Africa is ripe for renewable energy innovation, with the adoption of wind and solar resources a key solution to addressing energy security.

According to the World Economic Forum, as of 2019, the electricity access rate was 46% with 570-million people not having access. By 2050, Africa’s population will reach 2-billion. This further shines a light on the importance of renewable energy, to not only achieve sustainability goals, but to also provide a reliable and crucial source of energy for millions across the rapidly growing continent.

However, cross-border payments are traditionally slow, and costly, and hinder growth for the renewable energy sector. How can cutting-edge technology impact such an important industry in today’s climate?

Understanding Africa’s potential

According to data from Energy, Capital & Power, Africa has an estimated 10 terawatts of solar capacity, 350 gigawatts of hydro power, and 110 gigawatts of wind power. Some areas are starting to adopt expansive solar facilities, such as Morocco and Egypt, but there is ample room for further renewable energy resources to be put in place in other markets.

Ola Oyetayo, CEO of Verto, says this makes it a crucial sector to watch in emerging markets, with room for both innovation and growth. “This will require collaboration between markets, however, cross-border payments remain an issue and can hinder the development of resources and expansion across regions in need.”

He says the use of alternative payment methods, such as digital wallets, is increasing in the infrastructure industry at a compounded annual growth rate of up to 30%. “That said, the renewable energy sector seems to fall short, with the majority of cross-border payments still being made through traditional methods, such as wire transfers and cheques. Not only does this result in delays to funds landing in the recipient’s account, but transaction fees can add up quickly to make it costly and inefficient.”

Then there are also the safety risks to consider using these channels. So, what is the reason for this reluctance to catch up to more innovative payment methods, and what impact would this switch have on renewable energy businesses in emerging markets such as Africa?

Out with the old

Oyetayo believes there are several reasons why the renewable energy sector is reluctant to adopt these alternative payment methods. “Some of these include a lack of awareness, not having the appropriate technology with these capabilities, regulation concerns, and a resistance to change over concerns of interrupted operations or preference for traditional methods.

“Sticking with the traditional methods, however, may be leaving these businesses vulnerable to problems that prevent them reaching their full potential. Common issues surrounding traditional methods are the high costs associated with cross-border payments, from high transaction fees, long settlement times, and losses due to exchange rate fluctuations. There may also be the perception of digital wallets being an increased cybersecurity threat and a lack of clarity around them being a safer alternative payment method,” he explains.

Understanding the benefits of enhanced financial technology and digital payment methods such as e-wallets could be the necessary steppingstone for renewable energy companies to reach their growth goals and innovate African markets more quickly. Often, this involves a transition to a new payments provider that is not a traditional bank, but will offer the solution to the problems associated with the traditional methods.

Acceleration of digital wallets

Adoption of digital wallets is on a fast upward trajectory in emerging markets, particularly in Southeast Asia where consumer numbers are projected to reach 310 million by 2025, according to Bain & Company. This study also found that India and China accounted for 70% of the world’s 2.1 billion digital wallet users.

In comparison, it was found by McKinsey that only up to 7% of all transactions in Africa were made via digital payments, compared with 50% in Turkey. The adoption of digital wallets not only presents an opportunity for renewable energy companies to grow across the continent, but also to connect with other businesses using this payment method.

For renewable energy firms, remaining innovative with clean energy solutions to reach sustainability goals is imperative, but this needs to go hand-in-hand with innovative technology when it comes to making and receiving payments. Accessing digital financial services catered to delivering solutions to African markets provides support for business growth, an improved way of life, and ultimately, a better planet.

Opportunities for Africa’s renewable energy

According to the World Economic Forum, an estimated 60% of healthcare facilities in sub-Saharan Africa don’t have access to a reliable electricity supply. This presents a strong use case for renewable energy solutions like solar panels or wind turbines to provide a source of energy.

The use of digital wallets can improve security and flow of funds, cutting out the need to rely on cash payments, cheques, or slow bank transfers with multiple touchpoints.

There has already been attention on the growth opportunities for renewable energy from Jack Dorsey’s digital payments company, Block, and the bitcoin-focused venture firm, Stillmark, who led a $2-million seed investment into Gridless, a Kenyan-based bitcoin mining company. This investment will help open more mines across Africa. According to Gridless’ founder, Erik Hersman, the power generation and mini-grids will help solve the power access issue that roughly 600-million across Africa face.

“Evidently there is ample opportunity for renewable energy businesses to help address the issue of limited access to energy across Africa. The adoption of improved financial technology and alternative payment methods like digital wallets can bring growth opportunities for the renewable energy sector and could be transformative for people and businesses across Africa,” concludes Oyetayo.