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Monica_55905 Jun 24

Africa Energy Yearbook Barometer

Africa Energy Yearbook Barometer image
Results from the EnergyNet Yearbook's 2020 industry survey. The survey questioned 176 key sector stakeholders, including Government officials, project developers, investors, legal and regulatory experts on which direction they believe energy development on the continent is heading under the current climate. 
Industry experts, from Finnfund, Elsewedy Energy, Rensource Energy and the African Business Magazine, discussed the results of the Africa Investor Sentiment Survey and the on-the-ground impact of these results. The survey had asked 176 energy sector figures including investors, project developers, and legal and regulatory staff to find out what they thought the major trends would be this year and next. The survey found that most investors expect COVID-19 to have an impact on their investments going forward including a substantial number who expect investments to decrease:

•    52% of respondents said that COVID-19 will have an impact on their investment strategy, with 32% saying possibly and 17% saying it would not have an impact. 
•    The survey also found that 40% thought that COVID-19 will mean a decrease in investment in African energy, with 37% believing investment would remain stable and 23% who felt that investment would increase.

Poll: The audience was asked during the session to vote on what impact they thought COVID-19 would have on energy investment flows in Africa in 2020/21 - they were more pessimistic than the actual investors who were surveyed with 63% feeling that COVID-19 will mean a decrease in investment. However a higher proportion than in the survey (31%) felt investment would increase and a much smaller proportion than in the survey (6%) felt that it would stay about the same. 

However, the survey found that investors hold a long-term positive view towards Africa despite the pandemic, particularly in the area of renewable energy. Almost 90% of respondents said they were most likely to invest in solar and 66% said they were most likely to invest in smart and off-grid energy. The survey also showed a decreasing interest in oil and gas. Respondents were also asked what they would cite as the main obstacles to more investment in the Energy & Power sector in the next three years – policy and regulatory constraints were seen as the most important. Access to finance was also seen as a major issue.

Encouragingly, 43% of respondents felt that Africa compared better, as a value proposition, with other emerging markets - 34% felt it was about the same, 24% said it was better elsewhere.

Takeaways
  • For developers and builders, the overriding theme at present is uncertainty. It is harder to make plans, clients are more risk-averse but clients want developers and builders to take more responsibility and provide flexibility for projects. There seems to be inadequate access to finance for project development on the continent but there seems to be plenty for bankable projects.
  • Projects have faced delays with country borders being closed – this has affected the supply chain for goods and services so progress has been limited for many projects. At the same time, energy demand has dropped 15-20% which has put stress on already stretched utilities. As governments are focusing on COVID-19 specific activities there is less capacity to work on power deals and some IPPs are running out of capital. However, energy deals are counted in years and not months and overall there is much reason to be positive about the market and opportunities.
  • Board approvals are still being given during lockdown, deals are still being pulled together, and much due diligence is being carried out virtually. COVID-19 doesn’t seem to be impacting on governments’ take-up of renewable energy at present. Africa represents a huge demand, but there are also many problems and issues to fix which represents opportunities.