.
12 https://stat.link/62tusv

Box 3.1. Access to clean cooking in Southern Africa

Clean cooking – the use of modern stoves and clean fuels for cooking – is a cross-cutting solution
to advance various sustainability objectives such as health and climate protection, affordable
energy, and women’s empowerment (CCA, n.d.). In Southern African countries excluding South
Africa, the estimated welfare cost per capita of premature deaths from household air pollution in
2019 was approximately 2.5 times higher than in South Africa and 1.5 times higher than Africa’s
average.13 Eighty-seven per cent of the South African population had access to clean cooking in
2020, compared to an average of 37% in other Southern African countries and 30% in Africa as a
whole. Since 2000, the share increased by 31 percentage points in South Africa, compared to an
average increase of only 7 percentage points in other Southern African countries over the same
period (Figure 3.13).

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 3. Investing in renewable energies for Southern Africa’s sustainable development

Box 3.1. Access to clean cooking in Southern Africa (continued)

Figure 3.13. Share of the population with access to clean cooking

in Southern Africa, 2000 and 2020

2000 2020
%
100

90

80

70

60

50

40

30

20

10

0
South Africa Eswatini Botswana Angola Namibia Southern Lesotho Southern Zimbabwe Africa Zambia Mozambique Malawi
Africa Africa
(excluding
South Africa)
Note: In Malawi and Mozambique, the reported share is less than 5%.
Source: IEA (2021a), World Energy Outlook-2021, www.iea.org/reports/world-energy-outlook-2021 based on WHO (2021),
Household Energy Database, www.who.int/data/gho/data/themes/air-pollution/who-household-energy-db and IEA (2021b),
World Energy Balances 2021 (database), www.iea.org/data-and-statistics/data-product/world-energy-balances.
12 https://stat.link/bck2ra

Investing in clean cooking solutions can contribute to social and environmental sustainability
while creating opportunities for small entrepreneurs. Mozambique and Zambia provide
examples:
• Mozambique. In 2012, CleanStar Mozambique (CSM), a small to medium-sized enterprise,
designed a profitable ethanol-fuelled cooking stove to reduce indoor air pollution and
deforestation from the use of wood and charcoal for cooking. The CSM project involves a
value chain starting with a contract farming scheme that generates cash for smallholder
farmers who supply raw materials to the CSM plant. Ethanol-based fuel and cook stoves
are then produced and distributed. The CSM target of supplying 25 000 stoves annually is
expected to prevent the deforestation of 14 000 hectares of forest and save 169 000 tonnes
of carbon (CCA, 2022).
• Zambia. In 2019, Emerging Cooking Solutions Zambia, a social enterprise, received
EUR 1 million in funding from Energy and Environment Partnership Africa to scale up
the use of its pay-as-you-go clean cooking stove in Zambia. Each stove saves 4 tonnes of
CO2 and EUR 50 per year while improving family health. The project aims at substituting
charcoal with sustainably produced biomass pellets for 20 000 households and is expected
to create 100 direct jobs (EEP Africa, 2021).

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Due to lower investments into off-grid renewable electricity capacity, access to off-
grid electricity in Southern Africa has grown sluggishly compared to the rest of Africa
(Figure 3.14). In 2010-20, Southern Africa attracted only 3% (USD 52 million) of total
investment in off-grid renewables in Africa. Mozambique and Zambia received 65% of all
commitments to the region (IRENA/AfDB, 2022). In South Africa, prohibitive energy and
installation costs and a lack of specific contracting solutions (e.g. green power purchase
agreements) for energy providers are slowing down the uptake of off-grid systems
(Engineering News, 2022).
Figure 3.14. Share of the population with access to off-grid renewable electricity in Africa
and Southern Africa, 2010-19

African population with access to off-grid renewable electricity

Southern African population with access to off-grid renewable electricity
%
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Note: Off-grid renewable electricity includes electricity through mini-grids, solar home systems, solar lights, hydropower,
and biogas (IRENA, 2022a).
Source: Authors’ calculations based on IRENA (2022a), IRENASTAT (database), https://pxweb.irena.org/pxweb/en/IRENASTAT/
IRENASTAT__Power%20Capacity%20and%20Generation/RECAP_2022_cycle2.px/ and UN DESA (2022), “World Population
Prospects: The 2022 Revision”, United Nations (database), https://population.un.org/dataportal/data/indicators/67/
locations/903/start/2000/end/2030/table/pivotbylocation.
12 https://stat.link/71cxl6

Public policies can catalyse investments in Southern Africa’s renewable

energy sector
Advancing energy security and a just energy transition in Southern Africa requires
co-ordinated policies based on national and local contexts. As shown in the previous
sections, investments in renewable energies have the potential to enhance energy
security and reduce carbon emissions in Southern Africa. They can increase access to
clean energy for the most vulnerable, hence generating social and economic returns.
However, each country in the region is unique in terms of energy access and production
capacity (Figure 3.15). Different policy solutions are needed to address challenges and
opportunities at the national level. Taking that into account, this section discusses three
priority areas for policy makers to catalyse renewable energy investments in the region:
• Strengthening regional co-operation to harmonise regulatory frameworks and
scale up investments in renewable energy infrastructures. Closer co-operation
among all countries in Southern Africa is key to setting realistic energy transition
objectives, assessing investment needs, harmonising regulatory procedures and
ensuring effective policy implementation and monitoring. Regional initiatives on
cross-border infrastructures can accelerate renewable energy uptake.

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• De-risking private sector investments in renewable energy projects, including

through public-private partnerships and development finance. For example,
countries relying on large fossil fuel production capacity and more advanced
regulatory frameworks (e.g. Angola and South Africa) can make the best use of
public-private partnerships to accelerate the transition towards clean energy
production. Through development finance institutions, international co-operation
can play a major role in mobilising private capital in more vulnerable countries
with significant renewable energy potential, low access to electricity and lower
regulatory capacity (e.g. Malawi, Mozambique, Zambia and Zimbabwe).
• Dedicating specific policies and financing solutions to increase access to clean
energy in rural areas. Less than 15% of the rural population has access to electricity
in Angola, Malawi, Mozambique and Zambia (World Bank, 2022a). Dedicated policies
and financing instruments can help scale up off-grid renewable energy solutions
(e.g. mini-grids or stand-alone systems) and accelerate access to clean energy while
creating opportunities for small entrepreneurs in rural areas.

Figure 3.15. Installed electricity capacity and access to electricity

in Southern African countries, 2020-21
Coal and peat Renewable hydropower
Solar Oil
Wind Pumped storage
Nuclear Natural gas
Fossil fuels not elsewhere specified Bioenergy
% of installed renewable electricity capacity % of population with access to electricity
% Total installed electricity capacity (RHS) Megawatts
100 70 000
90
60 000
80
70 50 000
60 40 000
50
40 30 000
30 20 000
20
10 000
10
0 0
Lesotho Eswatini Zambia Mozambique Malawi Namibia Angola Zimbabwe South Africa Botswana
Note: RHS = right-hand side. Data on installed electricity capacity refer to 2021, while data on access to electricity
refer to 2020.
Source: Authors’ calculations based on IRENA (2022a), IRENASTAT (database), https://pxweb.irena.org/pxweb/en/
IRENASTAT/IRENASTAT__Power%20Capacity%20and%20Generation/RECAP_2022_cycle2.px/ and World Bank (2022a),
World Development Indicators (database), https://data.worldbank.org/products/wdi.
12 https://stat.link/ojbxf7

Regional co-operation is key to harmonise regulatory frameworks and scale up

investments in renewable energy infrastructures
Harmonising regulatory frameworks and implementing action plans at the regional
level can help reduce constraints on investment, such as high cost of capital, across
countries. As seen in Chapter 1, the weighted average cost of capital for energy projects
can be up to seven times higher in Africa than in Europe and North America (IEA,
2022a). Almost all renewable energy policies of countries in Southern Africa (Table 3.1)
highlight the high initial cost of capital as the major constraint to renewable energy
investment. Other key constraints are inadequate regulatory frameworks on renewable
energy procurement, limited funding options and the lack of skilled personnel to
design, install and maintain renewable energy systems. Hence, there is a large scope
for regional co-ordination on these matters. The 2016-2030 Renewable Energy and

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Energy Efficiency Strategy and Action Plan (REEESAP) was adopted in July 2017 in
Eswatini by the SADC ministers responsible for energy. The plan provides a framework
for SADC member states to develop their own strategies and action plans for renewable
energy and energy efficiency, through common strategic guidelines on regulatory and
institutional frameworks, financing mechanisms and capacity building, among others.
The SADC Centre for Renewable Energy and Energy Efficiency was formed as part of the
implementation of the REEESAP to lead the development and implementation of a holistic
regional renewable energy and energy efficiency programme (SACREEE, 2019). Ensuring a
coordinated and effective implementation of the REEESAP at national level will be crucial
to improve the renewable energy investment landscape across the region.
Most Southern African countries have set renewable energy targets within their
national policies. Most countries in Southern Africa included renewable energy targets
within their national policies, but their timeframes and specifications vary (Table 3.1).
All 16 countries in the SADC submitted nationally determined contributions (NDCs) in
the context of the Paris Agreement. Of the 16 NDCs, all but Botswana’s include renewable
energy objectives, but only 11 are quantifiable. The SADC-aggregated quantifiable NDC
renewable energy targets amount to 29.6 GW of renewable energy installed capacity by
2030 (Muñoz Cabré et al., 2020).

Table 3.1. Renewable energy targets in national policies of selected

Southern African countries
Country Energy transition targets National policy
Angola By 2025: 5 000 megawatts (MW) of large hydropower, 500 MW of biomass, 2014 Angola Renewable Energy Strategy
100 MW of solar, 100 MW of wind and 100 MW of small hydropower.
Botswana By 2025: 100 MW of solar photovoltaics (PV). 2007 and 2016 National Development
By 2030: 25% renewable energy. Plans (NDP 10 and 11)
Eswatini By 2030: 50% renewable energy penetration in the electricity mix. Energy Masterplan 2034
Mozambique By 2043: 4 900 ca. MW hydropower, 530-980 MW solar and 2018 Integrated Master Plan of Energy
150-270 MW wind. Infrastructures
Namibia By 2030: 49% to 70% renewable electricity. Under the 70% scenario: 2016 National Renewable Energy Policy
530 MW of solar PV, 349 MW of wind, 347 MW of hydropower, 150 MW of
concentrated solar power and 40 MW of biomass.
South Africa By 2030: 39.7% of renewable generation capacity, 17 742 MW of 2019 Integrated Resource Plan for
wind, 8 288 MW of solar PV, 4 600 MW of hydropower and 600 MW of Electricity
concentrated solar power.
Zambia By 2030: 2 015 MW of grid-connected renewable energy and 1 886 gigawatt Renewable Energy Strategy and Action
hours of off-grid renewable energy provided by PV mini-grids and solar Plan 2022
home systems.
Zimbabwe By 2030: 26.5% renewable electricity, 1 575 MW of solar PV, 275 MW 2019 National Renewable Energy Policy
of bioenergy, 150 MW of small hydropower, 100 MW of wind, 250 000 solar
water heaters, 8 000 domestic bio-digesters and 288 institutional
bio-digesters.

Source: Authors’ compilation based on Muñoz Cabré et al. (2020), Expanding Renewable Energy for Access and
Development: The Role of Development Finance Institutions in Southern Africa, and desk research.

Policy makers can increase cooperation at the regional level to accelerate the transition
towards renewable energy. The Southern Africa Power Pool Plan 2017 includes a “high
renewables” scenario with 53% renewables in the energy mix by 2040, which has been
set as a feasible high-level policy target for the SADC region (Muñoz Cabré et al., 2020).
Under this scenario, the SADC region would need an estimated annual investment of
USD 2.4 billion to add 2.8 GW per year until 2040. Southern African countries can plan
co-ordinated actions, such as the Africa Clean Energy Corridor (Box 3.2), to better attract
investment into clean energy regional power pools.

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Box 3.2. The Africa Clean Energy Corridor

The Africa Clean Energy Corridor (ACEC) is a regional initiative that aims to accelerate
the development of renewable energy and cross-border trade of renewable power within
the Eastern Africa Power Pool and Southern African Power Pool. The initiative was
launched in 2014 by 19 African countries in Eastern and Southern Africa and has since
involved more than 30 governments, regional organisations, development partners and
financial institutions. Following the successes achieved in East and Southern Africa,
the West Africa Clean Energy Corridor was initiated in 2016.
The ACEC spans five main pillars:
i) Zoning and Resource Assessment to identify sites for renewable power generation
in areas with high resource potential and suitable transmission routes
ii) National and Regional Planning to fully consider cost-effective renewable power
options
iii) Enabling Frameworks for Investment to open markets and reduce financing
costs
iv) Capacity Building to plan, operate, maintain and govern power grids and markets
with higher shares of renewable electricity generation
v) Public Information and Awareness Raising on how the corridor can provide
secure, sustainable and affordable energy.
By creating a larger regional electricity market, the ACEC could attract investments of
up to USD 25 billion per year in generation and USD 15 billion in grid infrastructure by
2030. The full operationalisation of the initiative could meet 40-50% of the power needs
in East and Southern Africa by 2030, increase the electricity supply by 2.5 times and cut
the annual CO2 emission level by 310 megatonnes.
Sources: AU/IRENA (n.d.), “Africa Clean Energy Corridor / West Africa Clean Energy Corridor”, Working
Document, https://au.int/sites/default/files/newsevents/workingdocuments/33313-wd-africa_clean_energy_
corridor_west_africa_clean_energy_corridor_e.pdf and UNEP (2020), “Clean Energy Corridors in Africa”,
https://climateinitiativesplatform.org/index.php/Clean_Energy_Corridors_in_Africa.

Public-private partnerships and development finance can help de-risk investments

in renewable energies
Public-private partnerships can help mobilise the resources needed for renewable
energy projects. The amount of funds needed to decarbonise the energy sector is beyond
the financial capacity of governments in the region. For example, South Africa’s energy
transition requires about USD 250 billion in the next three decades (Reuters, 2022). This
translates to USD 8.3 billion per year, which the South African government cannot raise
on its own. Public-private partnerships can allow governments to access private sector
finance, technology and skill expertise which can lead to a better allocation of risk between
public and private entities (World Bank, 2022b). Joint ventures between government-
owned public utilities and private players are emerging as effective solutions to finance
renewable energy projects across the region. In November 2022, during COP27, SkyPower
Global and the government of Zimbabwe signed an agreement on a 500-megawatt
solar photovoltaic project worth USD 400 million. The project is expected to generate a
USD 1.5 billion stimulus to Zimbabwe’s GDP and 14 000 job years (Khaleej Times, 2022).
Countries can use various policy instruments to promote private investments in
renewable energy. Examples from Southern Africa appear in Table 3.2.

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Table 3.2. Examples of policy instruments to promote private investments

in renewable energy in Southern African countries
Policy instrument Brief description Example
Renewable Long-term contracts with renewable energy producers, In Namibia, an interim Feed-In Tariff programme was announced
Energy Feed-in typically based on the cost of generating the renewable in September 2015 that aimed at increasing investment in non-hydro
Tariffs (REFiTs) energy technology (Couture et al., 2010) sources. Fourteen projects rated at 5 MW were awarded and reached
commercial operation within 12 to 24 months (IRENA/AfDB, 2022).
Public tenders A government power purchase agreement with the Established in 2010, South Africa’s Renewable Energy Independent
successful bidder of a call for tenders to install a certain Power Producer Procurement Programme is a competitive,
capacity of renewable energy-based electricity. The final market-based tender procedure that expedites private sector investment
selection follows the evaluation of all offers on the basis into renewable energy production. As of 2021, the programme
of the price and other criteria (IRENA, 2013) had procured and signed agreements with 93 independent power
producers for 7.308 GW of total capacity (TaiyangNews, 2021).
Net metering A billing mechanism that credits solar energy system Zimbabwe’s 2022 regulation on net metering allows households and
owners for the electricity they add to the grid (SEIA, n.d.) corporations to feed back up to 5 MW of their excess electricity into
the grid (RenewAfrica.Biz, 2022).
Investment Fiscal, financial and other incentives to promote private In 2022, Angola introduced fiscal incentives for companies engaged
incentives sector investment in renewable energies in the production and sale of renewable energy. The incentives include
a 35% reduction of the corporate income tax and a 60% reduction of
the investment income tax (PLMJ, 2022).

Source: Authors’ compilation based on desk research.

Procurement programmes from independent power producers14 (IPPs) can promote

investments in renewable energy but necessitate effective regulatory frameworks.
IPPs are becoming Africa’s fastest-growing solution to mobilise private investment in
renewable energy. However, these procurement schemes require established regulatory
and institutional frameworks and remain concentrated in a few countries. South Africa’s
Renewable Energy Independent Power Producer Procurement Programme is the headline
renewable investment promotion strategy in Southern Africa, attracting 80% of the total
IPP investments in the region in 2020 (IRENA/AfDB, 2022).
Shifting from Renewable Energy Feed-in Tariffs (REFiTs) to auctions can reduce the
risk related to renewable energy investments for governments, but using both can be
more beneficial in some cases. Many countries are shifting away from the use of REFiTs to
auctions. REFiTs impose a higher risk to governments and may not reflect a true market
price. While auctions are suited for established projects, they transfer most of the risk to
investors (IRENA, 2018). South Africa has switched its focus from REFiTs to auctions with
significant success (Eberhard and Kåberger, 2016). However, most of its peers in the region
do not have the same financial, legal and regulatory environment nor the advantages
stemming from the country’s size that would give them similar results. Hence, most
countries in Southern Africa would benefit from REFiTs as a complement to auctions
rather than as a substitute for them.
Net metering can respond to the demand for small-scale renewable energy projects
but requires clear regulations at the local level. The growing population and the increasing
share of small to medium-sized enterprises in Southern Africa have amplified the demand
for small-scale decentralised renewable energy projects. Net metering – which allows
the owners of renewable energy systems to receive credit for the energy they add to the
grid (SEIA, n.d.) – not only can boost investment in renewables but can also encourage
energy efficiency. Namibia and South Africa were the first Southern African countries
to use net metering as a renewable energy policy (IFC, 2020b). Research shows that clear
national regulations are necessary to prevent challenges related to the management of
net metering solutions at the local level (Roux and Shanker, 2018).
Development finance institutions can be instrumental in de-risking renewable energy
investments. The COVID-19 pandemic has exacerbated Southern African countries’

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debt situation, thereby increasing the financial risk of renewable energy investments.
Development finance institutions can serve to spearhead the mobilisation of private
sector players and institutional investors into renewable energy investments. To address
credit and currency risks, among many others, development finance institutions can offer
financial instruments such as guarantees for renewable energy projects, co-investments,
co-financing and subordinated debts (Masamba et al., 2022; OECD, 2021b). Furthermore,
development finance institutions can provide technical support and capacity building
to catalyse the development of less risky bankable projects. For example, the World
Bank Group’s Scaling Solar programme implemented in Zambia in 2015-16 offered a
standardised and replicable solar photovoltaics procurement model with significant risk
mitigation products that translated into low tariffs and rapid project implementation
(IRENA/AfDB, 2022).
Collaborative relationships between institutional investors and development finance
providers at the local level can help mobilise capital for investments in renewable energies.
The successful mobilisation of private capital for sustainable investments – including
from institutional investors – has mostly taken place through collaborative initiatives at
the local level, often in the form of strategic investment funds and green banks (Halland
et al., 2021). One example is the Climate Finance Facility (CFF) of the Development Bank
of Southern Africa (DBSA), launched in 2019 as a specialised lending facility designed
to increase private investment in climate-related infrastructure projects (including off-
grid power, mini-grids and urban distributed solar systems, energy and water efficiency)
in Eswatini, Lesotho, Namibia and South Africa. It is the first example of a green bank
applied to an emerging market. The project raised an initial USD 110 million through the
DBSA and the United Nations’ Green Climate Fund. During its 20-year lifespan, the CFF
is expected to generate a reduction of about 30 million tonnes of CO2-equivalent, save
approximately 23 000 jobs through the installation of efficient water systems and reach
more than 400 000 indirect beneficiaries (Convergence, 2019).

Dedicated policies and financing solutions can increase access to clean energy in
rural areas
Scaling up off-grid and mini-grid renewable energy solutions requires dedicated
policies and regulations. Key regulatory issues to address off-grid renewable energy
solutions include licensing and permitting requirements (including quality standards),
tariff-setting frameworks and the implications of the arrival of the main grid (IRENA,
2016). A growing number of countries in Africa have introduced dedicated mini-grid
policies (UNIDO, 2020). Specific policy initiatives have been less prevalent in Southern
Africa (IRENA/AfDB, 2022), but some promising exceptions exist, such as in Mozambique
(Box 3.3), and could be adapted to other countries in the region.

Box 3.3. Policy initiatives to scale up off-grid renewable energy projects

in Mozambique

In 2021, only 40% of the population in Mozambique had access to electricity, 36% from
the grid and 4% via off-grid projects (AfDB, 2021). The government’s target is 100% access
by 2030, with 68% of Mozambicans connected to the national grid and 32% accessing
energy off-grid (Zitamar, 2022).
In September 2021, the Mozambican government approved a new policy regulating
energy provision through off-grid solutions. The policy offers an improved regime

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Box 3.3. Policy initiatives to scale up off-grid renewable energy projects

in Mozambique (continued)

to attract private investments in solar home systems and other standalone energy
solutions in rural areas. Besides promoting interest from the private sector, the policy
aims to mobilise several existing incentive schemes from international partners (Laakso
and Petric, 2022). Two examples of such schemes follow:
• Founded in 2019, BRILHO is a USD 35.5 million programme mandated to catalyse
energy access through solar home systems, green mini-grids and improved
cooking solutions, to benefit 1.9 million Mozambicans and 17 000 small businesses
by 2024. In the first quarter of 2022, the BRILHO programme connected more than
80 000 homes in Mozambique to solar-powered systems (Zitamar, 2022).
• The Beyond the Grid Fund for Africa (BGFA) is an international multi-donor
initiative to incentivise energy service providers to scale up innovative sustainable
businesses and accelerate access to affordable and clean off-grid energy in peri-
urban and rural areas. Launched in 2021, BGFA’s second financing round will offer
a total of EUR 6.7 million in results-based financing to private off-grid energy
providers (Beyond the Grid, 2021).
Source: Authors’ compilation.

Supportive policies can help scale up the use of sustainable and affordable biogas in
rural areas. Biogas production relies on agricultural waste such as forest and crop residues,
and animal manure from rural areas. It is one of the means to reduce the consumption
of fossil fuels and contribute to the transition towards a net zero energy system (IEA,
2022c). At the end of 2019, 410 000 Africans were using biogas for residential cooking.
Over the past decade, the annual growth rate of biogas production declined continuously
until it became negative in 2019. The decline in growth has been attributed to a lack of
maintenance, a shortage of feedstock or the upfront initial cost of installing a biodigester
(IRENA/AfDB, 2022). Communicating and promoting the use of biogas through low-cost
digesters, setting up appropriate policies and institutional frameworks, and offering
financing solutions can facilitate the diffusion of biogas technologies and help increase
energy security in Southern Africa (Kaifa and Parawira, 2019).
Flexible renewable energy policies can serve clean energy and rural development goals.
Reducing the use of spatially blind incentives, introducing a flexible policy framework
and taking into account the characteristics and specific needs of rural communities are
key policy considerations to promote clean energy access and economic development in
rural areas (OECD, 2012). For example, land-use conflicts can often slow down the uptake
of renewable energies in rural areas (Groenendaal, 2018). Agrovoltaics – the simultaneous
use of areas of land for both solar photovoltaic power generation and agriculture (Dinesh
and Pearce, 2016) – can provide innovative solutions to address these conflicts and serve
both clean energy and food security objectives. Since 2014, the SUNfarming Food and
Energy (F&E) Plant in South Africa undertakes scientific research on food plants and
herbs that grow underneath solar modules. Today, the plant facilities are also used to
develop joint certified training programmes for local students and to produce healthy
food (vegetables, fruit, medicinal herbs) for low-income communities in the area while
generating carbon-neutral solar energy (Matich, 2022).
There is a strong case for developing the capacity of local investors and financial
intermediaries to engage in much-needed off-grid renewable energy projects. Over the
2007-19 period, investments from developed countries accounted for 85% of commitments

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 3. Investing in renewable energies for Southern Africa’s sustainable development

to off-grid renewable energy in most African countries (IRENA/CPI, 2020). Launched in

June 2019, the Southern African Renewable Energy Investment and Growth Programme
is implementing a prototype approach to enable small and medium-sized enterprises in
rural areas that are leveraging solar energy to access climate finance, especially local
currency financing: the programme is now supporting four participating local financing
institutions in Tanzania and three in Zambia to deploy climate finance to green small and
medium-sized enterprises (REEEP, n.d.).
Energy communities would benefit from policies that increase local ownership of
energy projects. Energy communities are grassroots innovations that diffuse the local
production and use of renewable energy at the community level (Hargreaves et al.,
2013). A study on energy communities in 46 African countries shows that, overall, these
communities are not sufficiently empowered to institute and manage their own energy
projects. Currently, ownership of community energy projects is a challenge, as most
projects are owned by the government solely or in partnership with elitist groups. Enabling
policies are necessary to provide platforms for participatory stakeholder engagement that
allow the involvement of citizens in the planning, implementation and management of
energy communities (Ambole et al., 2021).

Notes
1. This refers to the geometric average of the 2020, 2021, and 2022 growth rates, or the annualised
change between 2019 and 2022.
2. Authors’ calculations based on UNCTADstats (2022).
3. Authors’ calculations based on OECD (2022b).
4. Impact investing refers to “investments made with the intention to generate positive,
measurable social and environmental impact alongside a financial return” (GIIN, 2023).
5. Authors’ calculations based on OECD (2021a).
6. Authors’ calculations based on fDi Intelligence (2022).
7. Authors’ calculations based on Bureau van Dijk (2022). See Annex 1.B in Chapter 1 for
methodological information.
8. Authors’ calculations based on IRENA (2022a).
9. Authors’ calculations based on IRENA (2022b).
10. Authors’ calculations based on OECD (2022c).
11. Authors’ calculations based on IEA (2022b). Non-combustion energy sources include energy
sources reported as renewable within the International Energy Agency database but exclude
energy sources relying on fuel combustion, such as biofuels and municipal waste. Data reported
for Southern Africa do not include Lesotho and Malawi.
12. Authors’ calculations based on fDi Intelligence (2022).
13. Authors’ calculation based on Roy (forthcoming).
14. “An Independent Power Producer is an entity, which is not a public electricity utility, which owns
and or operates facilities to generate electric power for sale to a utility, central government
buyer and end users” (SAIPPA, n.d.).

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