Gulf investors seen likely to keep funding Africa renewable energy despite the Iran war
NAIROBI, Kenya (AP) — Middle East sovereign wealth funds and state-backed companies are unlikely to reduce renewable energy investments in Africa despite disruptions from the Iran war, given the strong long-term economic and strategic reasons driving such financing, analysts say.
Investors, enriched by the Gulf region’s abundant oil and gas, are increasingly turning to Africa’s clean energy sector due to rising electricity demand, rapid urbanization and the continent’s growing role in global supply chains tied to critical minerals and manufacturing.
A report published by the Clean Air Task Force last month found that more than $101.9 billion will flow into Africa’s renewable energy sector by the end of 2024 from Gulf countries led by the United Arab Emirates, Saudi Arabia, Qatar, Kuwait and Bahrain. The bulk of investment has been concentrated in North Africa, Southern Africa and parts of East Africa, while West Africa has received relatively limited funding.
“Africa remains one of the few regions with clear demand growth,” said Matthew Tilleard, managing director of Nairobi-based CrossBoundary Energy, which develops and operates renewable energy projects. “Short-term shocks can delay individual transactions, but the biggest infrastructure opportunities require a long-term view of risk and value.”
Africa faces one of the world’s largest electricity deficits. Nearly 600 million people across the continent still lack access to electricity and many more face unreliable supplies. Governments are increasingly turning to private investors to help finance solar, wind and hybrid energy projects to expand generation capacity without overstraining public finances.
This gap has created opportunities for Gulf investors seeking diversification beyond oil and gas.
“Ultimately, Gulf investments in Africa are driven by pragmatic national interests and strategic returns,” said Louw Nelson, a political analyst at Oxford Economics. “There is currently significant energy investment underway across Africa, which are long-term projects that take years to build, so we do not expect major disruptions.”
Overseas investments in renewable energy form part of broader strategies among Middle Eastern countries to diversify their economies and adapt to the global shift towards cleaner energy.
Energy and development analyst Joel Okanda said disruptions to oil and gas shipments due to the war with Iran could strengthen the case for renewable energy investment as it shows how vulnerable such supply routes can be.
“These companies, many of which are state-owned, have significant capital, but they also understand that the world is slowly moving away from fossil fuels,” Okanda said. “Investing in renewable energy allows them to diversify their portfolio and position themselves for the energy systems of the future.”
Africa’s energy sector is at the center of many global economic changes, including the energy transition and increasing demand for minerals such as cobalt and gold, which are used in many high-tech products.
“For investors, renewable energy projects can provide strategic access to sectors beyond electricity generation,” Tilleard said. “Power plants or large industrial operations built to supply minerals could position Arab investors close to supply chains for minerals used in batteries and other technologies.”
Perceived risks, including currency volatility and policy uncertainty, particularly in West Africa, continue to shape where such investors invest, Okanda said.
“Generating power is only part of the equation,” Okanda said. “You also need transmission systems and a functioning electricity market where electricity can actually be sold and paid for.”
