Global Financing of SDG7 in Africa

Overall, there is a slight increasing trend of global financing towards SDG7-compliant sectors (SDG7 projects, and policy and capacity-building) in Africa. Over the past eight years, SDG7-compliant commitments from international public donors (official development assistance and other official flows), along with directed mobilised private finance, increased from EUR 6.4 billion in 2014, to EUR 9 billion in 2022.

In terms of international public finance, SDG7- compliant commitments over the study period (2014- 2022) totalled EUR 61.7 billion, accounting for nearly three-quarters of total international public energy related finance. The trend over the study period shows a slight average increase in commitments, but with fluctuations and a peak of EUR 8.1 billion in 2018.

Prior to the COVID-19 pandemic, the slight upward trend in energy investments was driven by increases in both public (with important yearly variations), and mobilised private finance. However, private finance, which reached record highs between 2016 and 2019, was severely affected by the pandemic, hitting a record low in 2020. It has not yet recovered to pre-pandemic levels.

With a total of EUR 35 billion, more than half of all public SDG7-compliant commitments, between 2014 and 2022, came from multilateral institutions whose contributions remained largely steady. The majority of their contributions were directed to transmission and distribution (T&D), renewable energy (RE) and policy and capacity-building. The largest proportion of SDG7-compliant commitments from public donors after multilateral institutions has come from EU Institutions and Member States (EI & MS), followed by North America, Asia & Oceania, non-EU Europe and the Middle East.

In terms of sectoral repartition of public commitments, highest levels of support have been provided for RE projects and T&D projects (respectively EUR 23.8 billion and EUR 22.9 billion in total). Policy support and capacity-building strongly increased since 2018. Clean cooking and energy efficiency are the two SDG7-areas that have been dramatically underfunded with very low levels of public commitments, as well as private investments. The clean cooking sector in particular has experienced a decline of an already very small financing amount, being at the same time the SDG7 target that is the most off-track.

Of the EUR 61.7 billion of public finance provided to SDG7-compliant projects, Egypt received the most commitments with EUR 5.9 billion, followed by African regional projects, and Morocco with EUR 4 billion each, and South Africa with EUR 3.7 billion. Commitments in these countries primarily went to RE and T&D (centralised) projects.

The 22 Least Developed Countries (LDCs) in Africa face the greatest electrification and clean cooking challenges and analysis of the flow of global commitments into SDG7-compliant projects shows that LDCs received EUR 27.1 billion-worth of commitments between 2014 and 2022, while Lower, Middle Income Countries (LMICs) received EUR 23.8 billion, representing 44% and 38.5% respectively of the total SDG7-compliant commitments.

Funds committed to LDCs went primarily to T&D projects and account for EUR 12.9 billion of the total. While policy and capacity-building projects, which play a vital role in LDCs’ ability to provide energy access, received EUR 6.3 billion.

Concessional finance in the form of official development assistance (ODA) provided by development finance institutions is critical, as many African countries are suffering from current high debt levels and an increased burden of debt servicing.

ODA loans have been the predominant method of finance for SDG7-compliant projects (43%), with EUR 26.6 billion committed between 2014 and 2022. Other offical flows was the next highest category, with EUR 18.2 billion (29%). ODA grants have been a mainstay of SDG7-compliant financing, representing one-quarter of the total commitments, with a total of EUR 15.8 billion and an annual average of EUR 1.7 billion. LDCs received 60% (EUR 9.6 billion) of the ODA grants over the study period.