Focus On Investment Opportunities In Africa's Green Economy

Amanda Cheesley Deputy Editor 9 June 2023

Focus On Investment Opportunities In Africa's Green Economy

As investment steps up in Africa, Tarek Zouari, managing partner and founder of Exco Tunisia, a member of accounting network Kreston Global, discusses the barriers and opportunities to foreign investment into Africa’s growing green economy and the role of accounting in shaping Africa’s green agenda. 

For investors seeking to do business in Africa, Tarek Zouari at Exco Tunisia believes that tapping into the emerging green economy is an attractive opportunity. 

“Not only is there appetite for foreign investment, but a growing population means there is demand for green innovation that creates a climate-resilient food supply, workforce and economy,” he said in a statement.  

Africa is the second largest continent in terms of land area, and is estimated to have around 60 per cent of the world's uncultivated arable land. In addition, the continent is home to about 10 per cent of the world's renewable fresh water resources, including the Nile, Congo, and Niger rivers. As of 2022, Africa's total population is estimated to be around 1.4 billion people, which is about 17 per cent of the world's total population. 

“This presents both opportunities and challenges for Africa's future development, positioning the continent as highly vulnerable to the effects of climate change and also a site of great renewable potential as the green economy evolves,” he continued. 

He looks at key sectors and opportunities for foreign investment in the African green economy, as well as the role of accounting in shaping Africa's green agenda.

Renewable energy
With abundant solar, wind, hydro and geothermal energy resources, Zouari estimates that Africa’s energy transition presents $100 billion per year investment opportunity and climate-resilient infrastructure offers investment potential of between $130 billion and $170 billion. “Many African countries have set ambitious targets for the development of renewable energy, including the installation of large-scale solar and wind farms,” he said. 

Examples of renewable energy projects in Africa include Lake Turkana Wind Power Project – a wind power project located in northern Kenya, with a capacity of 310 MW.  Another example is Ethiopia’s Grand Renaissance Dam. “While not strictly a renewable energy project, the Grand Renaissance Dam in Ethiopia is one of the largest hydroelectric projects in Africa, with a capacity of 6,000 MW,” Zouari said. 

Agriculture and agribusiness
Sustainable agriculture practices, such as organic farming and agroforestry, can help to reduce greenhouse gas emissions and promote biodiversity. “Foreign investors can participate in the development of sustainable agriculture projects, invest in agribusiness companies that prioritise sustainability, or provide financing to smallholder farmers to adopt sustainable farming practices,” Zouari continued.

“Organic farming projects are becoming increasingly popular in Africa like the organic farming in Ethiopia,” he said. The Ethiopian government has set a target of converting 30 per cent of its farmland to organic farming by 2025, with an estimated investment of $500 million. 

Another example is solar-powered irrigation systems. According to the World Bank, only 4 per cent of agricultural land in sub-Saharan Africa is irrigated, and most irrigation systems are powered by diesel generators. “Solar-powered systems offer a cost-effective and environmentally-friendly alternative,” Zouari said. 

The EU has also recently stepped up efforts to catalyse public-private investment in African agriculture, with the launch of the €200 million ($214 million) Agri-Business Capital Fund in 2019, which receives funding from the European Development Fund. The blended finance impact fund is designed to increase agriculture smallholders' access to finance through loans, and has been welcomed by some investment managers. The fund forms part of the Africa-Europe Alliance for Sustainable Investment and Jobs.

Waste management and recycling
“Waste management and recycling are also emerging sectors in the African green economy,” Zouari continued. Many African countries face significant challenges with waste management, with inadequate infrastructure and limited recycling facilities. “Foreign investors can invest in waste management and recycling facilities, support the development of sustainable waste management practices, or invest in companies that specialise in waste management and recycling,” he said. 

Recent examples of projects include the Lagos Waste Management Project in Nigeria which is a public-private partnership that aims to improve waste management and recycling in the city of Lagos. The project has a total budget of $200 million and is expected to create more than 27,000 jobs. 

“There is also the Waste Management and Recycling Project in Cape Town, South Africa which is a public-private partnership that aims to improve waste management and recycling in the city,” Zouari added. The project has a total budget of $100 million and is expected to create more than 2,000 jobs.

Green technology in mining
“Natural resources are a significant contributor to continental GDP, so green technology is increasingly being adopted in the mining industry as companies seek to reduce their environmental impact and improve sustainability. Mining companies are increasingly turning to renewable energy sources such as solar and wind power to reduce their carbon footprint and energy costs,” he said. 

Role of accounting
Zouari also highlighted that accounting plays a key role in shaping Africa's green agenda as it provides a framework for measuring, reporting, and managing the environmental impact of business activities. 

“With the growing global focus on sustainable development, companies operating in Africa are increasingly expected to report on their environmental, social, and governance (ESG) performance. At the same time, projects funded by international organisations can play a crucial role in promoting and implementing ESG principles in Africa,” he continued. 

“A foreign investments ESG principles may determine their fate in the African market as governments, regulators and international funding bodies such as the World Bank, the African Development Bank, and the United Nations, increasingly prioritise ESG considerations in their project approval and funding decisions,” Zouari said.

“With this in mind, the finance and accounting sector have a responsibility to support foreign green investment into Africa by conducting ESG assessments and audits to evaluate a company's environmental, social, and governance practices and identify areas for improvement,” he continued.

They also provide sustainability reporting and assurance services to help companies report on their ESG performance in a transparent and credible manner and offer sustainability training and capacity building to help companies build their ESG knowledge and skills and implement sustainability initiatives effectively, Zouari concluded. 

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