Finance is a significant factor in decarbonising Africa’s ICT sector

Raisibe Morathi, Vodacom Group CFO. (Image: Vodacom)

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As Africa’s ICT sector grows – connecting millions of people, powering digital economies, and enabling the services that underpin modern life – a pressing question looms: how do we continue to expand this critical digitalisation while moving to a low-carbon future?

At Vodacom, we know firsthand that the path to net zero depends heavily on electricity decarbonisation. Our networks rely on energy from a range of sources, including the grid and on-site power solutions, to operate base stations and data centres that keep our customers connected.

Balancing the energy needs of expanding connectivity with our decarbonisation objectives is important for our business strategy, investor confidence, and our responsibility to the continent we serve.

Emissions reduction targets are embedded in our long-term incentive plan (LTIP), reinforcing accountability at management level. Finance is one of the most significant factors in meeting these goals.

The good news is that the investment landscape is shifting. According to our recently released Decarbonising Africa's ICT Sector report, in 2023, US$1.8 trillion was invested globally in renewable energy production – but the reality is that Africa's share remains woefully inadequate. 

Annual renewable investment needs to reach US$4.5 trillion globally to stay on track with climate targets, and the funding gap is nowhere more acute than here on our continent. To meet net zero ambitions, the ICT sector must overcome decarbonisation financing barriers through innovative funding models.

Utility-grade renewable energy projects, which are supported by transmission and distribution infrastructure, are essential to decarbonising Africa’s electricity systems. The continent cannot meet its climate ambitions without expanding clean generation capacity at scale.

These types of renewable projects require substantial upfront capital and often involve long development cycles before returns materialise. In many African markets, those risks are amplified by currency volatility, high interest rates, underdeveloped capital markets, policy uncertainty, and the fragile financial health of many state-owned utilities.

Reliable, affordable energy remains the first priority for many African economies, and decarbonisation must support - not compromise - that objective.

This is where innovative financing and collaboration are indispensable to the net zero journey. 

Mechanisms such as power purchase agreements (PPAs) and blended finance models, alongside enablers like independent power producers (IPPs) and public-private partnerships (PPPs), play a critical role in de-risking projects and improving their overall financial viability. 

Development finance institutions (DFIs) further support this ecosystem by partnering alongside like-minded investors to assist with project development and financing for renewable energy projects

For Vodacom, the opportunity is significant. As a creditworthy corporate off-taker, we can sign PPAs with IPPs that provide the revenue certainty investors and lenders require. In doing so, we don't just secure clean energy for our own operations, but we actively enhance the bankability of projects that benefit the entire region.

While utility-scale projects are vital, millions of people and thousands of mobile base stations operate in areas where utility power is unreliable or absent. Mini-grids are emerging as a practical way to expand both electricity access and digital inclusion simultaneously. 

Yet this solution is viewed as problematic within traditional financing models. Many projects are too small to justify the transaction costs associated with extensive due diligence. Revenue streams can appear uncertain, subsidy frameworks inconsistent, and regulatory protections limited. As a result, projects with developmental potential often struggle to attract affordable capital.

Here, connectivity infrastructure can serve as a game-changer. A telco base station as an anchor customer provides predictable and continuous demand for electricity, which can stabilise revenues, improve project bankability, and enable developers to secure better financing terms. 

More importantly, once power infrastructure is established, surrounding businesses and communities often benefit too, creating local economic ecosystems that reinforce both energy access and digital participation.

On-site renewable energy generation and energy efficiency measures are equally important, particularly for base stations and data centres. Solar PV systems, battery storage, efficient cooling technologies and energy retrofits can materially reduce operational costs and greenhouse gas emissions. 

However, these are constrained by high upfront costs, limited local financing in domestic currencies, a shortage of technical expertise, and financial institutions unfamiliar with the risk profile of these investments.

Newer financing approaches are gaining traction. Energy Service Companies (ESCOs) combine financing, implementation and performance guarantees, allowing businesses to repay investments over time through the savings generated. 

Revolving credit facilities, concessional loans and sustainability-linked financing are also helping turn clean energy investments from large once-off capital decisions into more manageable operational expenditure models. These mechanisms not only reduce risk but also accelerate adoption, allowing operators to scale efficiency and renewable solutions across their networks.

At Vodacom, we are exploring and advancing innovative models, such as our virtual wheeling project with South African utility Eskom, enabled by a platform developed by our subsidiary Mezzanine and renewable energy from IPPs such as SOLA. This approach allows us to aggregate demand across our network and access renewable energy at scale.

Encouragingly, momentum is building at a policy level. The recent Addis Ababa Declaration at the second Africa Climate Summit underscores the urgent need to mobilise climate finance to support Africa’s transition to a low-carbon economy. It also highlights the need for financial system reform and stronger collaboration between governments, financiers and industry. 

Connectivity is central to Africa’s economic future, but digital growth must be balanced with the transition to lower-carbon energy systems. The continent needs an energy transition capable of supporting both development and decarbonisation simultaneously. Finance will determine whether this can happen at the scale and pace Africa requires.