Southern Africa’s energy sector is facing an execution gap that is slowing investment and delaying projects, despite strong appetite from financiers and developers.Investors and developers say project preparation, transmission infrastructure and investment readiness are now the main constraints, limiting the pipeline of bankable projects.The issue was reinforced during a recent KPMG South Africa discussion on the region’s energy investment outlook, convened in partnership with Invest Africa.The region is increasingly positioned as a key hub in Africa’s power sector, supported by abundant renewable energy resources, relatively established electricity systems and significant reserves of critical minerals used in electric vehicles (EVs), battery storage and other low-carbon technologies. However, Africa continues to attract a disproportionately small share of global energy investment despite its resource base and long-term demand outlook.While capital is available, Africa continues to rely heavily on external financing for long-term infrastructure development, despite holding more than $4-trillion in savings across public funds, pension funds and other institutional investors, according to the Africa Finance Corporation, and cited in industry discussions.Plenty capital but few bankable projectsEnergy investors say funding is no longer the main constraint in Southern Africa’s power sector, marking a shift in how the investment challenge is being understood.“There is a lot of capital looking for good projects,” said Stefan Bölling, senior investment manager for Deutsche Investitions- und Entwicklungsgesellschafts (DEG), the German development finance institution within the KfW Group.Africa’s major problem right now is execution— Melissa SikwilaHe said development finance institutions, commercial banks and local lenders continue to show strong appetite for well-prepared energy projects, particularly where risks are appropriately allocated and structures are bankable.Blended finance mechanisms, guarantees and public-private partnerships are increasingly being used to mobilise private investment and reduce perceived risk.However, despite this available capital, many projects fail to reach financial close due to weaknesses in project preparation, regulatory uncertainty and limited execution capacity.Execution and transmission key constraintsIndustry participants said the most significant barrier to energy expansion in the region is execution capacity rather than funding.“Africa’s major problem right now is execution,” said Genesis Energy executive vice-president of project development and investment Melissa Sikwila.She said governments, developers and financiers often focus on raising capital, while insufficient attention is given to execution readiness, regulatory frameworks and infrastructure required to bring projects to completion.Transmission infrastructure also emerged as a key bottleneck.“You cannot sell what you cannot transmit,” Sikwila said.Without adequate grid expansion and transmission capacity, new generation projects risk being stranded or unable to reach demand centres, particularly as countries expand renewable energy, develop gas infrastructure and deepen regional electricity trade through platforms such as the Southern African Power Pool.The execution and transmission constraint is becoming more pressing as electricity markets in the region move towards cross-border electricity trade.Policy uncertainty and risk raise costsFinancing costs in Africa are widely understood to be higher than in comparable emerging and developed markets due to persistent perceptions of risk among international investors, as well as structural challenges such as policy inconsistency, regulatory uncertainty and limited ability to deliver projects. Even where capital is available and investor appetite is strong, industry participants say these factors increase transaction complexity and slow down deal closure.Bölling said African energy assets in DEG’s portfolio have delivered a strong performance over time, reinforcing the view that perceived risk is often higher than realised risk.Electricity integration issuesIndustry participants said regional integration efforts, particularly through the Southern African Power Pool, continue to offer pathways for expanding electricity trade and improving system efficiency. However, unlocking this potential will depend on more than capital availability.Southern Africa already accounts for more than 60% of Africa’s installed electricity generation capacity and holds significant critical mineral reserves, amplifying execution and transmission constraints on the continent’s electricity sector expansion. “The challenge is not funding. The challenge is executing and delivering projects to completion,” Sikwila said.Business Day