Africa is characterised by strong regional imbalances. South Africa and North Africa account for less than 20% of the population but more than 45% of energy investment and over 65% of installed electrical capacity. By contrast, Sub-Saharan Africa, home to most of the region’s population, receives less energy investment and has limited access to reliable electricity. New connection rates have steadily increased since 2000 but remain well below the universal access target set for 2030, with 600 million people still lacking electricity access and more than 1 billion people without clean cooking.

Over the past decade roughly half of energy investment in Africa has been in oil and gas, primarily made by private companies with a view to export. Meanwhile, spending on clean energy remained relatively flat at less than USD 30 billion per year until 2021. Since then, growth has intensified, driven by clean energy investment, especially in low-emissions power. Global technology cost reductions have improved the competitiveness of clean energy and solar PV now represents the least-cost source of power in many African countries. This has led to a tripling of private sector clean energy investment, rising from around USD 17 billion in 2019 to almost USD 40 billion in 2024.

Public and development finance (DFI) funding for energy projects in Africa has fallen by approximately one-third in the last ten years, reaching USD 20 billion in 2024, largely due to a reduction of more than 85% in spending by Chinese DFIs. While representing a small share of overall spending, the public sector and DFIs are particularly important for projects in nascent markets, using new technologies or in commercially unviable areas where it can be challenging for private sector investment relying on concessional funds to ensure profitability.

Against this backdrop, private equity and venture capital play a key role in financing early-stage businesses, especially in energy access, given their ability to invest in smaller-scale, higher-growth companies. Since 2015, venture capital firms have provided 40% of the capital to energy access start-ups. However, the average size of deals in the off-grid solar sector remains quite small at USD 7 million and, due to concerns about profitability, both venture capital and private equity firms have begun directing attention away from pure-play residential energy access. Instead, there has been a move towards nascent areas such as electric vehicles (EVs), where spending reached almost USD 70 million in 2023, an eightfold increase since 2021, and commercial and industrial solar companies where offtake is considered less risky than residential consumers.