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21st Dec 2021

Africa set to ‘build back different’

It was a pleasure to be back amidst the bustle of the Africa Energy Forum in London last month, meeting face-to-face after more than a year away. It was clear that activity in the power sector on the continent is picking up, with companies busy working on transactions, particularly in the renewables space. African Energy Live Data shows a project pipeline of more than 10GW expected online in 2022.

Filed under: Blog Articles

21st Dec 2021

In our business, we have seen an increasing demand for investment professionals, both at the senior and junior level, with some notable wage inflation starting to creep in at the lower end of the experience range. Clients are having to think laterally to find the people they want, with everybody chasing the same talent. The emergence of new funds is adding further pressure on the limited pool of individuals with both power and Africa investment experience. The dearth of closed deals in the sector values those candidates with one or more completed transactions under their belt at a premium.

Renewed activity is welcome, the sector has slowed down in recent years with few new projects coming online. Gradual shifts in policy are showing signs of reversing the trend. South Africa is embarking on a large-scale procurement programme and other countries in sub-Saharan Africa are not so far behind. Nigeria is showing signs that it might nearly be ready to begin procuring power again as the outlook for distribution companies improves. In Kenya, breakneck efforts to improve the performance of its distribution company Kenya Power in time for elections next year, alongside the development of an auction policy for renewable power, may help put the sector on a more sustainable footing, if implemented effectively.

Meanwhile, solar projects are being procured and brought online across the continent, from Malawi to Zimbabwe, Togo to Mali to Senegal, Kenya to Madagascar.

It is also clear that the sector has undergone profound changes, with the gap of a year making these changes even more pronounced. COP26 brought home the challenges facing the natural gas industry. Some development finance institutions in the United States and Europe are reducing funding for gas technologies and they are, in some cases, being followed by private investors. African governments insist these gas projects are essential for development and for increasing the amount of renewable power that can be used on the grid. Growing networks need to be able to balance variable renewables to ensure the lights stay on when they are not producing power and that grid frequency remains stable.

The commercial and industrial (C&I) sector is a segment of the industry that continues to grow and grow. The opportunity to provide generation solutions that can provide reliable power, reduce costs, and reduce greenhouse gas emissions for some of Africa’s largest businesses, all while reducing exposure to the risk of regulatory and policy change and long procurement timelines, is unsurprisingly appealing. With on-grid opportunities at a premium, C&I offers an attractive alternative for investors.

The drive towards electrification is also creating opportunities for mini-grids and solar home systems. Electrification remains a priority for many governments and donors and while business models still have some way to go before becoming commercially viable, there is a strong will to fill the gap. Utilities are increasingly open to blended approaches, from integrated mini-grids in Nigeria to Kenya Power seeking to become a C&I player in Kenya.

In recruitment, the growth of C&I and off-grid businesses has drawn in a different profile of individual; enthusiastic younger entrepreneurs from North America or Europe who have a passion for Africa and an impact agenda. They are hiring and developing local talent with encouraging energy and focus. The reduced complexity of their businesses, when compared to a traditional IPP is allowing them to build skilled workforces free from expensive expats or fly-in, fly-out consultants.

However, limited on-grid opportunities have disillusioned some of the larger funds which had been looking for big-ticket investments on the continent. They have struggled to find large enough deals in Africa and are turning their attention to other markets in Latin America, Southeast Asia, and Eastern Europe, which are better able to offer investment opportunities at scale. While the C&I market is growing, there are no companies yet able to offer the scale of business needed to maintain the interest of international institutional investors aside from the large diesel and rental companies.

One area that promises big-ticket investment opportunities in the longer term is emerging green hydrogen and carbon capture technologies. While the latter has limited scope for development within Africa while the technology is immature, the continent has huge potential for green hydrogen production in the longer term, at least on paper.

The cost of power is the determining factor for the commercial viability of green hydrogen production. With some of the best solar resources on the planet, several African governments are pushing hard to be at the front of the queue for investment into the technology. North African countries which can combine excellent wind and solar resources and have existing gas and renewables experience and infrastructure are likely to be the first movers, with pilot projects at scale already underway.

South Africa also has big advantages. With an established electricity grid, good wind and solar resources, and a technology giant in Sasol which has experience with, and demand for hydrogen, the country has moved uncharacteristically quickly to develop a green hydrogen policy. Sasol is keen on the technology and is embarking on small-scale pilot projects, with the ultimate goal of using green hydrogen to produce sustainable aviation fuel using its proprietary Fischer-Tropsch processes. Namibia and Mauritania are also pressing forwards with large-scale projects.

The prospective scale of green hydrogen projects, with figures in the tens of gigawatts for renewable capacity being talked about, has the potential to draw some of the largest global investors to the continent. Opportunities in the hydrogen value chain, such as port infrastructure, pipelines, and shipping, could re-open the door for some of the investors who have left the continent in recent years.

So, as we welcomed back visitors to the AEF and AIX conferences recently, we also cautiously welcome the early signs of the increased project and investment activity in our sector. This activity might take a different form from the past but as long as more people have access to sustainable power, long may it continue.

Tim Beckh is a Partner in the Power & Infrastructure of Millar Cameron, a leading executive and senior management recruitment business operating exclusively in Africa and emerging markets. For more about Millar Cameron visit our website at or speak to one of our team.

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