Low ratings scores scupper Africa’s JET fund-raising prospects, says IEA



Published Jun 7, 2024


The International Energy Agency (IEA) has warned that Africa will continue to play poor cousin to China and the rest of the world in the Just Energy Transition (JET) as the pace of investment is ramped up to meet 2030 targets while the continent is just starting off the blocks.

According to the IEA World Energy Investment report released yesterday, only Botswana and Mauritius are holding sufficient investment-grade ratings accessing the funds required for capital-intensive clean energy projects in Africa.

The report said that debt repayments, which have increased sharply in recent years, mean that many African governments have difficulty in accessing outside investment, and this is compounded by low sovereign debt ratings.

South Africa’s long-term foreign and local currency debt ratings is currently rated BB- with a stable outlook by Fitch Ratings Agency, Standard & Poor's is at BB-, and Moody’s Investor Service rates the country Ba2.

According to the IEA, the world now invests almost twice as much in clean energy as it does in fossil fuels.

It said two-thirds of the record $3 trillion (R57 trillion) invested in energy sources in 2024 will be devoted to sectors such as renewables, electric vehicles, nuclear power, grids, and storage and efficiency, even as higher financing costs hinder projects.

The remaining $1 trillion will go to coal, gas and oil – a level that’s still too high to conform with global climate goals.

The IEA said investment in clean energy technologies will climb to $2 trillion this year, almost double the amount spent on fossil fuels.

Of the clean energy investments that have recently been made, the majority are in renewable power generation.

“While these projects are vital to meet Africa’s rising electricity needs in a sustainable way, the prospects for further growth will be limited as long as the grid itself is not upgraded and expanded,” the IEA said.

“With average line losses of 15%, inefficient grids and insufficient interconnections are already creating bottlenecks for new renewable energy projects in the region.”

Achieving Africa’s energy and climate-related goals by 2030 will require annual investments of more than $200 billion through the end of this decade.

“Our tracking of energy spending suggests that around $110bn is set to be invested in energy across Africa in 2024, of which nearly $70bn to fossil fuel supply and power, with the remainder going to a range of clean energy technologies,” it said.

The IEA said spending trends vary widely across Africa, but neither the total amount nor the proportion spent on clean energy were enough to put the continent on track to reach its sustainable development goals.

As they stand, energy investments are equivalent to only 1.2% of the region’s gross domestic product (GDP) and clean energy investments – while rising – account for just 2% of the global total, the IEA noted.

As the era of cheap borrowing comes to an end, certain kinds of investment are being held back by higher financing costs.

However, the impact on project economics has been partially offset by easing supply chain pressures and falling prices.

Solar panel costs have decreased by 30% over the last two years, and prices for minerals and metals crucial for energy transitions have also sharply dropped, especially the metals required for batteries.

The IEA noted that globally, China’s 2024 investment in renewables, grid development, battery storage and end-user facilities was at $676bn, the rest of the world has $223bn, while Africa has $43bn invested.

Africa targets to spend $123bn on net zero emissions (NZE) by 2030, the rest of the world $402bn, while China projects $594bn.

Investment on the end user would take up $77bn of investment from Africa, $282bn from the rest of the world, while China anticipates $396bn.

The IEA’s analysis of the past and future energy investment in Africa in announced pledges and NEZ scenarios indicated that Africa will invest $23bn in low-emissions electricity in the current year, and $57bn in the 2026–2030 period.