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Africa
Imports and Exports
Logistics

Africa must raise energy tariffs to attract investment

15 May 2025 - by Staff reporter
 Source: kun.uz
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Africa holds immense energy potential, with more than 125 billion barrels of proven oil reserves, 620 trillion cubic feet of natural gas and 60% of the world’s best solar resources.

However, the continent continues to struggle to attract the capital needed to leverage these resources for transformative development.

This was the paradox discussed at the Invest in African Energy Forum in Paris this week where global business leaders highlighted how innovative financing mechanisms could help unlock Africa’s vast energy opportunities.

“There’s a huge amount of financing required to close the financing gap on the continent. It’s quite clear that there’s not enough capital and we need to think about innovative ways to source capital,” said Africa Finance Corporation Vice President, Taiwo Okwor.

“With the right fiscal regimes, regulatory frameworks and policies, investors will come to invest in the energy sector in Africa.”

By using innovative financing tools and regional cooperation mechanisms, Africa would be able to scale investments and reduce risk.

Additionally, by leveraging blended finance, de-risking strategies and multilateral partnerships, countries can not only secure capital but bolster energy access at a continental scale. However, challenges will need to be addressed, including lack of investor certainty, regulatory barriers and red tape. 

“Investors thrive on predictability,” said Ibra Ndiaye, Partner: Energy, Industry and Services at Forvis Mazars.

“According to the African Energy Chamber, 45% of investors cite uncertainty in legal frameworks in Africa as a major concern before entering new markets. This ambiguity in regulatory frameworks creates a delay in project implementation.”

To address regulatory challenges and increase energy capacity, there is an urgent need for systemic reform in the continent’s utility companies.

Stronger institutions and reforms have emerged as critical drivers for attracting private-sector involvement.

Panellists noted that many state-owned utilities across Africa were unable to deliver consistent and reliable energy services due to financial instability and poor infrastructure.

“What have we done to improve the quality of utilities going forward? I think 85% of utilities across Africa are technically insolvent and cannot meet the energy needs of Africans,” said Reginald Max, Senior Adviser for Infrastructure and Independent Power Producers for the Trade and Development Bank.

Max added that, until the underlying inefficiencies in energy distribution and cost recovery were addressed, investor confidence would remain weak.

Another core issue was the need to implement cost-reflective tariffs. Tariff policies in many countries have kept electricity prices artificially low, discouraging private investment and further burdening state utilities.

“The key is cost-reflective tariffs,” said Liz Williamson, Head of Energy Corporate Finance at Rand Merchant Bank.

“We need the political will to go through the pain to get to cost-reflective tariffs. This could make a big difference in terms of liability.”

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