NAIROBI, Kenya (AP) — Analysts say Middle East sovereign wealth funds and state-backed companies are unlikely to scale back renewable energy investments in Africa despite the disruption caused by the Iran war because of the strong long-term economic and strategic reasons driving such financing.
Investors who made their fortunes on the Gulf’s abundant oil and gas are increasingly turning to Africa’s clean energy sector, attracted by growing power demand, rapid urbanization and the continent’s growing role in global supply chains linked to critical minerals and manufacturing.
A Clean Air Task Force report released last month found that more than $101.9 billion had flowed into Africa’s renewable energy sector by the end of 2024, led by the Gulf states, led by the United Arab Emirates, Saudi Arabia, Qatar, Kuwait and Bahrain. Most investment is concentrated in parts of North, Southern and East Africa, with West Africa attracting relatively limited funding.
“Africa remains one of the few regions where demand growth is significant,” said Matthew Tilleard, chief executive of CrossBoundary Energy, a Nairobi-based company that develops and operates renewable energy projects. “Short-term shocks may delay individual deals, but the largest infrastructure opportunities require a longer-term view of risk and value.”
Africa faces one of the largest electricity deficits in the world. Some 600 million people on the continent still lack access to electricity, and many more face unreliable supply. Governments are increasingly turning to private investors to finance solar, wind and hybrid power projects to expand generation capacity while avoiding overstretching public finances.
This gap creates opportunities for Gulf investors looking to diversify beyond oil and gas.
“Ultimately, Gulf state investments in Africa tend to be driven by pragmatic national interests and strategic returns,” said Law Nelson, a political analyst at Oxford Economics. “There are currently a lot of energy investments underway across Africa that are long-term projects that have been years in the making, so we don’t expect major disruption.”
Overseas investment in renewable energy is part of a broader strategy by Middle Eastern countries to diversify their economies and adapt to the global shift toward clean energy.
Joel Okanda, an energy and development analyst, said disruptions to oil and gas shipments caused by the war with Iran could strengthen the case for renewable energy investment because it showed how fragile such supply routes are.
“These companies, many of which are state-owned, have significant capital but also understand that the world is moving away from fossil fuels,” Okanda said. “Investing in renewables allows them to diversify their portfolios and prepare for the energy system of the future.”
Africa’s energy sector is at the center of a global economic transformation that includes the energy transition and soaring demand for minerals such as cobalt and gold used in many high-tech products.
“For investors, renewable energy projects can provide strategic opportunities to enter industries other than power generation,” Tillard said. “Power plants built for mining or large industrial operations could give Arab investors close to the supply chain of minerals used in batteries and other technologies.”
Okanda said perceived risks, including currency fluctuations and policy uncertainty, particularly in West Africa, continue to influence where such investors invest.
“Generating electricity is only part of the equation,” Okanda said. “You also need a transmission system and a well-functioning electricity market where electricity can actually be sold and paid for.”
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