COP27 will be held in Egypt this November. Why is this important for the country and the rest of Africa?
COP27 is the biggest climate-focused international gathering of the year. The fact that it is being held on the African continent again will give African countries a louder voice in speaking about the specifics of the continent’s net-zero transition.
While the continent has historically been a low emitter of greenhouse gas emissions (currently only 3.8 percent), Africa offers the potential for significant investment in green renewables that can aid in bridging the power gap – which currently sees close to 600 million people in the region living without access to reliable electricity.
COP27 is an opportunity to show international investors that strategic and sustainable infrastructure investment can return attractive ROIs and provide households with increased access to power while helping the world reach net zero.
What will be the key questions for infrastructure investors at the conference?
The developed countries of Europe will be focusing on how to reduce their vulnerability to global energy supply-chain shocks like those we are seeing because of the war in Ukraine. A key question for international investors in infrastructure will be the investment decision parameters around new infrastructure developed to offset this vulnerability. The key question will be whether, in light of recent geopolitical changes, some investment in fossil-fuel-related infrastructure can be justified in the context of the supply-chain issues highlighted by the Ukraine crisis.
Africa needs up to $100 billion a year to bridge the infrastructure gap. What can be done to galvanise more private capital?
Africa has historically been among the world’s lowest-risk investment regions when project defaults are considered, outperforming Eastern Europe, North America and Asia. Yet the risk perception remains unreasonably high. Highlighting the belts-and-braces nature of risk management on African projects will hopefully help to attract more international capital to bridge the infrastructure gap.
The biggest barrier, however, has not been a shortage of capital. Governments and other planning authorities on the continent have tended to approach infrastructure development, particularly private sector participation, on an ad hoc basis, with projects typically stemming from bilateral negotiations. To increase the scale and impact of private sector participation in bridging the gap, governments need to focus on procurement processes that are programmatic and driven by credible long-term infrastructure plans.
What part does sustainability play in solving the region’s infrastructural challenges?
As Africa becomes increasingly urbanised and digitised and as it transitions towards cleaner energy, sustainability-led investment must be a focus. An absence of resilient infrastructure means critical urban centres are disproportionally vulnerable to climate change.
In terms of potential benefits, Africa’s infrastructure deficit and capital scarcity mean it offers highly competitive returns on investments and the opportunity to generate greater positive impacts. When one considers the low baseline, a dollar goes a lot further in Africa towards achieving these impacts and sustainable goals than it would in many other regions.