Africa is at a pivotal moment in its fight against climate change, with the continent increasingly vulnerable to its effects. Recent years have seen a rise in extreme weather conditions, and South Africa faces significant environmental problems related to water scarcity and the energy transition.
Rising sea levels and storms are eroding Western Cape and KwaZulu-Natal coastlines, threatening properties, ecosystems and infrastructure, and driving calls for improved coastal management and climate adaptation.
There is a growing focus on fostering innovation in climate technology to address the adverse effects of climate change. For example, Cyclone Eloise, which affected Mozambique, brought heavy rains and strong winds to parts of Limpopo and Mpumalanga in January 2021, resulting in flooding, infrastructure damage, and disrupted agriculture.
Innovative climate tech solutions are essential to mitigate these effects, and startups in the climate tech sector can increase public awareness about climate change and the importance of sustainability.
Blended finance, which combines public, private, and philanthropic capital, is a powerful tool in achieving the sustainable development goals, particularly those related to climate action (SDG 13), affordable and clean energy (SDG 7), and industry, innovation, and infrastructure (SDG 9). By leveraging different funding sources, blended finance structures can unlock significant opportunities for scaling climate tech innovations.
But building a climate tech business in Africa comes with its own difficulties. Unlike more mature markets, Africa has a nascent venture capital ecosystem, which means limited access to funds needed for early-stage climate tech startups. This, coupled with inadequate infrastructure, such as unreliable power supply, poor internet connectivity, and the lack of efficient transportation and logistics’ networks, hinders the development and deployment of climate tech solutions.
In this context, investors often view African markets as high-risk because of political instability, regulatory uncertainty and economic volatility. The prohibitively high cost of borrowing locally makes it difficult for start-ups to finance their operations through traditional debt. Additionally, a highly fragmented regulatory landscape across African countries presents complexities in cross-border operations and scale-up strategies.
Successful cleantech solutions require local tailoring, raising costs and complexity. Entrepreneurs and investors must consider collaborative strategies such as blended finance models, local partnerships and innovative financing mechanisms for local start-ups to innovate. At a regulatory level, engaging with policymakers to advocate for supportive regulations and incentives can create a more favourable environment for cleantech businesses.
Blended finance combines public, private, and philanthropic funds to de-risk investments in climate tech. Collaborating with governments and communities and using crowdfunding, green bonds can attract additional funding.
Blended finance has mobilised significant capital for tech start-ups. According to a report by the Organisation for Economic Co-operation and Development, blended finance transactions attracted more than $140 billion in private sector capital for development projects from 2012 to 2018. In Africa, blended finance initiatives are contributing to closing the funding gap for start-ups. For instance, the African Development Bank has partnered with various entities to leverage $100 billion in private sector capital by 2030.
Providing funding to climate tech startups is essential for quickly addressing critical gaps and driving measurable impact. It helps overcome shortages in research and development facilities, local STEM (science, technology, engineering and maths) talent, and fosters a supportive ecosystem through education and training.
There have been a number of success stories. Zimi Charge, a Cape Town-born electric vehicle (EV) startup is driving South Africa’s transition to a greener economy by providing accessible and sustainable electric vehicle charging solutions. There are more than 350 charging stations in South Africa, and EV owners can use the mobile app to find, charge and pay at any of their or other public charging stations.
Plentify is a start-up focusing on smart energy management solutions designed to optimise energy usage and reduce carbon footprints. The company’s “HotBot” is a smart water heating solution that integrates with the electrical grid to manage and control energy consumption.
Register here to attend the SA Innovation Summit hosted in the City of Cape Town on 19 and 20 September.
Buntu Majaja is the chief executive of the SA Innovation Summit.
