Africa Eyes Regulatory Reforms to Attract Private Investors to Energy Sector

ADDIS ABABA – A timely regulatory overhaul of Africa’s fledgling electricity sector will attract private sector investment and ensure energy security on the continent, attendants of high-level public-private dialogue on the energy sector have agreed.

Africa generates only 4% of the global energy despite having 60% of the best solar resources worldwide, and more than 5000 billion cubic meters (bcm) of natural gas discovered to date, among other resources.

Even with vast opportunities, there is also low private sector investment in energy infrastructure and service delivery, participants of the Dialogue on Private Sector Investment in Electricity and Infrastructure Development in Africa, heard.

The dialogue, hosted by the UN Economic Commission for Africa (ECA) and the RES4Africa Foundation last week, brought together stakeholders from the public and private sectors, including policymakers, international organizations, and decision-makers working in energy and infrastructure.

They discussed the changes needed in policy and regulatory frameworks to ensure adequate openness, attractiveness, and readiness of African markets for private investments.

ECA Energy policy Expert Yohannes Hailu highlighted the recent regulatory environment and risk assessments made in 16 African countries as an essential entry point to address regulatory barriers that limit effective private sector investment in energy infrastructure.

“Advancing electricity market regulatory improvement and reform is a significant part of the solution towards de-risking investment in Africa’s energy infrastructure,” Yohannes said.

The expert emphasized that credible regulatory framework and policy remained key instruments for member countries striving to crowd in private capital in their electricity markets via generation, transmission, distribution, and off-grid system development.

The ECA and African Union Commission continental framework was validated during the two-day Dialogue on infrastructure development in the continent where more than 568 million people have no access to electricity.

The framework offers guidance on mainstreaming the key regulatory instruments at regional and national levels to crowd-in private investment.

In addition, representatives from Ministries of Energy and Regional Energy Regulatory institutions provided feedback on regulatory areas for technical cooperation with ECA and the RES4Africa Foundation.

They also identified areas of regulatory technical cooperation including green hydrogen, storage of batteries, standardization of contracts, development of grid codes and risk-mapping.

The Dialogue also discussed developing a regional framework for private sector participation in electricity markets.

Participants acknowledged the importance of continued exchanges of knowledge between energy regulatory authorities across the Continent and the private sector.

Africa needs to increase investment in electricity infrastructures, from generation to networks and off-grid systems, in order to meet both regional and global targets of providing universal access to energy for all by 2030. Achieving these goals would require annual investments of $30 billion until 2030, as per IEA Africa Energy Outlook 2022 estimates.

The high-level dialogue agreed to address policy and regulatory barriers can not only contribute towards financing sustainable infrastructure development but also be able to crowd in private investments.

The dialogue “highlighted the commitment of Member States and the private sector to work together through facilitation of a conducive business environment for private investment and developing the right (Public-Private Partnership) PPP framework for successful application of PPP in infrastructure finance,” said Robert Lisinge, head of ECA’s Private Sector Development and Finance Division.