This note has been written by FSD Africa, the Global Energy Alliance for People and Planet, and Systemiq in collaboration with Mission 300.
Context: Africa’s energy transition and labor market dynamics
Investments in jobs and skills are central to livelihoods, wellbeing, and economic value creation, and are critical in countries’ transition to the economy of tomorrow. This is particularly evident in the energy sector, where workforce constraints are already emerging as a limiting factor. More than half of 700 energy firms, trade unions and educators surveyed by the IEA reported skilled worker shortages as a potential bottleneck to scale. Recent analysis suggests that a shortfall of approximately 6 million workers globally could reduce renewable energy capacity by around 10%, shifting the global power sector from a 1.7°C pathway toward approximately 2.4°C(NCI, 2025).
Africa sits at the center of this dynamic. The continent holds approximately 60% of global renewable energy potential, yet accounts for only ~2% of the global renewable energy workforce, highlighting a structural imbalance between resource potential and workforce capacity (IEA,2025). The success of worker transitions in Africa is therefore central not only to the region’s economic transformation, where energy access and security remain key drivers of development, but also to global energy security and climate outcomes.
The forthcoming Unlocking Africa’s Green Transition: Opportunities Towards a Green and Inclusive Workforce report estimates that Africa’s climate transition, with particular focus on mitigation activities, could generate between 4 and 8 million jobs by 2030, rising to approximately 66 to 85 million by 2050. These jobs span 15 sub-sectors across energy and power, mobility and transport, agriculture and nature, and materials. The energy and power sector alone is projected to account for 40–50 million jobs by 2050. Many of these jobs are expected to be located in distributed, service-oriented systems – such as clean cooking, distributed solar, and mini-grids. Roles are concentrated in installation, distribution, maintenance, and customer-facing services. Overall, around 85% of green jobs in Africa are expected to be informal in 2030, reflecting both labor market structures and the nature of delivery models. However, this varies significantly across countries, driven in large part by energy system design. In markets such as Nigeria and Kenya, where decentralised, service-led systems dominate, employment is expected to be largely informal, while in countries such as South Africa, more centralized and utility-scale energy systems are likely to generate a higher share of formal employment.
The region faces a significant skills gap, particularly among young people, with over 80% off track to acquire the skills needed for employment (UNICEF,2022). In Kenya’s energy sector, employers most often cite graduates lacking practical skills and unavailability of trained workers as the main hiring difficulties. Workforce systems in Africa are not yet equipped to support the scale or nature of this transition. Existing training systems often remain oriented toward formal, capital-intensive sectors and are not well aligned with the distributed and service-based roles that dominate many energy access markets. Technical and vocational education and training (TVET) systems across Africa face chronic underfunding, weak industry alignment, and poor infrastructure which limits their ability to deliver work-relevant skills at the pace and scale required (ACET,2025). These challenges are particularly visible in markets where job creation is expected highly informal, or where delivery rely on micro-enterprises, such as Nigeria (IEA,2025)
The transition is also taking place within a challenging employment landscape. Globally, labor markets are being reshaped by automation, demographic shifts, and geopolitical pressures. In Africa, demographic dynamics are particularly pronounced, with the continent needing to create approximately 15 million jobs annually to keep up with new labor market entrants alone, on top of unemployment challenges, which are particularly acute amongst young people and in the South of the continent.
The energy transition could absorb part of this labor supply productively and support wider enterprise growth with knock-on employment effects. But this will only materialize if the workforce systems exist to support it.
Financing challenges: allocation, structure, and distribution
The Jobs and Skills for the New Economy (JSNE) report, launched with the COP30 Presidency in Belém, highlights that investment in jobs, skills, and workforce transitions is central to economic growth, social stability, and climate outcomes. However, financing for skills development faces a set of structural challenges that are particularly acute in Africa. Three gaps define the problem.
Volume gap. Although climate and development finance has scaled over recent years – more than doubling for low- and middle-income economies globally between 2019 and 2024 (CPI,2024) – overall funding directed to jobs, skills, and workforce transitions remains extremely limited relative to their role in economic development and social and environmental progress. Globally, less than 0.5% of climate finance currently supports skills and capacity-building. In Africa, this gap is compounded by structural constraints on public finance. General education systems already face an estimated $97 billion annual financing gap9, while high borrowing costs and limited fiscal space reduce governments’ ability to invest in skills. In addition, skills and education spending are often treated as recurrent expenditures rather than productive investments, making countries more reluctant to finance them through debt instruments.
Access gap. A further challenge is that existing financing mechanisms often fail to reach the actors most in need –namely workers, small firms, and local training providers. Globally, skills financing is typically channeled through governments, large programs, or formal education systems, with limited mechanisms to support worker-level or firm-level investment. In Africa, access to employer-financed training is heavily skewed by firm size in the formal sector despite the job creation potential in MSMEs. Analysis found that the gap between small and large firms in formal training provision is wider in Africa than in any other region, with large firms around 47% more likely to provide formal training.10 In the informal economy, the gap is even more acute. ILO analysis across 26 African countries finds that informal apprenticeship, largely self-financed by households, remains the dominant route to skills acquisition. As a result, financing remains concentrated at the top of the system, while many workers and firms are excluded.
Efficiency gap. Finally, there are important challenges related to the efficiency of financing. First, globally, most skills funding is delivered through input-based mechanisms, such as funding training institutions or programs based on enrolment, rather than employment outcomes. Experience from South Africa’s Komati transition demonstrates that without alignment to real job pathways, skills investments risk low returns in terms of workforce results. This weakens accountability and often results in limited impact on employment or productivity. Outcome-based financing instruments could improve alignment but they represent a very small share of total development finance. Second, financial instruments are often poorly suited to the characteristics of skills investments, which require small-scale, dispersed, and long-term investments. Lastly, limited data and weak tracking of employment outcomes constrain both understanding of labor market dynamics and the ability to design, target, and scale effective financing instruments.
Action Agenda: for MDBs and DFIs to scale and align finance for skills
Multilateral development banks, together with public, private, and philanthropic actors, have a pivotal role to play in scaling people-centered investment – not only within Africa’s energy sector, but also across other sectors and regions. This role is not only about increasing the volume of capital mobilized, but also improving how capital is structured, targeted, and deployed to deliver labor market outcomes. Four shifts in how we mobilize and deploy financing are needed.
The first is a shift in the targeting of financing toward workforce development and high-employment value chains. This implies moving beyond financing models primarily focused on infrastructure investments to explicitly include investments in TVET, work-based learning (apprenticeships, on-the-job training), certification and accreditation systems, reskilling and upskilling programs. Two approaches could be adopted to increase volume and improve access:
a.) Earmarking financing for skills. A practical approach could be to earmark a defined share or establish a benchmark for jobs and skills components in MDB project financing; embedding these elements upstream, during project preparation and design, could ensure workforce considerations are systematically integrated rather than retrofitted (IEA,2025).
b.) Targeting funding to underserved actors. In addition, targeted efforts should be made to allocate funding to last-mile delivery actors, including small training providers, MSMEs, and community-based programs. This could include establishing dedicated funding windows or facilities for small providers and MSMEs, with simplified application and reporting requirements; channeling finance through local intermediaries (e.g. micro-finance institutions, training networks, cooperatives) that can reach smaller actors.
The second shift is to mobilize larger volumes of finance for skills and employment programs from different sources, and use scarce concessional financing more strategically. MDBs and DFIs can play a catalytic role by:
a.) Using scarce concessional finance to crowd in private and domestic capital. Concessional funding can improve the risk-return profile of skills investments and attract private investors, commercial banks, and impact investors that would not otherwise participate. This can include subsidizing early-stage training models to make them viable for investment, financing pilot programs and proof of concept to demonstrate demand and reduce uncertainty for investors, using interest rate buy-downs or concessional co-investment to make lending to training providers and skills programs attractive for banks, providing viability gap funding where user fees or employer contributions are insufficient.
b.) Using guarantees and risk-sharing instruments to encourage commercial banks, microfinance institutions, and firms to invest in skills. credit guarantees for loans to training providers or education institutions, risk-sharing facilities with local banks financing workforce development, co-investment or first-loss structures to attract private investors, risk-sharing for firms investing in employee training.
c.) Incentivise financing at the level of firms and workers. To reach scale, financing must also flow directly to and catalyze resources from corporates and households; for example, MSME financing for firms to train and hire workers (e.g. working capital linked to training commitments), worker-level financing, such as training loans, stipends or vouchers.
d.) Aggregate and structure investments to attract institutional capital. MDBs can help pool smaller, fragmented investments into larger financing vehicles that can attract institutional investors (pension funds, insurance companies) and large-scale private capital. For example, they could aggregate portfolios of training providers (e.g. TVET institutions, private academies) seeking financing for expansion and develop multiple employer-led training programs within or across sectors.
The third is a shift from maximizing the volume of financing deployed to maximizing outcomes per unit of investment.
a.) Increasing use of result-based finance. Greater use of results-based financing instruments could help create explicit links between investments and labor market outcomes including job placement, retention, improved job quality, and income gains with a focus on vulnerable groups (e.g. youth, informal workers, women).
b.) Funding the delivery ecosystem. This requires structuring financing packages that can enhance outcomes by focusing on training ecosystems (providers, trainers, certification bodies) rather than single projects and including supplementary services such as intermediaries that connect training to jobs (e.g. placement agencies, labor platforms).
c.) Aligning skills investments to market demand. This requires ensuring that skills development is closely linked to existing and emerging market opportunities, so that training reflects the capabilities employers and sectors actually need. For example, building in co-design requirements with industry bodies or skills councils, or requiring evidence of market demand.
The fourth shift is to strengthen the institutional and financial capacity required to design, fund, and implement skills systems at scale, within government and financial institutions. MDBs already play a central role in supporting governments on budgeting, public financial management, and domestic resource mobilization. This support should be extended more explicitly to skills financing, ensuring that workforce development is systematically integrated into national fiscal frameworks. MDBs can help by supporting governments:
a.) Treat skills as a strategic public investment. MDBs can support a shift toward recognizing skills as productive investment, supporting analysis of economic returns (e.g. productivity, employment, tax revenues) and incorporating skills into human capital and growth diagnostics.
b.) Integrate skills financing into medium-term expenditure frameworks (MTEFs). MDBs can help governments link skills spending to fiscal planning and expenditure ceilings, moving away from short-term and fragmented investments.
c.) Support the development of dedicated financing mechanisms for skills. MDBs can create dedicated budget lines, funds, or financing windows to improve visibility, coordination, and scale of skills investment, and avoid fragmentation across ministries and programs. They can also help governments design sustainable domestic financing instruments, including skills levies and tax incentives, and by providing technical assistance to strengthen targeting, prioritization, and cross-government coordination of resources.
In addition, MDBs can work with private banks and financial intermediaries to develop lending products for training providers and firms, provide guarantees and risk-sharing facilities, build understanding of skills as an investable sector.
How other partners can help
While MDBs and DFIs have a distinctive role in shaping the scale, structure, and incentives of financing, they cannot shift the system alone. Progress will depend on coordinated action across governments, philanthropy, donors, private sector actors, training providers, and civil society. Each has a complementary role to play in expanding the volume of financing, improving access, and increasing the effectiveness of investments in jobs and skills. In particular:
- Governments have a central role in setting direction, building systems, and creating the enabling environment for investment. This includes integrating jobs and skills into national development, industrial, and energy transition strategies; strengthening coordination across ministries responsible for finance, education, labor, energy, and industry, and ensuring that workforce priorities are embedded in sector planning and public investment processes. Governments are also essential in building the data infrastructure needed to identify skills gaps, track employment outcomes, and generate the market intelligence that MDBs and financiers need to design and evaluate investments effectively.
- Bilateral donors and multilateral initiatives can help by providing concessional and grant-based funding at scale, alongside technical assistance, to support system-level reforms and the expansion of proven approaches. Blending grants with MDB loans and softening loan terms can support the affordability of skills investments. Advocating for greater integration of jobs and skills into lending programs and project design as shareholders can also drive incentivization and prioritization.
- Philanthropic actors can play a more flexible and catalytic role, particularly where speed, experimentation, and higher risk tolerance are required. They are well positioned to support early-stage innovation through technical assistance and capacity building, helping to scale new delivery models and financing models. In addition, philanthropy can play a unique convening role, bringing together diverse actors and sustaining focus on workforce outcomes that may fall between institutional mandates.
- Private sector is essential not only as a beneficiary of stronger workforce systems, but as a co-investor and active co-designer of them. Employers can help ensure relevance by articulating skills needs, embedding workforce development into their supply chains and procurement models, creating stronger incentives for local hiring, training, and supplier upgrading.
Taking the agenda forward in Africa and beyond
Africa’s energy transition will not succeed on the back of infrastructure investment alone. The workforce that installs, operates, maintains, and services a continent-scale renewable energy system must be built in parallel. The financing system has not yet caught up with that reality.
A roundtable hosted during the World Bank/IMF Spring Meetings by FSD Africa, the Global Energy Alliance for People and Planet, and Systemiq in collaboration with Mission 300 reinforced both the urgency and the direction of travel. Structural challenges are becoming better understood, workable solutions are emerging, and a growing body of case studies demonstrates that effective models exist across contexts. What is required now is the will to deploy them at scale, share what works, and replicate across geographies and sectors.
Progress depends on action at two levels: the development finance community and enabling actors taking this agenda forward within their respective organisations; and strengthening the global research and financing architecture needed to scale workforce transition investment in Africa and beyond. The Jobs and Skills for the New Economy Initiative is working to advance this agenda globally whilst also supporting in-country workforce transition strategies and disseminating learnings across contexts.
