The good news is that the current upswing in renewable investments in Africa is expected to continue for the foreseeable future. Alberto Simoes, a member of the executive team at CMS Africa and partner heading the Lusophone Africa practice, together with Bridgett Majola, a banking and finance lawyer who leads the Project Finance division for Energy and Infrastructure in South Africa, weigh in on the pros and cons of investing in a continent that is rich with renewable energy resources.
Africa has 40% of the world’s solar energy potential and huge potential in hydro and wind energy, which is why increasing investment here will contribute greatly to renewable energy and achieve energy transition through sustainable development, says Simoes.
However, there are limited financial markets, with the exception of South Africa, Nigeria and Kenya, which require finance from outside the continent – a trend that Simoes has been seeing.
When it comes to Lusophone Africa, he says there has been a concerted international effort to create the conditions required for the development of renewable energy in the five countries. He points out that Angola and Mozambique, which have major potential for producing renewable energy, have attracted more investment in this area compared to the others.
“There have been huge efforts to modernise the regulatory framework of these countries. In Angola there has been a recent new private investment law flexibility on the foreign exchange and the possibility of dividend repatriation,” Simoes noted.
He is of the view that the government needs to focus on simplifying the licensing of projects which is still a cumbersome issue.
Majola highlights that many African countries are able to produce minerals that are vital to producing clean energy, and she has observed a shift from using technology from abroad to local suppliers, partly due to regulations that require this.
“I think it will assist with any foreign direct investment that comes in or any offshore producer, to also produce locally, because now it should be easier for them to comply with some of the requirements that made it a bit difficult to manufacture in South Africa or in African countries,” Majola said.
She notes that while the local empowerment agenda is being embraced, this isn’t happening at the speed it should.
Simoes and Majola also unpack other legal and regulatory obstacles that investors, developers and enterprise managers experience when venturing into renewable energy, and how these challenges can be overcome.
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