A critical focus of the Third International Financing for Development meeting in Addis Ababa, Ethiopia was financing energy in Africa.
Africa’s energy challenges are immense, with 621 million people lacking access to electricity. Power shortages diminish the region’s growth by 2-4 per cent a year, holding back efforts to create jobs and reduce poverty. Despite a decade of growth, the power generation gap between Africa and other regions is widening.
Energy-sector investment in Sub-Saharan Africa is inadequate, at only US$8 billion a year or 0.4 per cent of gross domestic product. A ten-fold increase in power generation is needed to achieve the United Nations sustainable development goal of universal access to energy by 2030; if current trends continue, the goal won’t be reached until 2080.
Africa’s energy financing gap – the extra investment it needs to bring modern energy to all – stands at $55 billion per year until 2030. That sounds like a large sum, but it would deliver high social and economic returns. Our report outlines how governments, private investors and aid agencies could mobilize the finances needed to bridge the gap.
Strengthened international cooperation is essential to close Africa’s energy sector financing gap. A more efficient and equitable global tax system would contribute substantially. The current system allows global companies to dodge their tax obligations. Stemming illicit financial flows from Africa, which stood at US$69 billion in 2012, would also make a difference.
Once strong global development goals are in place, backed by smart financing and a fair climate deal, African countries will be in a better position to transform their economies. In fact, Africa’s leaders have an amazing opportunity to show the rest of the world the way to a sustainable future. Africa can leapfrog over the damaging energy practices that have brought the world to the brink of catastrophe.
If financed correctly, Africa can both grow and show the way, by embracing a dynamic energy mix. And the continent’s energy potential will transform lives.