Summary

BCLP’s Simon Buchler participated in the UK-Africa Virtual Legal Services Trade Mission organised by the Ministry of Justice and the Department for International Trade as part of their ‘Legal Services are GREAT’ initiative. The event brought together participants in the UK-Africa legal services sector for three days of panel discussions, one-on-one meetings and Q&A sessions. These focused on the rapid commercial change taking place in Africa and covered topics including data protection, methods of dispute resolution and the future of the energy and infrastructure sectors on the continent. 

Simon sat on a panel alongside Rachel Barrett (Linklaters), Fiona Gulliford (Trinity International) and Pieter Badenhorst (AFGRI), to discuss how COVID-19 is impacting the development of renewable energy and environmentally sustainable projects across Africa and the measures that can be taken to stimulate more investment in this sector. 

The panel identified that the shift from fossil fuel energy to renewable sources across Africa is increasingly focussing on ‘off-grid’ energy solutions – looking to tap into the huge rural market where grid access is often very limited. However, improvements in technology and decreasing asset costs are opening up more exciting investment opportunities in the green energy sector. For instance, battery storage projects do not just help communities access more reliable power and avoid peak electricity prices, but can offer attractive returns for investors through guaranteed offtake contracts such as those under the new Eskom Battery Storage Programme in South Africa. 

In addition, the panel discussed the importance of green hydrogen as a clean gas and storage solution, and how this could be the next big investment opportunity across Africa as the cost of electrolysis technology starts to fall. 

Another benefit of this shift is the impact on other sectors such as the agriculture industry where on-site renewable energy generation and batteries are generating more reliable access to electricity to power irrigation systems and enable new agtech solutions such as decentralised cooling facilities to keep produce fresh.

However, it was noted that real change towards a more sustainable and green economy needs three key ingredients: 

1. Investor appetite – it is not sufficient to expect corporations operating in Africa to invest in renewables purely on the grounds of Environmental, Social & Governance (ESG) policies. Sustainable energy projects must also be financially viable. We are starting to see this from Oil & Gas majors who are currently involved in three times as many renewables projects in Africa as in 2000. 
2. Enabling environment – governments have a role to play not just in ensuring political stability but creating an attractive environment for investors with the right balance of subsidy regimes and taxation relief. In addition, multinational support to mitigate project risk is key. For example, the World Bank scheme to guarantee the payment liabilities of offtakers, the African Development Bank’s new $10 billion COVID-19 facility and KfW’s Regional Liquidity Support Facility.
3. Infrastructure – for this shift to gather real pace, many African countries will need to also attract investment (or seek development funding) to improve their core infrastructure. For example, a grid scale project will have difficulties if the transmission system is faulty; activities cannot be remotely monitored if the country’s digital infrastructure is inadequate; and projects will experience significant delays if the domestic road and transport system are not running smoothly.