In a move that underscores the growing momentum of the renewable energy sector in South Africa, Solarise Africa, a pioneering Energy-as-a-Service provider, has successfully secured a R160 million investment from Mergence Investment Managers. This strategic funding partnership is set to accelerate the deployment of Commercial & Industrial (C&I) scale renewable energy solutions across the country, marking a significant step forward in the region’s transition to sustainable energy.

The Importance of Renewable Energy in South Africa

South Africa, like many countries, is grappling with the challenges of an unreliable energy grid, primarily due to aging infrastructure and a heavy reliance on coal for electricity generation. The country has faced recurring power shortages and load-shedding, which have had detrimental effects on both the economy and the quality of life for its citizens. These challenges have heightened the urgency for alternative energy solutions, particularly renewable energy, which offers a more sustainable and reliable option.

The South African government has recognized this need and has been actively promoting renewable energy projects through initiatives like the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). This program has successfully attracted billions of rand in investments, fostering the growth of wind, solar, and other renewable energy projects across the country. However, the C&I sector, which includes businesses and industrial operations, has emerged as a critical area where renewable energy can make a substantial impact.

Solarise Africa: Pioneering Energy-as-a-Service

Solarise Africa has positioned itself at the forefront of this movement, offering Energy-as-a-Service (EaaS) solutions tailored to the needs of businesses in Africa. The company’s model provides businesses with the infrastructure and technology needed to harness solar energy without the burden of upfront capital investment. This approach has proven particularly attractive in the C&I sector, where companies are increasingly looking for ways to reduce their energy costs and minimize their environmental footprint.

Since its inception, Solarise Africa has been committed to driving the adoption of renewable energy in Africa. The company’s portfolio includes a range of solar projects that provide reliable and cost-effective energy solutions to businesses across the continent. By partnering with financial institutions, Solarise Africa has been able to offer flexible financing options, making it easier for businesses to transition to clean energy.

The Strategic Partnership with Mergence Investment Managers

The R160 million investment from Mergence Investment Managers represents a significant milestone for Solarise Africa. Mergence, a well-established South African investment management firm, is known for its focus on sustainable and impact-driven investments. The firm’s decision to invest in Solarise Africa reflects its confidence in the growth potential of the renewable energy sector, particularly in the C&I space.

Mosa Molebatsi, Senior Investment Associate at Mergence Investment Managers, emphasized the strategic importance of the partnership, stating, “This ongoing demand makes companies like Solarise Africa an attractive investment option, highlighting the resilience and growth potential of the C&I sector. We are excited to support Solarise Africa in its expansion efforts. This partnership reflects our commitment to investing in sustainable projects that provide both environmental and economic benefits.”

The funds will primarily be used to finance the installation and expansion of solar energy systems for commercial and industrial clients. This will not only help businesses reduce their energy costs but also significantly lower their carbon footprints, aligning with global efforts to combat climate change.

Addressing the Decline in Residential Solar Uptake

Despite the overall growth in the renewable energy sector, there has been a noticeable decline in residential solar uptake in South Africa in 2024. This trend is largely attributed to a reduction in load-shedding, which has diminished the immediate incentive for households to invest in solar power. However, the C&I sector continues to thrive, driven by businesses’ need for reliable and cost-effective energy solutions.

Jan Albert Valk, Co-Founder and CEO of Solarise Africa, addressed this issue, noting, “Despite a recent decline in residential solar uptake in 2024, largely due to a reduction in load-shedding, the C&I solar market in South Africa continues to thrive. Businesses are increasingly investing in renewable energy solutions to mitigate against an unreliable grid, reduce electricity costs, and demonstrate a commitment to sustainability and climate action. This facility allows us to accelerate our growth and reach more businesses in need of reliable, clean energy solutions. It’s a testament to the growing confidence in renewable energy in South Africa and our role in this transformative journey.”

The Role of PSG Capital in Facilitating the Deal

The deal was facilitated by PSG Capital, a leading corporate finance advisory firm in Africa, which served as the lead transaction advisor and arranger. PSG Capital’s involvement was crucial in structuring the deal and securing the necessary funding. Khaya Hlophe-Kunene, Director at PSG Capital, emphasized the strategic importance of the partnership, stating, “We are proud to have played a role in facilitating this partnership, which aligns with our focus on supporting innovative energy solutions in South Africa and the rest of the African continent.”

PSG Capital has a strong track record of advising on significant transactions in the energy sector, and its involvement in this deal highlights the growing interest in renewable energy investments. The firm’s expertise in navigating the complex financial landscape of South Africa was instrumental in bringing this partnership to fruition.

The Broader Impact of the Investment

The R160 million investment in Solarise Africa is expected to have far-reaching impacts beyond just the financials. By enabling more businesses to adopt solar energy, the investment will contribute to reducing South Africa’s overall reliance on coal, thereby lowering the country’s greenhouse gas emissions. This is particularly important in the context of South Africa’s commitments under the Paris Agreement, where the country has pledged to peak its emissions between 2025 and 2030 and then begin a decline.

Furthermore, the expansion of renewable energy infrastructure will help to create jobs and stimulate economic growth in South Africa. The renewable energy sector is labor-intensive, particularly during the construction phase of projects, and the deployment of new solar systems will create opportunities for local employment and skills development. This is a critical consideration in a country where unemployment remains a significant challenge.

Challenges and Opportunities in the South African Renewable Energy Market

While the investment marks a positive development, it also highlights some of the ongoing challenges in the South African renewable energy market. One of the main challenges is the regulatory environment, which can be complex and slow-moving. Although the South African government has made strides in supporting renewable energy, there are still bureaucratic hurdles that can delay project implementation.

Additionally, the financial viability of renewable energy projects is closely tied to the stability of the local currency and the broader economic environment. Fluctuations in the value of the South African rand can impact the cost of imported solar equipment, making it more difficult to maintain cost-effective project pricing. However, with the right financial instruments and hedging strategies, these risks can be mitigated.

On the opportunity side, the South African renewable energy market continues to present significant growth potential. The country’s abundant solar resources make it an ideal location for solar power generation, and there is a growing recognition among businesses of the need to diversify their energy sources. As more companies prioritize sustainability and seek to reduce their carbon footprints, the demand for C&I solar solutions is expected to rise.

The Future of Solarise Africa and the Renewable Energy Sector

Looking ahead, Solarise Africa is well-positioned to capitalize on the growing demand for renewable energy solutions in South Africa and beyond. The company’s focus on the C&I sector, combined with its innovative financing model, gives it a competitive edge in a rapidly evolving market. The partnership with Mergence Investment Managers will not only provide the capital needed for expansion but also enhance Solarise Africa’s credibility and visibility in the market.

As the world continues to grapple with the effects of climate change, the role of renewable energy in mitigating these impacts cannot be overstated. Companies like Solarise Africa are at the forefront of this effort, providing the technology and infrastructure needed to transition to a more sustainable future. The R160 million investment from Mergence Investment Managers is a strong vote of confidence in Solarise Africa’s mission and a clear indication of the growing importance of renewable energy in South Africa’s economic landscape.

Conclusion: A Milestone for Renewable Energy in South Africa

The strategic partnership between Solarise Africa and Mergence Investment Managers marks a significant milestone in the ongoing development of South Africa’s renewable energy sector. With the R160 million investment, Solarise Africa is poised to accelerate its efforts to provide reliable and sustainable energy solutions to businesses across the country. This investment not only underscores the growing confidence in the C&I solar market but also highlights the broader potential for renewable energy to drive economic growth and environmental sustainability in South Africa.

As Solarise Africa expands its reach and impact, the company will play a crucial role in helping South Africa achieve its renewable energy goals and reduce its carbon emissions. The success of this partnership could serve as a model for other countries in Africa and beyond, demonstrating the power of strategic investments in driving the transition to a more sustainable energy future.

Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

27th August, 2024