What Africa's renewable investment wave requires most is design

THERE are established markets, and then there are conditions that precede them. Africa’s renewable energy sector finds itself suspended between the two - an area where assets have begun to accumulate, but where the mechanisms for scaled capital reallocation remain embryonic.

- Avania Moosa, Director: Resources & Energy and Chetan Jeeva, Head: SA Corporate & Leveraged Finance, Absa CIB.

The signs of emergence are there: a growing base of operational projects, increasing engagement by institutional investors, and a gradual deepening of regional power strategies.

Project finance remains the dominant mode of capital deployment, limited by nascent markets and structured around risk more than strategy.

Institutional capital remains cautious not because it lacks appetite, but because the architecture it relies on remains unevenly distributed.

Without foundational reforms in funding architecture, including the creation of creditworthy pipelines, improved tariff bankability, and mechanisms for absorbing early-stage risk, the pool of M&A-eligible assets will remain shallow.

Furthermore, capital deployment and capital reallocation are symbiotic, and without institutional funding pathways that can mature assets into scale, the secondary market is confined to isolated, opportunistic transactions.

To read Africa’s energy investment landscape correctly is to understand that it is not yet a market in the true sense. It is a terrain in assembly - one that demands design more than capital.

According to recent findings, global M&A activity in the energy transition space reached $497 billion in 2024 - approximately 13.4% of the total $3.7 trillion in global M&A transactions across all sectors.

In Africa, however, both the scale and structure of activity remain comparatively modest. While the number of recorded deals declined slightly - from 102 in 2023 to 94 in 2024 - the aggregate value more than doubled, from $5 billion to $12 billion.

The rise in transaction value, despite lower volume, suggests a selective escalation in asset maturity and pricing, likely driven by a small cohort of commercially proven projects entering the secondary market.

Some analysts interpret this activity as a turn toward tactical consolidation, with companies pursuing smaller transactions to strengthen or rationalise portfolios.