Green finance needed to help feed Africa’s poor
The growing renewables sector will bring about significant job creation and help to modernise agricultural practices
Food security across Sub-saharan Africa is an enormous and ongoing concern. Last year, 250.3-million Africans — nearly a fifth of the population — went hungry. This is an increase of 47.9-million since 2014. In its 2020 report, Africa Regional Overview of Food Security and Nutrition, the UN’S Food and Agriculture Organisation (FAO) said the combined impacts of conflict and climate change have made it necessary to build communities’ resilience and to find peaceful solutions to strengthen food security. Drought and changing weather patterns have poured oil on the flames, as have disease and the lack of access to finance. Limited infrastructure, especially transport, and the failure of economies to keep up with population growth have added additional dimensions to the problem. The report warns that food security will continue to get worse because of the Covid-19 pandemic.
“In addition to hunger, across all countries in Africa, millions of people suffer from widespread micronutrient deficiencies, and overweight and obesity are emerging as significant health concerns in many countries ... the food system in Africa does not provide food at a cost that makes nutritious food affordable to a majority of the population, and this is reflected in the high disease burden associated with maternal and child malnutrition, high bodymass, micronutrient deficiencies, and dietary risk factors.”
Food and Agriculture Organisation
The report says it is important to change food systems to ensure people have access to affordable and healthy diets that are sustainably produced.
Why green is the new black for the financial services sector
In the context of food security, renewable energy is an attractive branch of investment within the overall economy. As far as South Africa is concerned, renewables are an important part of the economy and investment in it is aligned with the country’s commitment to the 2015 Paris Agreement on Climate Change.
Most, if not all, major financial institutions have moved — to greater or lesser degrees — to align with government’s undertakings in terms of the Paris Agreement as well as the Sustainable Development Goals. It makes sense for the financial services sector to work towards increasing financing for renewable energy projects. South Africa, like the rest of the world, simply has no option but to move towards cleaner forms of power and reduce greenhouse gas emissions. An added bonus is that this shift will also bring about job creation in the growing renewables sector.
Making finance available to invest in renewables is no longer simply an option. It has become an imperative.
Why renewables?
Renewable energy, especially solar power, can make a significant contribution to the green economy. Clean technologies are known to improve people’s general quality of life; their access to water, technology and information; education; food preparation options, and employment, while reducing transport-related emissions by shortening the value chain between harvest and table.
Opportunities for investment in these technologies are abundant and promising. Investing in solar power, in particular, could see progress in at least four areas of agriculture that will modernise the sector. These are:
• Irrigation systems
• Desalination plants
• Refrigeration capabilities, and • Environmentally friendly practices to
improve food quality.
Environmentally friendly practices to improve food quality
The degradation and destruction of natural ecosystems are major threats to crop diversity and the stability of food systems. Climate change, in particular, has been identified as a major determinant of damage to or destruction of ecosystems. Many experts agree that continuing with unsustainable agricultural practices will, in the long term, increase global food insecurity. Employing and maintaining environmentally sustainable practices are critical to planetary and human health — action in this regard cannot be deferred, whether food or non-food related.
Distributing affordable sustainable technologies for agriculture is a clear step in the right direction, one that brings with it an abundance of investment opportunities.
Challenges to investing in renewables
While investing in and rolling out renewables is the obvious way forward for both the public and private sectors, daunting barriers exist. These need to be examined and tested to build robust and highyielding investment environments.
Capital constraints and economic challenges
These include high installation, maintenance and repair costs, compared with the low costs of competing sources of energy. Mistaken perceptions of costs further muddy the waters, as do uncertainties about funding processes, inadequate government subsidies, and an unwillingness on the part of banks to fund mediumto long-term investments in shrinking economies.
Solar projects will become more economically viable only if adoption rates are scaled up, solid public-private partnerships are formed, governments come on board, and clear regulatory frameworks are put in place.
Trade restrictions and economic regulation
Utilities across the continent have invested heavily in the traditional energy technologies of coal, gas and oil, all of which are mature and well understood, wielding enormous market power. These present a formidable barrier to renewable energy, which needs to compete with existing infrastructure, expertise and policy. Scaling renewable technologies will require clarity of policy, long-term price certainty and regional co-operation.
Access to finance
The market for renewable energy technologies is relatively new. This can lead to higher volatility and thus greater risk for lenders. Since most renewable technologies are still relatively young, they entail added risk.
Lack of consumer education
A strategic market barrier to solar technology uptake is a lack of clear messaging and limited consumer awareness about the technology. This often generates negative perceptions based on a poor understanding of the costs or how a technology works in practice.
Creating sound investment vehicles
To roll out renewable technologies at scale in Africa would require the dedicated development of targeted investment incentives. Subsidies and other forms of support given to fossil fuels must be eliminated, while efforts to support innovative new technologies should be thoroughly strategised and accurately directed.
By aligning a broad investment community and mobilising private finance, renewable electricity infrastructure offers an attractive return profile for long-term investors. Today, an increasing number of institutional investors are recognising the potential for infrastructure investment to deliver inflation-linked, long-term and stable cash flows.
A kettle boiled twice a day in the UK uses five times the electricity that most people in Mali use in a year.