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Investing in clean energy an opportunity for African middle class

Goldman Sachs projects the transition to renewable resources from fossil fuels (crude oil, natural gas and coal) will create a $16 Trillion Investment opportunity through 2030. Achieving reliable electricity for all in African countries requires approximately $120 Billion a year through 2040. This is an indication of the projected and actual growth of energy projects. With a focus on distributed solar power generation, these projects are capable of generating between 10% and 30% in annual returns.

Sub-Saharan Africa has one of the lowest global income rates. Africa Development Bank (AfDB) Middle-Class criteria caps the daily per capita income for the African middle class at between $2 to $20. However, this segment is open-minded and keeps an eye on strategies designed to prevent downwards mobility. In line with the United Nations Sustainable Development Goal 10 on reduced inequalities, there is a collective call to action to generate solutions to bridge the income inequality gap.

The annual return potential of renewable projects and investments is an opportunity for wealth creation for the AfDB 350 Million African middle class.

With the fractional shares investment model gaining traction in Europe, Americas, and other emerging markets, the African middle class is proving to be a segment to watch in creating win-win scenarios when drawing up renewable energy projects. Approximately 121 Million people within the age range of 15 & 64 hold Commercial Bank deposits averaging $6.4 Billion annually between 2004-2015.

Exposing clean energy-focused investment opportunities with returns above the regional average annual interest rate of approximately 7.03%, stakeholders in the renewable energy ecosystem would not only have created alternative sources of investment opportunities for the African middle-class but also a circular model where the end-user is empowered directly economically by the very product they pay for.

Furthermore, 72% of surveyed households in Africa responded they put aside 15% of their income as monthly savings; $135 per household. This gives an indication of the potential fractional investors that can be pooled from the sub-Saharan Africa region for infrastructures that support clean energy sources including hydropower, solar, wind, geothermal, and various types of biomass. Decentralized solar options, including mini-grids, are expanding rapidly in Africa reaching rural unconnected and urban underserved populations. Along with helping to meet energy needs in a cost-effective, secure and environmentally sustainable manner, renewable energy can strengthen socio-economic development.

A fundamental challenge remains the question if concerned institutions like regional commercial banks have the rails needed to drive such engagements in collaboration with stakeholders in the renewable energy ecosystem.

We have seen traction gaining a place in digitization, growth, and adoption of mobile wallets,  mobile banking platforms from Pan African Banks, and Telecommunication companies in the region. We cannot also underestimate the presence of technology solution providers who can meet this created demand by integrating the platforms in place.

Streamlining this potential to cover regulation, lean implementation, and ease of adoption is a critical component in communicating this perspective.

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