Africa's energy paradox can be an investment thesis, if policy clarity meets patient capital

The access and affordability gap

Despite years of progress, energy access in Africa remains uneven and costly. The Powering Africa's Future report indicates that nearly 43% of the continent's population lacks electricity, with rural rates falling below 20%. Households can spend up to 15% of their income on electricity, compared to less than 5% in developed economies. At the same time, the cost of electricity is among the highest in the world. Households and small enterprises often pay tariffs two to three times higher than global averages, largely due to inefficiencies in generation, transmission losses, and small market scales. The result: even when power is available, it's often unaffordable.

The scale of the challenge is staggering but so is the size of the opportunity. With Africa's population projected to double by 2050, the demand for reliable, affordable power could make the continent one of the world's most dynamic energy markets. By leveraging technological innovation and strengthening collaboration and regional coordination among African countries to mobilize resources and harmonize policies, the continent will unlock its vast energy potential and drive sustainable, endogenous development.

Gas as a pragmatic bridge, export orientation versus local valorization

Renewable capacity alone cannot yet meet the continent's fast-rising demand. Gas offers reliable baseload power to stabilize grids while cleaner technologies scale up. At the same time, industrial sectors from fertilizers to manufacturing depend on affordable gas to grow. Modern regulatory reforms are essential to unlock this potential. The report documents a general trend toward modernization of legislation across Africa's oil and gas sector. Recent reforms aim to attract foreign investors while controlling the country's rent and include strengthening frameworks regarding local content. Operating rights typically last 30-35 years for gas, providing long-term certainty. Stability clauses foster long-term predictability and operational resilience by insulating contract terms from legislative shifts. The report also highlighted that Africa could exceed 100 bcm/year LNG export capacity by 2030.

However, Africa's gas narrative should not simply mirror that of the past focused solely on export. The choice between liquefied natural gas (LNG) exports and local valorization is not binary. Export revenues can finance domestic infrastructure, while a share of production should be ringfenced for local power generation, fertilizer production, and clean cooking. The key lies in balanced monetization strategies that serve both global markets and local development. LNG exports bring in foreign currency and enhance geopolitical standing but when most of the value chain remains offshore, domestic industries and consumers benefit little. The report emphasizes that countries able to retain more of the downstream value through gas-to-power, petrochemicals, or local storage and distribution networks build resilience and generate broader economic multipliers.

In other words, the true investment thesis lies not only in extracting and exporting, but in constructing ecosystems: pipelines, terminals, processing hubs, and local supply chains that keep value circulating within the economy.

Scaling renewables and integrating grids, regulatory modernization in electricity

While gas offers a transition pathway, renewables represent Africa's long-term promise. Yet significant hurdles remain. Powering Africa's Future report points out that renewable energy financing is still heavily concentrated among a few markets, leaving many countries unable to attract affordable capital. High interest rates and perceived risk keep the cost of financing among the world's highest. Perceived regulatory uncertainty and gaps in transmission infrastructure further slow deployment. Integrating intermittent sources like solar and wind into already fragile grids adds another layer of complexity, often leading to instability and costly curtailments.

The report indicates frameworks are evolving toward international standards, with competitive procedures guaranteeing transparency. Financial mechanisms including incentive tariffs and tax benefits increasingly favor renewables.

To unlock scale, investors must look beyond generation to transmission and storage. Hybrid systems combining solar or wind with battery storage and flexible gas peakers are already proving viable in markets like South Africa, Kenya, and Morocco. Regional power pools, if effectively implemented, could help balance supply and demand across borders. The next phase of Africa's renewable story is therefore less about adding capacity and more about integrating systems.

Building durable value through local content

A sustainable energy strategy must also be an inclusive one. The Powering Africa's Future report underscores that local content is not merely a policy checkbox but a long-term value driver. Multiple countries have enacted frameworks requiring workforce localization, local goods preference, and capital ownership thresholds, with ambitious targets for the coming decade. Encouraging local manufacturing, assembly, and workforce development reduces political risk, strengthens social acceptance, and builds domestic capabilities that outlive individual projects. Investors who embed local partnerships in their business models are better placed to navigate regulatory uncertainty and to align with national development goals.

Moreover, fostering local expertise creates feedback loops that improve project delivery. From engineering to maintenance and data management, African firms are increasingly capable of providing high-value services once reserved for international contractors. Supporting this ecosystem is both good economics and good politics.

The report specifically notes that renewables offer significant potential for local job creation but require robust local content policies. These provisions reflect states' desire to maximize economic benefits by stimulating local company integration and strengthening national skills.

Electricity market liberalization: clarity before capital

Perhaps the most decisive variable in the investment equation is market structure. In many countries, the electricity sector remains dominated by state monopolies burdened by tariff deficits and operational inefficiencies. According to Powering Africa's Future, reforming these markets through unbundling, transparent procurement, and independent regulation is essential to attract private capital.

Investors are less deterred by high risk than by unquantifiable risk. Clear rules on grid access, power purchase agreements (PPAs), and tariff adjustments can dramatically improve bankability. Where reforms have taken root for instance, Morocco's renewable auctions or Kenya's independent power producer (IPP) framework capital has followed. The lesson is straightforward: clarity precedes investment.

Turning paradox into thesis: actionable insights

For investors and policymakers alike, Africa's energy paradox can be turned into progress through clear priorities and coordinated action:

• Investors should look for markets with credible follow-through and stable regulations.
• Energy projects in gas and renewables mature over decades investment horizons and must match Africa's needs and timelines.
• Combining oil, gas, renewables, and grid assets spreads risk and supports a balanced transition toward cleaner systems.
• Strong local content policies are transforming expectations from workforce participation to local ownership and building resilience.
• Cross-border grids, pipelines, and power pools can turn fragmented national markets into scalable regional ones.
• Clear and independent regulatory frameworks consistently applied are the single greatest enabler of private capital.
• Gas and renewables investments must fuel African industries and households, not only external markets.
• Future growth relies more on efficient power transportation and management than on generation.
• Development banks can de-risk projects, but sustainable progress will come from mobilizing African savings and pension funds.
• Pragmatic energy transition strategies anchored in clean growth and job creation will define Africa's competitive advantage.

Key takeaway

Africa’s energy transition is accelerating. With demand set to double by 2050, resilient and consistent investment will win. Oil and Gas will bridge the gap as renewables scale—where governance is strong and local value creation starts early. Modern regulatory frameworks are paving clear paths for investors who choose consistency and partnership. The time is now: invest long-term, build locally, and power Africa’s future.

^{Authors note: All references correspond to the Forvis Mazars report "Powering Africa's Future: Energy trends, regulatory framework, and energy policies in Africa 2025".}

Authors

Ibra ndieme Ndiaye and 
Ndeye Madjiguene Dieng