Financing Needs to Meet SDG7 by 2030
Africa and Europe agree that huge resources need to be mobilised to make the United Nations’ Sustainable Development Goal 7 (SDG7) target a reality. The funding gap to achieve SDG7 in Africa poses a daunting challenge, but it is a challenge that can be met.
United Nations data show that of the 789 million people around the globe who are still without access to electricity, some 548 million (or 69%) live in Sub-Saharan Africa. Excluding South Africa, per capita energy consumption in Africa is just 180kWh per annum, compared to 6,500kWh in the European Union.
Such stark figures show the extent of the challenge facing Africa and its partners, given that energy is a prerequisite for development and essential to all economic activity, whether micro or macro in scale. As one influential study observed, in Africa, “energy plays a fundamental part in economic growth”, meaning that “insufficient and unreliable access to power is a major obstacle to business”. The impacts of this are well reported; power outages are estimated to cost Sub-Saharan Africa more than 2% of GDP per year, while the cost of electricity inefficiency is estimated at as much as 4% of GDP. In 2019 this alone was equal to anywhere between EUR 31.6 billion and EUR 63.2 billion.
Estimates of the continent’s annual financing needs differ widely – but all are on a grand scale. In its ‘low carbon scenario’, the African Development Bank’s New Deal on Energy for Africa envisages average annual in investments of EUR 35 billion to achieve universal access by 2030. In its Africa Energy Outlook 2019 ‘Africa case’ scenario – which is focused on meeting the SDG7 targets – the International Energy Agency (IEA) suggests a far bigger challenge, putting the annual average investment requirement at EUR 86.6 billion.
Whatever the actual numbers, mobilising this level of investment presents a formidable challenge. However, it is not insurmountable when put into context. The uppermost estimation – the IEA’s EUR 86.6 billion per year – is equal to 3.9% of Africa’s GDP and just 0.6% of the European Union’s gross national income, while the lower estimate is 1.6% and 0.25% respectively.
But if financing needs are not met in the near future, the burden during later years will increase exponentially. It is imperative that a substantial increase in support for projects and policies that help Africa to meet the SDG7 goal is placed firmly on the international agenda.