Investing in Africa’s renewable energy assets

Investing in Africa’s renewable energy assets has been a topic of great discussion, with a focus on the investment opportunities and challenges in achieving universal electricity access and transitioning to greener energy sources in Sub-Saharan Africa. Ziyaad Sarang, the Chief Investment Officer at Revego Fund Managers, sheds light on the potential mechanisms that can be utilized to mobilize more private capital in this sector. According to Sarang, while there has been significant investment in greenfield assets, the secondary market has been largely overlooked. The secondary market involves investing in operating renewable energy assets, recycling capital back into new assets, and attracting institutional investors to increase the pool of capital available for renewable energy projects. Sarang emphasizes the importance of unlocking capital from operating assets to create a financing ecosystem that encompasses both primary and secondary investments. Historically, the financing gap in renewable energy assets has primarily been filled by investments in greenfield projects, leaving the secondary market untapped. Sarang points out that there is a need for a circular motion of investments where capital is released from operating assets to fund new ventures. Development financing institutions (DFIs) play a crucial role in catalyzing investments from institutional investors and unlocking capital from operating assets. Institutional investors are attracted to operating assets due to their stable and predictable cash flows, which align well with long-term investment horizons. In sub-Saharan Africa, the secondary market for renewable energy assets is still developing. Revego Fund Managers is pioneering as the first African Yield Co. focused on operating assets, aiming to attract institutional investors to take a long-term view on these assets. The trends observed in this asset class point towards de-risked assets that generate steady dividend yields for investors, making them an attractive investment option. The cash flows from these assets can be reinvested in developing new projects, further driving the growth of the renewable energy sector. Public funding also plays a significant role in scaling up investments in renewable energy projects. Sarang highlights the vast pool of capital available in public markets, amounting to USD$250 trillion, which could be tapped to fund projects in sub-Saharan Africa. Mobilis, a partner in the report, is focused on redirecting public capital towards sustainable investments such as renewable energy projects in developing markets. By leveraging public funding and attracting institutional investors, the renewable energy sector in Africa can experience substantial growth and contribute to the region's transition towards greener energy sources. In conclusion, unlocking investment opportunities in Africa's renewable energy sector requires a multi-dimensional approach that integrates private capital, institutional investments, and public funding. By focusing on the secondary market, de-risked assets, and strategic partnerships, the renewable energy sector in sub-Saharan Africa can overcome financing challenges and drive sustainable development in the region.