Standard Bank, FirstRand, Nedbank and Absa eyeing R23 trillion jackpot

South Africa’s biggest banks are competing to capture the value of the continent’s transition to a low-carbon economy, which requires $1.1 to $1.3 trillion (R23.1 trillion) in financing. 

This is about transitioning to a low-carbon economy and broadening access to electricity across Africa to drive growth and industrialisation. 

Sub-Saharan Africa is at a critical juncture in its energy development and transition journey. 

Standard Bank’s head of energy and infrastructure, Dele Kuti, said this presents a significant opportunity for local banks to drive Africa’s future growth. 

“We don’t have to normalise the fact that 40% of Africans lack access to electricity. We must take action to address this power supply crisis,” Kuti said.

“In doing so, we must acknowledge that Africa also has a major need for more energy for the purposes of mobility and industrial development.”

Standard Bank has long been a proponent of a slower transition than some have demanded from Africa’s biggest lender by assets. 

It has continued to finance oil pipelines and said it would continue to fund natural gas projects to create reliable electricity on the continent. 

However, it has also upped its sustainable financing goals, aiming to provide over R250 billion in funding for renewable energy projects and other green initiatives across Africa by 2026. 

Although home to abundant natural and renewable energy resources, the continent still lags behind others in terms of energy investment, access, and wider security. 

Kuti highlighted the investment case for energy in Africa, citing the continent’s abundant resources and the need for significant investment to bridge the energy access gap.

“According to the International Energy Agency (IEA), an estimated $1.1 to $1.3 trillion is required to support Africa’s energy transition – the continent presents a vast opportunity for investors,” he said. 

“We need to develop bankable projects, implement supportive policies and regulations, invest in infrastructure development, to unlock Africa’s energy potential.” 

“In line with the likes of Europe, North America and Asia-Pacific, it is important to see natural gas as a crucial transition fuel.  Natural gas is 50% cleaner than burning coal in terms of its emissions and 25% cleaner than burning diesel.”

The main players in this transition will be South Africa’s largest banks, with the traditional ‘Big Four’ of Standard Bank, FirstRand, Nedbank, and Absa gearing up to capture this value. 

They are uniquely positioned in that they operate across multiple markets in Africa and have substantial balance sheets that enable them to finance large projects. 

These four will also compete heavily to finance South Africa’s transition away from a carbon-intensive economy. 

Estimates indicate the country needs around R4.6 trillion in financing for the green transition until 2035. 

This equates to roughly 3% of South Africa’s yearly GDP. Most of this capital would be committed to alternative energy sources, particularly renewable generation projects. 

This is feedback from Reserve Bank researchers Pierre Monnin, Ayanda Sikhosana, and Kerschyl Singh. 

South African banks are already competing fiercely in the space, working to capture the immense value that will be generated from overhauling the local economy. 

At a renewable energy roundtable last year, Standard Bank estimated the potential investment opportunity of the renewable energy sector is around R1 trillion. 

It said demand from companies and households for alternative energy sources is skyrocketing, with its loans for renewable energy projects rising to four times the amount for fossil fuels. 

Standard Bank South Africa CEO Lungisa Fuzile said, “We have to balance addressing the challenge of the energy crisis with the opportunities for the just energy transition.”

The bank estimates the value of the energy transition in South Africa to be R1 trillion, and it wants to capture a significant portion of the value. 

“When we are successful, Standard Bank can capture a significant portion of the estimated R1 trillion renewable energy investment opportunity,” Fuzile said. 

“We ought to be the go-to financial services provider for the energy transition in Africa as the continent’s largest bank.”