Over the past few years, many African countries have initiated transformation of their grid infrastructure and power generation by involving the private sector.
British power developer Gridworks recently signed two landmark agreements with the Ugandan government to begin construction on the Amari project, widely considered to be Africa's first independent transmission project to reach this stage.
ignite market liberalization
If one looks back in history, it would not be difficult to find the dominance of large, vertically-integrated utilities built around centralized generation assets, whether coal-fired power stations or large hydroelectric projects, supported by extensive transmission networks capable of delivering power over vast distances.
But such systems were extremely expensive to build and maintain; In many instances, only the state could afford the scale of capital required, especially at a time when electricity supply was considered inseparable from industrialization and economic development.
Over time, these utilities became natural monopolies.
But the deteriorating financial condition of public utilities eventually became so unsustainable that by the early 90s, many countries began exploring the unbundling of generation, transmission and distribution with entry into private participation and competition in certain parts of the market under new regulation, resulting in some of the continent's first independent power producer (IPP) deals being financially closed before the turn of the century.
Change in this regard has arguably been piecemeal and inconsistent.
However, over the past decade, global pressure to address climate change, particularly following the Paris Agreement, coupled with more accessible renewable energy technologies, has helped to restart the market liberalization agenda in African energy sectors.
uganda
Uganda is just one example of how countries have dismantled their power utilities, or are beginning to dismantle them, through adjustments in the regulatory environment allowing IPP participation in generation and transmission.
According to the Center on Global Energy Policy, about 87% of African countries now have some form of regulatory framework governing public-private partnerships (PPPs), with about 80% of them claiming frameworks applicable to the energy sector, even if their depth and sophistication still varies significantly from market to market.
SA is leading
South Africa is a notable case, where the last 15 years have seen some of the most significant structural change seen anywhere on the continent.
Last year, the government announced it would pursue private investment to build transmission lines through an Independent Transmission Program (ITP), recognizing that the country needed to modernize and expand its transmission network by about 14,000 km at a cost of about R440bn – capital which the state alone is not in a position to provide.
The announcement comes months after the long-awaited and heavily scrutinized Electricity Regulation Amendment Act came into force, leading to the restructuring of Eskom into separate generation, transmission and distribution entities, introducing the foundation of a more competitive electricity market.
South Africa has spent more than a decade developing what is considered one of the most successful renewable energy purchase programs implemented in an emerging market through the REIPPPP, which, since 2011, has attracted approximately R272bn in investment and supported the rollout of 95 projects producing more than 7,300 MW of electricity.
zambia
Zambia is also moving more aggressively toward diversifying its production mix and strengthening energy security, as one of the most severe recent droughts has exposed the vulnerability of a system heavily dependent on hydropower.
The Electricity (Open Access) Regulations of 2024 now provide non-discriminatory access to the national transmission and distribution network, allowing IPPs to sell electricity directly to large electricity users and regional markets.
In addition, the Government has adopted a competitive procurement framework for private sector investment in renewable energy, along with a liquidity mechanism intended to improve project bankability, while standardizing procurement documentation to reduce barriers to entry and the time it takes for projects to reach implementation.
It's a market correction story that has captured the attention of investors looking for long-term opportunities in emerging markets, and there is little to suggest the pace will slow.
investment
The question now is where that investment will be directed.
Apart from renewable-energy production, one of the first and most obvious areas where investment is likely to be directed is grid modernization and expansion, whether through expanding national transmission infrastructure into high-demand centres, or through decentralized systems better suited to isolated rural areas, where standalone power systems and mini-grids are often more practical.
According to the International Energy Agency, financing committed to decentralized energy solutions in sub-Saharan Africa has increased significantly since 2019.
Solar home systems and solar mini grids have also grown rapidly, with installations increasing 12-fold and 45-fold respectively in the last decade.
But despite that progress, decentralized systems are still not fully integrated into electrification strategies in large parts of the region, where they are often treated as transitional or complementary rather than central to long-term energy planning, and companies operating in the sector face financing barriers that limit their potential.
energy harvesting
Another area attracting attention is the energy aggregation market.
According to the Global Solar Council, Africa is set to install a record 4.5 GW of solar capacity in 2025, with about 44% of new additions coming from distributed, rooftop, commercial and captive systems rather than purely utility-scale projects.
It may seem that the continent is entering two parallel energy transitions at the same time: one led by large utility-scale infrastructure and the other driven by privately funded distributed systems, and this distinction matters immensely because distributed generation naturally creates demand for aggregation.
However, outside South Africa, the market is still in a very nascent stage, largely because sophisticated electricity markets depend on institutional infrastructure that many are still developing, including transmission access, wheeling frameworks, settlement systems, interval metering, balancing mechanisms and standardized market rules.
However, the real opportunity doesn't stop at how power is generated or transferred.
Across the continent, most of the underlying value lies in the commodities flowing into this system, particularly battery technologies and commodities linked to the broader renewable-energy industrial base.
In many ways, that ecosystem is already starting to take shape through the resources being developed, the infrastructure now being financed, and the way parts of the market are slowly starting to connect.
initial investment
For investors, the challenge is to quickly identify those relationships so they can understand where value may ultimately accumulate in the chain.
The optimism about Africa's energy sector in the coming decades is not entirely misplaced. Many markets are moving in the right direction, even if some are moving faster than others.
There are still persistent challenges to overcome, particularly the stubborn risk premium associated with African investments.
But as regulatory reform continues, barriers to entry are lowered and electricity markets are made more accessible to private capital, the broader direction of travel is becoming harder to ignore.
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