Unlocking Africa’s climate entrepreneurship potential: Bridging finance and policy gaps

By William ANNOH &Gideon Ofori OSABUTEY

Africa stands at a pivotal moment where climate challenges intersect with entrepreneurial opportunities. Despite contributing minimally to global greenhouse gas emissions, the continent faces disproportionate climate impacts.

This scenario presents a unique opportunity for African entrepreneurs to lead in climate innovation, provided that critical financial and policy barriers are addressed.

The financial landscape: opportunities and gaps 

Africa currently attracts only 3.3percent of global climate finance flows. To meet the continent’s Nationally Determined Contributions (NDCs) under the Paris Agreement, climate finance must quadruple annually until 2030.

Presently, flows of US$76.5 billion represent merely 12percent of the estimated annual finance required for Africa to achieve its 2030 climate goals. This stark financing shortfall underscores the urgent need for increased investment in climate-related initiatives.

However, the potential for climate investment in Africa is substantial. The International Finance Corporation estimates that climate investment opportunities in developing economies could reach US$23 trillion by 2030, with a specific US$1.5 trillion opportunity for small and medium-sized enterprises (SMEs) in the climate sector.

This highlights the critical role that African entrepreneurs can play in driving climate solutions, provided they have access to adequate financing.

Sectoral insights: where opportunities lie

Analyzing the distribution of climate finance across sectors reveals both progress and areas needing attention:

• Energy systems: In 2022, this sector received US$24.5 billion, accounting for 37percent of total climate finance flows in Africa. Despite possessing 40percent of the world’s best solar resources, Africa accounts for only 1percent of installed solar photovoltaic capacity. This disparity presents significant entrepreneurial opportunities in renewable energy deployment.

• Agriculture and food systems: Attracting US$6 billion (9percent of flows) in 2022, this sector is vital for both mitigation and adaptation. Given that 65percent of Africa’s farmland is degraded, and 270 million people face chronic hunger, there is a pressing need for innovative solutions in climate-smart agriculture and sustainable food production.

• Water and ecosystems: Despite water security being a critical climate vulnerability, this sector received only US$1.5 billion (2percent of flows) in 2022. Entrepreneurs have opportunities to develop technologies for water monitoring, purification, and ecosystem restoration.

Mobilizing domestic capital – an untapped resource 

Africa’s domestic financial markets hold approximately US$1.8 trillion in bank, insurance, and pension assets, yet only 14percent of tracked climate finance comes from domestic sources.

Mobilizing these resources is essential to reduce reliance on international funding, mitigate exchange rate risks, and foster sustainable, locally-driven climate initiatives.

The role of policy and ecosystem development

Creating an enabling environment for climate entrepreneurship requires robust policy frameworks and supportive ecosystems. Key recommendations include:

• Policy reforms: Governments should implement policies that incentivize private investment in climate initiatives, such as tax breaks, subsidies, and streamlined regulatory processes.

• Financial innovation: Developing de-risking instruments like guarantees and first-loss capital can attract private investors by mitigating perceived risks associated with climate projects.

• Capacity building: Investing in education and training programmes to equip entrepreneurs with the skills needed to develop and scale climate solutions.

• Public-Private partnerships: Encouraging collaborations between governments, financial institutions, and the private sector to co-fund and support climate initiatives.

Ashesi University’s contribution

Ashesi University, through initiatives like the Ghana Climate Innovation Centre (GCIC), plays a pivotal role in nurturing climate entrepreneurship.

By providing business incubation, acceleration programmes, and grant financing for SMEs, Ashesi is actively contributing to Ghana’s climate adaptation efforts.

For instance, the GCIC, in partnership with the German Development Cooperation (GIZ), has launched programmes to support SMEs in implementing climate adaptation practices within their enterprises.

Ashesi has also incorporated climate and sustainability education into its curricular and actively supporting the development of circular economy talent by preparing graduates who have the capacity to think and contribute to innovations around clean energy, sustainable agricultural practices, sustainable engineering, climate tech, sustainable urban development etc.

Africa’s journey toward a sustainable, climate-resilient future hinges on unlocking the potential of its entrepreneurs. By addressing financial gaps, implementing supportive policies, and fostering innovation, the continent can transform climate challenges into economic opportunities.

Institutions like Ashesi University exemplify the proactive approach needed to empower entrepreneurs and drive meaningful change in the face of climate adversity.

William Annoh is the Assistant Director of the Adei Research Studio under the Provost’s Office at Ashesi University, where he coordinates research grants and sponsored programmes, academic quality assurance and accreditation, and faculty scholarship programmes and initiatives. Gideon Ofori Osabutey teaches Climate and Sustainable Development Policies at Ashesi University. He is an interdisciplinary researcher interested in energy transitions, climate policy, and sustainable urban development in Africa.

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