The postwar global development system has been dramatically altered – a source of conversation and consternation at the recent UN General Assembly and convenings on climate change. Multilateral development banks are stretched thin, while major donors like the US and the European Union are slashing their foreign-aid budgets. The resource shortfalls are particularly pronounced when it comes to support for sustainable development and the green transition in emerging markets; African countries alone face a $2.8tn financing gap to support their collective climate goals.
Yet despite the retrenchment, African leaders are writing this next chapter of climate action: entrepreneurs in Nairobi, fund managers in Lagos, grassroots innovators, public and private institutional investors, and political reformers across the continent are mobilising to build a green economy.
With its abundant natural resources and rapidly growing workforce, Africa has the potential to achieve a clean-energy transition that powers sustainable, inclusive growth. But the loss of traditional development finance makes it more urgent than ever for investors, philanthropists, and other private-sector actors to support the region’s green revolution. To this end, the Soros Economic Development Fund (SEDF) is doubling down on African-led solutions as engines of sustainable economic growth and broad-based prosperity.
Clean energy is at the heart of these efforts. Today, roughly 600mn people across Africa still lack access to electricity, a major obstacle to propelling resilient economies capable of creating opportunities – jobs and mobility – for the millions of young Africans entering the workforce every year.
Fortunately, Africans know what works. Scaling proven technologies such as off-grid solar and climate-resilient infrastructure could help catalyse what Africa Climate Ventures’ James I. Mwangi calls “climate-positive growth.” But the large-scale deployment of these and other renewable energy technologies remains far too slow. For example, while Africa is home to 60% of the world’s solar resources, it accounts for just 1% of installed solar capacity and 2% of global clean-energy investment.
These gaps stem largely from risks – real and perceived – that have discouraged public- and private-sector investors from committing capital to the region. At SEDF, it is believed the greatest risk is inaction. Although Africa contributes only 2-3% of global carbon dioxide emissions, it is the world’s most climate-vulnerable continent. By 2030, as many as 118mn of its poorest people – those living on less than $1.90 per day – could be exposed to drought, floods, and extreme heat.
With Africa’s population projected nearly to double, to 2.5bn, by 2050, and urbanisation accelerating, energy demand will surge. Without clean power and climate-resilient infrastructure, this demographic boom could become a carbon catastrophe. And as is seen in countries around the world, governments that fail to deliver resilience and shared economic prosperity are vulnerable to instability, migration pressures, and political upheaval – all systemic risks for democracy and open society.
To date, SEDF has committed $55mn to initiatives led primarily by African investors and entrepreneurs, with additional commitments to follow. In some transactions, it takes first-loss positions in blended capital stacks, encouraging more commercial partners to come on board.
In every case, over time, proof of impact and financial returns will attract a broader set of investors, unlocking more capital for Africa’s green growth. And with each investment, we seek to strengthen local capital-market infrastructure through innovative and enduring partnerships, like the recently announced Alliance for Green Infrastructure in Africa and Acumen’s Hardest-to-Reach Initiative. It is essential to get this model right, particularly in light of the growing demand for the continent’s critical and rare-earth minerals, and the opportunity to ensure this mineral wealth translates into broad-based prosperity.
In short, let’s bet on a future in which African-led, inclusive, and pro-climate growth benefits us all. — Project Syndicate