Bright times ahead: With Africa’s innovation, finance, and renewables leading the way

2021 is coming to its inevitable end, and the time for yearly summaries is upon us. While Covid was still a big part of our lives, vaccines presented some problematic issues, and Omicron is reinforcing some difficult challenges across the continent, and worldwide, Africa had some positive developments. Global investment, innovation, and a renewable wave set the tone for a positive outlook while paving the path for a much-awaited 2022.

Emerging from the Covid recession

Albeit bleak economic predictions for Africa’s financial future under the Covid umbrella, sub-Saharan Africa is set to emerge from the 2020 pandemic-sparked recession, with growth expected to expand by 3.3 percent in 2021. This is one percent higher than the April 2021 forecast, according to the latest edition of Africa’s Pulse, a World Bank’s bi-annual report. This unexpected bounce is fueled by elevated commodity prices, a relaxation of stringent pandemic measures, and recovery in global trade. The report predicts continued, albeit modest, growth for 2022 and 2023.

Some of the continent’s largest economies, including Angola, Nigeria, and South Africa, are expected to grow by 0.4 percent, 2.4 percent, 4.6 percent, respectively. The rest of SSA is rebounding at a growth rate of 3.6 percent in 2021.

According to the report, multiple countries across the continent have seized the global crisis as an opportunity to foster necessary macroeconomic reforms. These include the unification of exchange rates in Sudan, fuel subsidy reform in Nigeria, and opening the telecommunications sector to the private sector in Ethiopia.

Looking ahead, The International Monetary Fund (IMF) predicts a 3.8% growth in 2022, and to that end, ensuring accelerated vaccine distribution in sub-Saharan Africa plays a vital role. The longer we allow such a large proportion of the global population to remain unvaccinated, the greater the possibility that new virus variants will develop. A Covid-free world runs through sub-Saharan Africa, requiring significant investment and a change in mindset for many.

African innovation is breaking records

According to Bloomberg, fundraising by African startups is set to reach $5 billion in 2021, a higher amount than the figure raised in the previous three years combined. The continent’s youthful and growing population, rising internet penetration, and the application of emerging technologies that could improve access to healthcare, financial services, education, and energy, all factor in the ecosystem’s staggering growth. In fact, between 2015 and 2020 growth of African tech startups receiving financial backing was nearly six times faster than the global average.

Covid has an essential role in this innovation acceleration, as more than 120 health technology innovations have been piloted or adopted in Africa, according to the World Health Organization (WHO), accounting for 12.8% of worldwide innovations relating to the pandemic. Alongside healthcare-related ventures, fintech was another sector that witnessed considerable growth in both new ventures and investment terms.

According to the World Intellectual Property Organization, the more developed an economy is, the more it innovates and vice versa. Few economies break this pattern, and SSA is a definite anomaly, as the region boasts the most significant number of economies performing above expectations for their level of development. This is very encouraging, but investment, both within countries and from global investors, is vital to spark innovation on the continent further. According to the World Bank, African countries, which currently invest only 0.01% per capita in innovation, must put more money and effort into the growing sector to secure the future of its extremely young population. International investors have a crucial role in establishing innovation as a growth engine across the continent. With some up-and-coming technologies and entrepreneurs, they have every reason to do so.

Renewable energy is becoming influential

A month and a half after coming to a close, COP26 is still under heavy debate, with some saying it was an excellent success for Africa and others calling it a monumental debacle.

Albeit falling short of the African negotiation team’s requests of $1.3 trillion a year, the conference attendees pledged more financing. The target of $100 billion is now expected to be reached by 2023. COP26’s president, Alok Sharma, stated that around $500 billion would be mobilized to developing nations by 2025, with many of these funds going to Africa. These international investments, coupled with private sector funds, will have a crucial role in fostering the continent’s green energy transformation.

The International Renewable Energy Agency (IRENA) estimates that with the right policies, regulation, governance, and access to financial markets, sub-Saharan Africa could meet up to 67 percent of its energy needs by 2030. A quarter of those energy needs could be met through clean, renewable energy.

Countries such as Egypt, Ethiopia, Kenya, Morocco, and South Africa are leading the increase in renewable energy supply, while some of Africa’s smaller countries, including Cabo Verde, Djibouti, Rwanda, and Eswatini, have set ambitious renewable targets.

Renewable energy use is gradually rising across the continent with an annual growth rate of 21% between 2010 and 2020 and a current total capacity of more than 58 GW. Some notable projects from the past year show that the sector is becoming increasingly influential across the continent. In the past month alone, Rio Tinto broke ground on a hybrid renewables project in Madagascar, Germany decided to back green power initiative in SSA with EUR 49m, Norwegian clean power producer Scatec ASA announced an upcoming 20-MW solar PV plant in Lesotho, and Malawi’s first utility-scale solar PV plant, the 60-MW Salima Solar project, has been officially inaugurated. There is still much to be done, but the renewable future is gaining momentum.

With an optimistic outlook, a rebounding economy, a growing innovation sphere, and a flourishing renewable landscape, Africa’s future is bright. Global investments and vaccine fairness acts are crucial in spurring this growth and should be targeted by governments, investors, and businesses worldwide.

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