For some years now, increasing attention has been drawn to a fact that is not very positive for the development of an African energy economy: the industry is heavily dominated by non-African manufacturers, investors and distributors. There is therefore a danger that Africans will (once again) be reduced primarily to consumers.
This dangerous situation is well known and widely documented. Just one figure from recent studies: Over $500 million in funding in 2021 went to African energy sector startups. But: Eight of the top 10 African startups that attracted the most capital were led by foreigners.
The good thing is that slowly a rethinking in the consciousness of many organizations can be seen: many tenders of international organizations are increasingly striving to support indigenous enterprises, initiatives and organizations in Africa with their programs.
Not so UNDP!
The so called “flagship initiative of UNDP’s Sustainable Energy Hub” aims to support innovative business models and financial mechanisms to accelerate energy access and the transition to clean energy. It explicitly sought to support solutions in the design phase “so that novel financial aggregation structures and models can be developed that can lead to financially closed transactions in East Africa, in the near future.”
That sounds good and forward-looking. In fact, according to its own statement, UNDP received “many applications from around the globe”. But then comes the disillusionment when the seven winners of the latest call for proposals are now announced: six of the seven funded initiatives/companies are not from Africa, and one is headquartered in South Africa.
One could argue that the investors’ money is mainly outside Africa. But the UNDP tender was not about financial capital, but about developing suitable instruments and models to facilitate investment.
UNDP apparently believes that these new instruments can be developed outside of Africa and overlooks the fact that indigenous initiatives are significantly more responsive to the specifics of the local market. It is not without reason that truly groundbreaking new financial instruments in this sector have been developed by local innovators:
- Muhammad Yunus developed the then novel instrument of microcredit as a local expert – while foreign financial instruments were only able to think in terms of traditional structures.
- The currently widespread Pay-as-you-go finance instrument was not developed in Europe or the USA, but by Afrisol in Morocco.
As with gender, it is also urgently time to increase the proportion of supported indigenous solutions to at least 50% in other areas. Otherwise, we will remain stuck in encrusted, traditional structures. This will hardly lead to real innovations. Most importantly, the enormous potential of local startups and innovators remains untapped.
UNDP would do well to rethink its own structures of thinking.
Harald Schützeichel is director of the Stiftung Solarenergie (Solar Energy Foundation), which, among other things, supports African energy startups with its own accelerator program through the Startup|Energy initiative.