Seeds of Opportunity: The African Growth Series
July 2022 | Issue 1
In this week's issue, you will learn more about:
- Carbon Markets in Africa
- AI software used to curb the next South African locust swarms
- Burkina Faso Spearheads Innovation in Agriculture
- Eastern Cape stands to receive close to R25 billion in energy investments
- Financing Ghana's SMEs
- Think Tank: Energy in Africa
Carbon Markets in Africa
The IEA’s recently released “Africa Energy Outlook 2022” highlights the increasing demand for electricity on the continent. As of 2022, 600 million people, or 43% of the African population, lack access to electricity. Most of them reside in sub-Saharan Africa, mainly in rural areas far from the national grids. Therefore, they rely on traditional biomass as a fuel source for basic needs such as cooking and heating. To achieve the region’s universal access to affordable, clean and modern electricity by 2030, nearly 90 million people need to be connected yearly. As the African continent continues to develop, a higher standard of living driven by rising incomes and expanded access to electricity will result in more Africans using more electrical appliances and equipment, placing further pressure on the electricity supply network. While Africa accounts for the smallest share of greenhouse-gas emissions globally, this increase in electricity generation must be done sustainably. But this will be expensive. In SSA alone, the net-zero transition will cost an estimated US$1.7 trillion by 2030. With official development assistance already declining before the Covid-19 pandemic, new innovative climate finance is needed. And this is where new, reliable and efficient carbon markets come in. Corporations find themselves under increasing pressure to limit their emissions, and if they want to exceed these established limits, they must purchase credits generated from emissions-reduction projects. Carbon markets have gained significant traction in recent years, with roughly 23% of global emissions now covered by some form of carbon pricing. The value of traded carbon dioxide permits soared by 164% in 2021, reaching a record $851 billion. But economic hardship, uncertainties such as the covid-19 pandemic, the war in Ukraine, and rising oil and gas prices all fuel CO2 price volatility. Unpredictable costs make it impossible for lower-income African countries with limited funds and technical capacity to participate in the carbon market on fair terms. As a result, Africa has largely been left on the sidelines of global carbon markets. Africa must establish an Emission Trading System (ETS) similar to Europe’s. This approach would create certainty and protect all sides from price volatility, enabling participating African countries to finance clean-energy transitions while generating large carbon offsets for European companies. African governments need to work together with developed regions to find a model that will benefit Africa and the developed world, driving the sustainability of the energy sector.
AI software used to curb the next South African locust swarms
As the grassy farmland region had just begun to recover from a devasting 6 – year drought, the Eastern Cape Province in South Africa experienced one of the worst locust infestations in 25 years, stripping 5 million hectares of grazing land earlier this year. During this infestation, millions of eggs were laid, which could lead to another swarm in September this year. Farmers in the area have now joined researchers to introduce a high–tech innovation software package that can track locust swarms in real-time. The idea is to pinpoint the exact location of the locusts in their juvenile stage (hooper stage) and exterminate them before they cause severe damage. Early tracking of the swarms will enable farmers to follow their flight path, identify their eggs and terminate them before they hatch, minimising the impact of future damaging swarms. This software solution developed by Vulcan Incorporated will mark the first time this cutting-edge technology is used to track locusts in South Africa. Previously this software was used to monitor the movements of large game animals. However, locust tracking technology has been widely used in East Africa, where countries such as Ethiopia, Somalia, Kenya, Uganda, South Sudan, and Tanzania recorded dwindling in numbers in 2021 after this technology was applied.
With this technology in place, farmers in the Eastern Cape eagerly await September to see how well their locust swarm early warning system works, and whether the insects can be effectively controlled.
Burkina Faso Spearheads Innovation in Agriculture
Micro-irrigation is the process of distributing water through the roots of the plant, via an underground network, therefore minimising the percentage of water lost as a result of evaporation. Not only is this innovative technique water-conscious, but when it is partnered with the process of ‘fertigation’ (which entails infusing the water with soluble fertiliser), it will not only optimise the use of local water, it will improve crop productivity. Due to the natural climate, exacerbated by the effects of climate change, this innovative form of farming has become popular in Burkina Faso and, recently, in Niger. The results of this farming technique are so beneficial that between 2019 – 2022 the use of this method has increased from 20 pilot farms to 500 farms to date. This innovation in agriculture will dramatically improve food security within Africa, where out of the top 15 countries in the world with the highest drought score, 11 are based in the continent. Through the incorporation of reusable energy sources, such as solar-powered pumps and groundwater water, micro-irrigation will combat a myriad of socio-economic problems caused as a result of the climate in Africa and the financial strain caused by drought; between 1970 – 2019, the most common climate crisis to cause economic loss in Africa was drought, costing the continent US$7.5 million. The positive impact of micro-irrigation has caught international attention in both Israel and the United States, where the process is now being introduced in Niger by Netafim, an Israeli irrigation company, which estimates the process to save between 30-55% of water. In South Africa and Gambia, IDE, an American water treatment firm, is currently conducting trials. The effectiveness of this innovation has been estimated to be worth US$572 million per annum by 2025 and will require specialist players throughout the continent to implement it further. This is an exciting innovation that will alter the agricultural landscape of Africa, allowing for increased crop production and therefore eliminating food scarcity and potentially leading to food exports to developed markets affected by current shortages.
Eastern Cape stands to receive close to R25 billion in energy investments
The first half of 2022 closed with a positive investment prospect for the Eastern Cape in the energy space. Independent, renewable energy trader, Earth & Wire recently announced plans to roll out the first long-duration energy storage system in the Eastern Cape by 2024. The project will involve an installation of a 300 MW/1 200 MWh battery storage system, which will be ordered from the US company, Ambri. A potential site being targeted is close to Somerset East, which has a capacity for installation of 700 MW of wind and 600 MW of solar photovoltaic energy, however, the modular nature of the system allows for installation at various locations. The investment injection for the Eastern Cape is a significant one, with Earth & Wire, estimating between R3.5-billion and R4 billion in capital for the system. Furthermore, the province will also benefit through investments in the transmission infrastructure required for connecting the system to the national grid. Overall, between R25-billion and R30-billion through the entirety of the project.
As the country battles energy challenges with load-shedding, adequate energy infrastructure, and project bottlenecks, progress is dawing in the private sector, with Earth & Wire's announcement being a testament to that. Although currently focused on private business customers, the company foresees meeting supply demands for municipal customers depending on how the municipal market develops.
Financing Ghana's SMEs
Research from Ghana's Ministry of Trade and Industry reveals that the country's small and medium enterprises (SMEs) struggle to access funds. Financing options are available to large corporations and poverty alleviation policies fund micro-enterprises hence SMEs sit in the “missing middle”. These companies make up roughly 80% of businesses in Ghana and according to the country's finance minister, Ken Ofori-Atta, funding for long-term projects in this sector is minimal with only 15% of bank loans lasting for five years or longer. This June, the country launched the Development Bank Ghana (DBG) which provides medium to long-term loans for SMEs and companies in agribusiness, manufacturing, and information and communication technology (ICT). The bank has a total of USD 759.5 million and is financed through a combination of 40% domestic and 60% foreign loans from USD 253 million from Ghana's government, USD 250 million from the World Bank, USD 170 million from the European Investment Bank, USD 46.5 million from the German state-owned development bank Kreditanstalt für Wiederaufbau and USD 40 million from the African Development Bank. Upon launch, the DBG has an initial USD 700 million it will loan to private financial institutions (which include CalBank, Consolidated Bank Ghana, GCB Bank Limited, and Fidelity Bank) who in turn will on-lend to SMEs. Along with the DBG, there are 13 other development banks across Africa that enable growth by increasing investment into SME markets across the continent.
Think Tank: Energy in Africa
Frost & Sullivan brings together industry experts Berrie de Jager - Renewable Energy. Mining. Fuel Services. Logistics (Standard Bank Group), Derek Boulware (Vice President and Head of Africa Research: Welligence Energy Analytics), Hendrik Malan (Africa CEO: Frost & Sullivan Africa), and Patrick Prestele (Energy & Power Consultant: Frost & Sullivan Africa) to address #Africa's lack of essential access to electrification, how the #energy requirements will have to be met; as well as the opportunity for private-sector stakeholders to get involved in the energy and #power sector.
Click HERE to register and be a part of the conversation on Thursday, 14 July at 15h00 SAST.
To find out more about opportunities in Africa, please contact Lynne Martin.
