Measuring Progress Towards SDG7 in Africa

Substantial amounts have been invested in the African energy sector in the pursuit of achieving SDG7 by 2030; in 2019 alone this figure reached EUR 19.9 billion. However, this falls significantly below the estimated financing needs of the continent.

Taking the International Energy Agency’s ‘Africa Case’ scenario (which assumes achieving 100% access to reliable, sustainable and affordable power by 2030 in line with the SDGs), the European Financial Flows on SDG7 to Africa 2021 report suggests that, based on EUR 18 billion average annual investment into Africa for the years under consideration, 2014-2019, there may be a funding gap of approximately EUR 69 billion per year, requiring an over three and a half-fold increase.

The energy transitions of Africa and Europe are intertwined, and look set to converge further along with the continents’ policy trajectories – and finance will play a critical role in this. In order to meet SDG7 and based on a scenario where African government spending rises to 1.9% of GDP (equal to China’s spend on power since 2000 but below India’s 2.9%), and with GDP itself growing by an average 6.1% per year over the decade as the effects of increased investment kicks in, donor and private financing of the continent’s energy sector will need to increase by 27.1% per year from 2020.

Private sector investment can scale up rapidly given the right conditions. Optimising regulatory frameworks to facilitate project finance can potentially make SDG7 considerably easier to achieve. Improved regulatory frameworks lower risk and ultimately bring into play the second enabler, commercial project finance. South Africa achieved this with the launch of the Renewable Energy Independent Power Producer Procurement (REIPPP) framework in August 2011; in the following five years some EUR 15 billion was leveraged in private debt and equity, while the independent power producer (IPP) market grew to equal an estimated 30%-50% of the market value of national utility Eskom, which at the time was supplying about 85% of all the electricity consumed in the Southern African Development Community (SADC) region’s 16 countries.

These potentialities are replicable in at least some African countries, typically the larger ones, and will be further investigated in the 2022 edition of the European Financial Flows on SDG7 to Africa report.