Category Archives: Zambia

What does 2024 have in store for renewables in Africa?

February 1st, 2024 By Ben Payton Image : rufous / Adobe Stock

The private sector is playing an ever increasing role, but grid capacity constraints and macroeconomic headwinds pose key challenges
February 1st, 2024
At the beginning of 2024 Africa has come to a key juncture in its renewable energy rollout.

The potential of technologies such as wind and solar energy to help close the continent’s energy access gap is now beyond doubt. Across Africa, however, there are multiple challenges in accelerating the speed and scale of the drive for renewables.

Roughly half of Africa’s population, around 600m people, lacks access to electricity; millions more endure an unreliable or intermittent supply.

Solar, in particular, has a key role in bringing more reliable access. Most of Africa enjoys excellent conditions for solar generation; and solar is well-suited for both utility-scale projects and smaller schemes designed to serve homes and businesses in remote areas.

Last year’s COP28 climate conference, along with the Africa Climate Summit held in Nairobi last September, reaffirmed the importance of renewables on the continent.

But whether 2024 will see donors and development finance institutions (DFIs) turn commitments into action remains to be seen. The International Energy Agency (IEA) estimates that $28bn in concessional capital is needed each year up to 2030 to mobilise $90bn in private sector investment – a more than tenfold increase from the present level.

Technologies mature

Hydropower, which has played a key role in the power sectors of many African countries for decades, remains the leading source of renewable energy on the continent. However, it is solar that is increasingly emerging as the main source of new capacity.

According to the African Solar Industry Association (AFSIA), the continent installed a record 3.7 GW in 2023, representing year-on-year growth of 19%. AFSIA notes that utility-scale solar projects are less common in Africa than in the United States, Europe or China. By contrast, it says 65% of the capacity added last year came from commercial and industrial projects – a large share of which are in South Africa.

“In [the] absence of reliable utility companies and grids supplying the required electricity, African companies and businesses finally have found an alternative with solar and storage thanks to plummeting prices of both key components,” AFSIA said in a report.

Meanwhile, cash-strapped utilities are increasingly looking to the private sector to supply electricity from large-scale wind and solar projects to the grid. In South Africa, a bidding round for independent power producer (IPP) projects, which will conclude in April, will be crucial for efforts to end the country’s disastrous power shortages.

Zambia is another country where the government is turning to the private sector, as it looks to extend electricity access to 60% of its population by 2030. Reforms introduced by President Hakainde Hichilema have facilitated private investment in the power market, with a focus on streamlining regulator approvals.

“Most renewable energy projects will continue to be financed at an increasing rate by the private sector in Zambia,” says Kusobile Kamwambi, head of the country’s Presidential Delivery Unit.

But one challenge, likely to become ever more evident in 2024, is that electricity grids in many African countries are struggling to absorb the power supplied by renewables. In Zambia, for example, ZESCO has set a cap of 50 MW on IPP projects – a limit that makes investment less attractive for some players in the sector.

Grids and batteries

The electricity shortages in countries such as South Africa highlight the importance of upgrading grid infrastructure at both the national and regional levels. Holger Rothenbusch, managing director and head of infrastructure and climate at British International Investment, the UK’s DFI, says that investment in cross-border transmission infrastructure will increase. He notes that there are “many exciting prospects” in decentralised renewable energy systems, which enable renewable generation in areas where grid access remains difficult.

“We are starting to see the potential of mini-grids to bring power to countries such as DRC and Burundi with historically low rates of access,” he says.
“Projects are being delivered with attractive financing models such as grants and private capital to mitigate offtake risk.”

Source: African Business , 1st February 2024


China announces plans to boost renminbi use in Southern Africa

In a visit to Zambia, the vice-president of the Bank of China, Lin Jingzhen, announced plans to boost the use of the renminbi in Southern Africa as Beijing seeks to extend the influence of its currency and counter the dominance of the US dollar.

In a meeting with Zambian President Hakainde Hichilema in Lusaka earlier this week, Lin said that the Bank will promote the use of renminbi across the region from its office in the country’s capital.

“We will earnestly act upon our responsibility and leverage our role in Zambia to provide holistic services and products related to RMB and to promote the use of RMB in bilateral trade and economic activities,” he said.

M’khuzo Mwachande, an investment banker in South Africa, tells African Business that the move makes economic sense for both parties.

“China remains Africa’s largest trading partner, and it’s already the fourth largest provider of investment capital, having made around $300bn worth of investments as of 2022.

“In relation to Zambia, China has invested more than $3bn in the country, with more than 500,000 jobs having been created by Chinese investments.

“Just last week, the Tanzania-Zambia Railway Authority announced that a firm from China has been shortlisted to submit a proposal to operate the Tanzania-Zambia transnational rail for $1bn.

“The recent announcement that China will promote the use of its currency in Zambia and the region could therefore be deemed as a practical illustration of the close economic relationship that already exists. It’s natural that partners who conduct so much trade together will seek to use their own currencies.”

Positive news for Zambia

Mwachande is also optimistic that the move shows Zambia remains an attractive trading partner for China, despite the problems Lusaka has faced in trying to pay back the debt issued by China and other international creditors. Zambia is the world’s second-largest exporter of copper, a metal that is deemed critical to the world’s green transition. China accounts for approximately half of global consumption for the commodity, making Zambia an important partner in southern Africa.

“This is positive news in the sense that it reflects that China still wants to do business with Zambia despite the $70m worth of debt that Zambia still owes to them, and the recent stall in the debt restructuring negotiations, which China co-chairs,” Mwachande says.

China and several African countries have also expressed the ambition to reduce the power of Western-dominated financial institutions and the prevalence of the dollar in international trade, which critics argue gives the United States outsized influence on a global level.

Mwachande believes that de-dollarisation is necessary for African countries including Zambia but rejects the idea that the continent should be caught up in a wider geopolitical battle.

“The renminbi is a good option for now simply because there isn’t yet any other viable alternative to the dollar,” Mwachande tells African Business.

“We’ve seen in the last couple of years how vulnerable Africa is to higher interest rates in the United States and how that has caused debt problems or massive currency devaluations – whether that is in Nigeria, Ghana, or indeed Zambia. To return to pre-Covid levels of economic growth, Africa needs other currency options, and one option is the renminbi.”

However, he notes that it doesn’t need to be a case of “either/or”.

“It’s a matter of African countries making sound economic decisions based on which international partners are best placed to help deliver higher growth,” he says.

Harry Clynch

Harry is Finance Reporter at African Business.

Source:  AfricanBusiness, 8th December 2024