Author: TIMOTHYRADIER

New Pan-African Fund Managers Association to focus on green finance

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The Pan-African Fund Managers’ Association (PAFMA) launched this week at the Africa Climate Summit aims to foster the adoption of alternative investments, with a particular focus on green finance.

The first day of the Africa Climate Summit in Nairobi saw the signing of an MoU marking the launch of the Pan-African Fund Managers’ Association (PAFMA), a new trade association bringing together fund managers from across the continent with backing from some of the industry’s most powerful players.

The five founding members of PAFMA are the Pension Fund Operators Association of Nigeria (PENOP); the Fund Managers Association (FMA) in Kenya; the Botswana Investment Professionals Society (BIPS); the Ghana Securities Industry Association (GSIA) and the Investment Management Association of Uganda (IMAU).

These national associations, which between them account for assets under management of over  $70bn, have established PAFMA in collaboration with FSD Africa, a specialist development agency working to build and strengthen financial markets across sub-Saharan Africa.

Championing alternative investments

The launch of PAFMA comes as the industry faces many challenges. These include historically low savings rates along with a scarcity of viable investment opportunities and the escalating environmental risks confronting the continent.

Recognising the prevalent dominance of government securities among the current investible assets managed by fund managers on the continent, PAFMA’s primary objective is to foster the adoption of alternative investments.

This includes a particular focus on green finance, a pivotal driver for bolstering various sectors of the economy. By championing these alternative investment avenues, PAFMA seeks to not only stimulate job creation but also enhance income generation.

Among its activities, PAFMA aims to spearhead localised research efforts and initiatives to enhance knowledge sharing and capacity building enabling fund managers to evaluate and make investments in regions and countries where they did not previously have a presence.

Serving as a proactive advocate, PAFMA will also offer policy insights and champion the interests of its members in both regional and international arenas as well as facilitating regular gatherings of fund managers from across Africa.

“What we need to have is a pan-African association of fund managers who can share ideas and then hopefully collaborate on actual transactions,” Mark Napier, CEO of FSD told broadcaster CGTN Africa.

“When there are so many billions of dollars under the management of these fund managers that are coming together under the new association, it could be a very powerful force. We want it to accelerate the investment figures made through these kind of entities by helping them share knowledge and build capacity in that way.”

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African financial institutions pledge to protect and restore nature in landmark statement

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“Nature Voices Pledge” will be launched at a Presidential Panel on nature at the Africa Climate Summit

Nairobi, September 5th, 2023: Some of Africa’s largest financial institutions are backing a call to conserve and restore nature amid a biodiversity crisis that threatens the wellbeing and livelihoods of tens of millions of its people.

The landmark “Nature Voices Pledge” is being launched by the African Natural Capital Alliance (ANCA), a collaborative membership organisation whose collective assets total US$390 billion. Among its members are major financial institutions such as Standard Chartered, KCB, Equity Bank, Ecobank, Access Bank, DBSA, Zanaco, FirstRand, Investec, Sanlam, Old Mutual, CalBank, ICEA LION and Fidelity Shield.

The Pledge commits the ANCA membership, which also includes governmental organisations such as the Ghana Ministry of Environment, Science, Technology and Innovation (MESTI) and civil society organisations including the African Wildlife Foundation, to support conservation and restoration efforts, integrate nature into their decision-making and promote sustainable financing solutions.

It comes amid growing evidence that the natural capital on which tens of millions of Africans depend is being lost due to factors including overexploitation, overpopulation, land-use changes and climate change. The value of the natural capital lost to Africa every year is estimated to be $195 billion according to the United Nations Environment Programme (UNEP).

The “Nature Voices Pledge” is to be announced at a Presidential Panel titled “Pioneering the Future of Nature in Africa” which is being hosted by the Africa Climate Summit 2023 on 5th September 2023

The event, which is being supported by ANCA, brings together leaders from several African nations including the Presidents of Rwanda, Republic of Congo and Burundi, to engage in a high-level dialogue on the future of nature in Africa. It will provide a platform for African leaders to discuss key challenges, opportunities, and policy interventions aimed at promoting nature and biodiversity for sustainable development across the continent.

The ‘Nature Voices Pledge’ encapsulates the shared commitment of ANCA’s member institutions to prioritise nature-positive practices and integrate environmental considerations into their core operations. It highlights three key principles that underline ANCA’s dedication to shaping a more sustainable and resilient Africa:

  • Acknowledging the Importance of Nature
  • Emphasizing the African Context
  • Assuming Responsibility

The Pledge also sets out a set of concrete actions ANCA members will take to achieve their nature-centred goals:

  • Support Nature Conservation and Restoration
  • Integrate Nature into Decision-Making
  • Promote Sustainable Financing Solutions
  • Strengthen Transparency and Reporting
  • Support Alignment of Policies and Regulations
  • Foster Collaboration and Knowledge Sharing

This historic commitment underscores the group’s urgency and conviction in driving transformative change toward a sustainable future for Africa.

Dorothy Maseke, Head of ANCA Secretariat and Lead of Nature Finance at FSD Africa, said:

“We in Africa are privileged to live on a continent so rich in natural capital but we must also recognise that our economy and our well-being depends on using it sustainably. This landmark pledge signifies that the members of ANCA are determined to play our part by putting nature at the heart of decision-making, so we reflect its true value and drive investment into activities which conserve and enhance nature rather than destructive activities for short term gain.”

Kaddu Sebunya, CEO, African Wildlife Foundation, said:

“As we stand on the cusp of the Africa Climate Summit, we come with a resounding message of hope, unity, and action. We support the Nature Voices Pledge and believe unity is essential to ensure the realisation of nature’s conservation in Africa for prosperity and future generations. At the African Wildlife Foundation we believe that biodiversity stands as a powerful ally in the face of our pressing climate challenges. We understand that acknowledging biodiversity’s pivotal role is the key to a harmonious future for both nature and humanity.”

FSD Africa Investments Commits US$19.5 Million To Boost Climate Resilience In Africa

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Investments in Acre Impact Capital’s Export Finance Fund, Catalyst Fund and Camco’s Spark Energy Services will help bridge financing gap for green projects

Nairobi, 5th September 2023 – FSD Africa Investments (FSDAi), the investing arm of FSD Africa, today announces new investments totalling US$19.5 million to support climate adaptation and climate-aligned infrastructure projects in Africa and to promote the continent’s resilience to climate change.

The investments in Acre Impact Capital’s Export Finance Fund I, Catalyst Fund and Camco’s Spark Energy Services, demonstrate FSDAi’s commitment to partnering with local asset managers and venture builders to support climate-smart projects that would otherwise struggle to access the finance they need.

The new commitments include:

  • US$12 million in Acre Impact Capital’s Export Finance Fund I, the first to address the lack of commercial debt financing for sustainable infrastructure projects guaranteed by official Export Credit Agencies (ECAs). Financing from ECAs reduces the cost of debt and makes infrastructure projects more affordable. However, in order to access ECA support, project sponsors have to make a down payment of ~15% of the project value using commercial debt which is increasingly scarce. FSDAi’s investment in Acre will facilitate the flow of ECA finance for social and green infrastructure, mobilising US$ 67 million directly related to FSDAi’s investment, providing improved access to essential services for over 500,000 people and generating over 2,000 jobs.
  • US$4.5 million in Catalyst Fund, a pre-seed venture capital fund and accelerator that will invest in and provide hands-on venture building support to tech start-ups that aim to improve the resilience of climate-vulnerable communities across Africa. The investment will help demonstrate venture building as an investible model that can accelerate the growth of climate-smart businesses in Africa with a target of creating or accelerating 40 businesses and helping 5m individuals and households to adapt to the effects of climate change.
  • US$3 million into Spark Energy Services (Spark), which is designed and managed by climate and impact fund manager Camco to provide financing to captive solar and energy efficiency developers in Sub-Saharan Africa. The platform seeks to address the lack of financing available to developers of smaller scale projects by innovatively aggregating small projects to reduce transaction costs and diversify risk. FSDAi’s investment in Spark will support a just transition and achieve local development benefits by facilitating a 0.61m MtCO2e (million metric tons of carbon dioxide equivalent) net reduction in greenhouse gas emissions, working in partnership with local developers, creating 1,400 jobs and providing a lower cost, reliable and clean power supply to commercial and industrial SMEs.

FSDAi makes investments in support of ‘innovative’ financial instruments, facilities and intermediaries that can accelerate the role of finance in Africa’s green economic growth. It is funded through UK International Development from the Foreign, Commonwealth & Development Office (FCDO).

One of FSDAi’s distinctive features is its mandate to take significant investment risk. FSDAi fills an important funding gap by assuming the commercial risk of novel financial solutions that neither development finance institutions nor private investors are prepared to take.

The new investments will be announced by Andrew Mitchell, UK Minister for Development, at a joint event being held by FSD Africa and PIDG during the Africa Climate Summit on September 5th.  It is one of a number of transactions and market building initiatives being unveiled by FSD Africa during the Summit which are designed to create a more innovative financing environment and so boost the participation of international and domestic private capital in Africa’s green economy.

Commenting on the investments Andrew Mitchell, UK Minister for Development, said:

“The climate finance projects we announced demonstrate the strength of our commitment to Africa’s green future. UK leadership is determined to unlock the funding needed internationally to drive forward the green agenda. Our ambitions can only be realised through partnership and cooperation, with Africa and the international community. We are stronger together – and we go far when we go.”

Anne-Marie, Chief Investment Officer, FSD Africa Investments, said:

“For Africa to achieve a green economic growth pathway, access to green finance needs to be scaled up. Our mission is to enable investments to flow by taking more risk and working with local intermediaries to bridge the gaps in the current financing structures.  We are backing these three funds, which provide innovative ways to finance businesses which will make a big contribution to Africa’s green economy.”

Pan-African Fund Managers’ Association launched to increase cross-border collaboration and drive investment into the green economy

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Nairobi, Kenya, September 04, 2023

In a first for Africa today sees the launch of the Pan-African Fund Managers’ Association (PAFMA), a new trade association bringing together fund managers from across the continent with backing from some of the industry’s most powerful players.

The five founding members of PAFMA are the Pension Fund Operators Association of Nigeria (PENOP); the Fund Managers Association (FMA) in Kenya; the Botswana Investment Professionals Society (BIPS); the Ghana Securities Industry Association (GSIA) and the Investment Management Association of Uganda (IMAU). These national associations, which between them account for assets under management (AUM) of over US$70 billion, have established PAFMA in collaboration with FSD Africa, a specialist development agency working to build and strengthen financial markets across Sub-Saharan Africa

The launch of PAFMA, at an event in Nairobi on 4th September during the Africa Climate Summit 2023 where the founding members will sign an MoU, comes as the industry faces many challenges. These include historically low savings rates – which as of 2021 stood at just 24% of GDP in Sub-Saharan Africa – along with a scarcity of viable investment opportunities and the escalating environmental risks confronting the continent.

Recognising the prevalent dominance of government securities among the current investible assets managed by fund managers on the continent, PAFMA’s primary objective is to foster the adoption of alternative investments. This includes a particular focus on green finance, a pivotal driver for bolstering various sectors of the economy. By championing these alternative investment avenues, PAFMA seeks to not only stimulate job creation but also enhance income generation.

Among its activities, PAFMA aims to spearhead localised research efforts and initiatives to enhance knowledge sharing and capacity building enabling fund managers to evaluate and make investments in regions and countries where they did not previously have a presence. Serving as a proactive advocate, PAFMA will also offer policy insights and champion the interests of its members in both regional and international arenas as well as facilitating regular gatherings of fund managers from across Africa.

Commenting on the launch, Oguche Agudah, CEO, PENOP Nigeria, said:

“I’ve always believed that the solutions to Africa’s challenges lie within us. We need to come together, commit to collaborate, and speak with one voice. The managers of capital on the continent have a unique opportunity to individually and collectively determine to a large extent the trajectory of the continent. Working together, we can achieve so much more. The time is now.”

Patrick Kariuki, Chairman, FMA and Managing Director, Gen Africa Managers Ltd, said:

“The Fund Managers Association is very excited to partner with other like-minded Pan-African Fund Manager Associations. Our industry and its future growth depend on vibrant collaboration amongst fund managers across Africa. With PAFMA, fund managers will be able to evaluate and make investments in regions and countries where we did not have sufficient local context. The Fund Managers Association is honoured to be invited to this exciting and very important initiative.”

Mark Napier, CEO, FSD Africa, said:

“We are excited about the establishment of the Pan-African Fund Managers’ Association which comes at a timely juncture. This association will be integral for African Fund Management organisations to ensure that they share industry knowledge, manage risks with a continental and international view and drive needed investment in critical sectors such as climate mitigation and adaptation. This African-led initiative is a powerful demonstration of our shared vision to transform Africa’s financial and investments sector landscape.”

Africa is part of the solution to climate change, not just a victim

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African and global leaders are gathering in Nairobi for the Africa Climate Summit which opens on 4 September.

Convened by President William Ruto of Kenya in conjunction with the African Union, the summit will address the urgency of marshalling resources to respond to the climate crisis, amid signs that we are entering unchartered territory.

This summit will also be about challenging the idea that African nations are solely victims suffering the impact of climate change, despite bearing little responsibility for it. Instead, the summit will aim to show all the ways that Africa can transform its economy by playing a major role in accelerating global decarbonisation.

Developing countries need access to energy, not access to fossil fuels

Underlying this is the growing realisation that we need to update our “vision” of growth and development, with its outdated assumption that economic growth must always depend on industries and practices which harm the planet.

As Ugandan climate justice advocate Vanessa Nakate has observed, “developing countries need access to energy, not access to fossil fuels”.

The possibilities for Africa and the world in an alternative, climate-positive growth path are immense. Africa is home to some of the world’s most potent renewable resources: its untapped renewable energy potential is over 50 times the world’s anticipated electricity demand by 2040. Importantly, in many African countries, solar energy can provide year-round electricity – making it a viable energy source even for industrial applications.

Moreover, because Africa contains relatively little in the way of established, highly-emitting industrial infrastructure, almost all newly generated renewable energy can be deployed directly towards greening local, regional and global economies. For example, Kenya already derives over 90% of its grid energy from green sources – and has only just begun to scratch the surface.

There is also a growing ecosystem of African start-ups using technology for green industries and processes across the economy, from clean cooking fuel to carbon capture and storage solutions. But these require risk capital and hands-on help to scale, attract further investment, and reach their potential. This was the thinking behind the partnership between FSD Africa Investments and Africa Climate Ventures – a new investment vehicle which aims to build Africa’s first “climate unicorns”.

Green Investment

Africa boasts some of the world’s greatest biodiversity, with massive natural mature carbon sinks consisting of forests, peatlands, mangroves, and 60% of the world’s remaining unused arable land. To realise global net zero by 2050, we need to protect our planet’s natural carbon sinks, make our consumption greener, and remove carbon from the atmosphere at a massive rate. More than any other region, Africa can rapidly scale these activities, providing immediate, diverse, and lasting climate benefits.

Uniquely among global locations, scaling up many of these opportunities in Africa does not require complex trade-offs, or painful transformations. In fact, the process could provide much-needed jobs for the continent’s youth, as well as desperately needed energy access and sustainable economic growth.

Many of these opportunities will offer healthy financial returns, if there is fair and equitable access to financial markets. But realising this opportunity will demand unprecedented levels of investment. Indeed, by developing its renewable potential for on-continent use, Africa could generate reliable electricity access for all Africans – including the nearly 600 million currently without any energy access – by 2030 whilst reducing total emissions associated with energy production by 80% and with 30% lower costs. However, this will require 40% more upfront investment.

So the need for finance and investment will need to be front and centre of discussions at the Africa Climate Summit. That means ensuring reforms to the global financial architecture take account of the climate crisis and addressing the factors that are restricting the flow of green finance. It also means recognising that the perceived higher riskiness of investments into green assets in developing countries requires a big increase in the availability of concessional and smart capital as well as greater financial innovation to address systemic barriers.

Africa is ready to play its part and, as this summit will show, it offers many opportunities for green capital investment. The rest of the world can accelerate and amplify this by partnering with, and investing in, the continent as well as supporting market building initiatives to ensure it has the capacity to absorb the capital needed. If they do so, then Africa and her young, dynamic population can truly play their role as global climate leaders.

James Mwangi is CEO of Africa Climate Ventures and Anne-Marie Chidzero is CIO of FSD Africa Investments.

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CRDB Bank hailed for Launching Kijani Bond with Unprecedented 10.25% Interest Rate: A Green Investment Opportunity for All

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Dar es Salaam. 31st August 2023 — The Minister of State, President’s Office for Investment and Planning, Hon. Prof. Kitila Mkumbo, hailed CRDB Bank for ushering in a new era of sustainable investment through the launch of the pioneering Kijani Bond. This historic launch event took place today at the Serena Hotel in Dar es Salaam.

In his speech, Hon. Prof. Mkumbo acknowledged CRDB Bank’s role in providing local institutions a pathway to harness the transformative potential of green bonds. He highlighted the government’s dedication to fostering an enabling environment for investors by enhancing existing policies, laws, and regulations.

“CRDB Bank has already set an exemplary precedent,” he remarked. The issuance of the Kijani Bond, with its multi-currency Medium Term Note (MTN) Programme of USD 300 million, signifies a monumental stride toward realizing Tanzania’s National Financial Sector Development Master Plan 2020/21 – 2029/30, a strategic blueprint to empower both public and private sectors for the greater welfare of the people.

CRDB Bank’s Group CEO and Managing Director, Abdulmajid Nsekela, echoed the sentiment that the Kijani Bond is accessible to all, contrary to misconceptions. He affirmed, “This is an investment that even an average Tanzanian can partake in and benefit from, with a minimum initial investment of just TZS 500,000.” Nsekela underscored the unique proposition of the Green Bond: attractive investment yielding an impressive 10.25% interest per annum. He emphasized the unparalleled stability of this investment, insulating investors from market fluctuations.

The launch of the Green Bond is intrinsically linked with the offer opening, spanning from August 31 to October 6, 2023. Subsequent to this period, the bond will be listed on the Dar es Salaam Stock Exchange (DSE). CRDB Bank anticipates raising TZS 40 billion (with a green shoe of up to TZS 15 billion) during this first phase, which reflects the faith investors place in this innovative financial instrument. The Kijani Bond launch marks a historic moment as CRDB Bank introduces the largest green bond not only in Tanzania but across Sub-Saharan Africa.

“CRDB Bank has often been a pioneer,” remarked Dr. Ally Laay, CRDB Bank’s Board Chairman, who expressed deep gratitude to the Capital Markets and Securities Authority (CMSA) and other stakeholders who contributed to the approval of the green bond. Dr. Laay emphasized that both local and international investors have the opportunity to benefit from this bond, as it offers loans in Tanzanian Shillings or US Dollars.

The CEO of the Tanzania Capital Market and Securities Authority (CMSA), Nicodemus Mkama, lauded CRDB Bank for achieving this historic milestone and reaffirmed the alignment of the green bond with international standards. Mr. Mkama remarked, “We expect that Kijani Bond will be instrumental in further developing green financing in Tanzania.” The CMSA’s endorsement underscores its confidence in CRDB Bank’s commitment to sustainable financing and sets the stage for significant growth in climate financing.

Evans Osano, Director, Capital Markets, FSD Africa, said: “The issuing of this trailblazing green bond demonstrates that Tanzania’s rapidly expanding green economy presents huge opportunities for investors, both international and domestic. As the first green bond to be issued in Tanzania, it is also a major moment for the sustainable finance agenda in Africa and we are proud to have been able to provide the technical assistance.”

FSD Africa is providing technical assistance in Kijani Bond issuance, while Stanbic Bank assumes the pivotal role of lead underwriter and book runner for the forthcoming green bond issue, with Denton Tanzania Law Chamber providing legal advisory services. Orbit Securities Tanzania serve as the sponsoring broker, KPMG is entrusted with the responsibilities of the reporting accountant, and Sustainalytics provides a second party opinion.

The Kijani Bond has garnered the attention of global investors, including The International Finance Corporation (IFC), a member of the World Bank Group. IFC intends to invest 40% of the total issuance, USD 300 million.

To invest in the Green Bond, individuals can visit any CRDB Bank branch or authorized broker. Investment forms are available on CRDB Bank’s official website www.crdbbank.co.tz, and inquiries can be directed to the Customer Service Center via the toll-free number 0800008000.

The issuance of the Kijani Bond demonstrates CRDB Bank’s dedication to environmental, social, and governance (ESG) principles, strengthening its position as a key player in green financing. With a history of sustainable initiatives and recognition from the United Nations Green Climate Fund (GCF), CRDB Bank continues to lead the way in fostering green finance solutions.

 

 

 

Using Direct Air Carbon Capture Technology to Address Emissions

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The Octavia Carbon Story

To keep global temperatures from rising more than 1.5°C as outlined in the Paris Agreement and prevent the worst impacts of climate change, the world will need to reach net-zero carbon emissions by around mid-century through removal and storage of as much carbon dioxide from the atmosphere as is put. While strategies to reduce emissions — such as increasing renewable energy, improving energy efficiency, and avoiding deforestation — are critically important, they will not be enough on their own. Reaching climate goals requires strategies that actively remove CO2 from the atmosphere.

Direct Air Carbon Capture is a promising carbon sequestration methodology but has yet to scale due to high costs. Kenya-based startup Octavia Carbon, which FSD Africa has invested in, though Cohort 11 of the Catalyst Fund is the only company utilizing DAC technology in the Global South and is uniquely positioned to disrupt the cost structure of current DAC projects.

‍The Octavia Carbon Innovation

Octavia Carbon is one of about twenty companies around the globe that are building DAC technologies. The company has developed a prototype DACC machine and are currently working on a separate Minimum Viable Product (MVP) with a paying customer which will allow for iteration. The machine design will be replicated, with initial machines capturing 5-10 tonnes of CO2 per year and later machines capturing 100 tonnes of CO2 per year. By end of 2024, Octavia Carbon aims to produce at least one of these machines a day, adding some ~40,000 tonnes of CO2 per year in DACC capacity to the global market.

The Octavia Carbon Story
Fig 1: Octavia Carbon’s prototype machine. Source; Octavia Carbon

‍Project Location

Kenya, where Octavia Carbon is based, is uniquely well-suited for DACC thanks to natural endowments such as excellent geology for CO2 storage, geothermal activity, and unique renewables capacity and potential. The Kenyan Rift Valley is home to high-porosity basaltic rock that readily bonds with CO2-enriched water (carbonic acid – H2CO3), the fastest and safest form of permanent CO2 storage. Geothermal energy is also important for Octavia because ~80-90% of the energy required in DACC is low-grade (~80°C) heat energy. In Kenya, that kind of heat comes readily from the ground and is already a ‘waste’ product of geothermal power production.

For the electrical energy that DACC machines do require, it is ideal to have 24/7 green electricity, ideally coming right down the grid, and without too many competing uses for decarbonization (e.g., displacing fossil power plants). Kenya is uniquely well-suited for hydropower and geothermal energy, which today make up >90% of Kenya’s grid, and virtually 100% in Central Kenya. Few places in the world have any significant area covered by a 100% renewable grid. Kenya is also well endowed with solar (great irradiation and no seasonality), which could in the future complement the renewable energy mix even more.

‍Project Impact

Octavia Carbon will removes CO2 from the atmosphere and either stores it in rocks or makes it available to industries like floriculture which require carbon. This will catalyse the emergence of a new circular carbon economy that will use cheap air-captured CO2 to create further products like synthetic fuels/plastics. These direct activities will create innovative and sustainable economic growth, which will dramatically improve millions of livelihoods. Furthermore, there are additional applications for captured CO2, like enriching greenhouses with CO2, increasing plant photosynthesis and thereby leading to a higher yield, and making nutritious horticultural products more affordable and accessible to the populations that need them most. Indirectly, DACC can also eventually change the economics of geothermal energy by using abundant waste heat, co-utilizing injection wells, and providing a reliable offtake for excess energy.

‍Growth potential

The business model involves extracting carbon from the air using DACC technology to either store carbon in deep rock formations or produce and then sell CO2 for industrial use. The growth trajectory depicted in the financial models is promising. By the end of 2024, wirh an annual CO2 production rate of 40,000 tonnes per annum, key customers will include industrial CO2 buyers and carbon credit off-takers. Based on Octavia Carbon’s calculations, the price per tonne of CO2 will range between $300 and $500 depending on customer profile and market fundamentals.

The range of prices for capturing a tonne of CO2 varies between $775 to 1200 today depending on the technology choice, low-carbon energy source, and the scale of their deployment. Hence, Octavia Carbon’s projected price for a tonne of CO2, which requires additional extraction from the sorbent, would make it a global cost leader by mid-decade.

It also has significant growth potential due to the market and natural conditions in Kenya. The cost of production in Kenya is much lower compared to the Global North where graduate engineers cost ten times more than in Kenya. Furthermore, the world’s largest DACC company has also located their largest installations in countries with high geothermal activity such as Iceland. In Kenya, it is estimated that there are about 7,000 to 10,000 megawatts (thermal) of untapped geothermal energy beneath the Rift Valley region. Both the supply of renewable energy and talented engineers at a fraction of the cost provides a significant competitive advantage in Octavia Carbon’s scaling plan.

FSD Africa, PenOp Equate To Deploy Extensive financing

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August 2,2023.

The Financial Sector Deepening (FSD) Africa Capital Markets has associated with the Pension Fund Operators’ Association of Nigeria (PenOp) to revitalize economic sustainability through mobilisation of extensive capital for private sector financing.

We develop Africa’s capital markets to increase the availability of long-term finance for economic development, to achieve a sustainable future for Africa’s people,” said Evans Osano, director, Capital Market at FSD Africa.

Osano gave the hint at the FSD Africa Capital Market Roundtable Series: Nigeria 2023 held in Lagos on Wednesday with the theme ‘Mobilising Patient Capital Via Innovative Financing Structures For Sustainable Development in Nigeria’.

Encouraging fund managers and partners to deepen participation, Osano said the country’s over $40 billion investible assets should be explored in developing the green economy as opportunities abound in infrastructure, housing, water, and power, among others.

He said environmentally friendly growth can improve access to food, services, create green jobs and boost incomes in new and existing sectors of the economy.

Osana said the transition towards carbon-neutrality and environmental sustainability will reduce the negative impacts of climate change among poor communities.

He said: “The traditional mindset is to say, I want returns for the level of risk I am taking and that is very simple and laid back, but given that we are operating in a context, an environment, we need to start thinking about how we can generate those returns and still contributing to solving the society’s problems.”

“How can I invest money that can also create jobs? That is impact investing. And impact is at the far end of the scale and we can start that journey. That is really what I am challenging the Nigerian institutions and investors to start thinking about.”

According to him, there is no point in getting a very high return and then one retires into an environment where if one falls sick, there is no access to medical care.

Oguche Agudah, chief executive officer of Pension Fund Operators Association of Nigeria, said: “What we need to do is to look at challenges facing us as a country in different ways and use the capital that we manage to tackle them in an innovative way.

“What needs to happen is for capital to be deployed in a manner that seeks to solve some of these challenges and for that capital to be deployed adequately in a way that compensates the capital providers for their risk, compensates them for their time, and also compensates the people who manage those funds. In this way, they will be incentivised to do it again and again and again.

“We need new sustainable models. We need new products, we need new mindsets, because the problems that are ahead of us are new. We also need to work together more closely in order to ensure that we have the society that we all crave for and that Nigeria can indeed be a beacon of hope to the rest of Africa.”

FSD Africa is currently implementing its initiative in over 60 projects in 33 countries across Africa including Ethiopia, Ghana, Kenya, Morocco, Nigeria, Rwanda, Tanzania, UEMOA, Uganda, Zambia, and Zimbabwe.

In Nigeria, FSD Africa Capital Market has initiated projects like the first African green bond, first certified corporate green bond in Africa, FMDQ – green bonds, and Infracredit Nigeria – guarantee and preparation facility (NSIA).

Mark Napier, CEO of FSD Africa, said the focus of his engagement with key actors in the Nigerian financial market is to significantly boost the role of the private sector in climate finance.

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United Kingdom Government reiterates commitment to Africa’s green industries

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In line with the UK Government’s commitment to supporting clean, green and sustainable economic growth in Africa, UK Foreign Secretary James Cleverly visited a Nigerian e-mobility platform and electric vehicle assembler, MAX Nigeria.

 

With support from the UK-funded Manufacturing Africa programme, MAX raised $31 million to ramp up the assembly of electric two- and three-wheelers. MAX is now gearing up for a third capital raise, to fund its expansion to become a regional e-mobility player. MAX Nigeria has empowered over 21,000 drivers operating in 8 cities within Nigeria and has contributed to cutting 52 metric tons of CO2 emissions from the environment.

Manufacturing Africa’s team of McKinsey consultants conducted a market assessment of the electric vehicle value chain for MAX, contributing to their electric vehicle (EV) scale-up strategy. UK-linked financiers including Novastar (backed by British International Investment) and Shell Foundation are some of the organisations financing MAX’s growth. MAX has also found a UK business partner in Field Ready, to support them on recruitment.

Work with MAX is part of the UK’s support for economic growth, job creation and value-addition in Africa that aligns with global climate priorities.

British funds continue to support game-changing entrepreneurs and companies in Africa. British International Investment manages a $4.7bn investment portfolio in Africa, including 86 companies and 43 funds in Nigeria alone. Other funding sources include:

  • Infracredit, which provides local currency guarantees to unlock long-term infrastructure financing in Nigeria
  • FSD Africa Investments, which invests in order to improve the financial instruments supporting Africa’s green economic growth
  • the Climate Finance Accelerator, a public-private finance initiative that supports low-carbon projects

Importantly, the UK also provides support for companies to access investment, whether from the UK or elsewhere. The Manufacturing Africa programme is supporting 22 manufacturers to land investments in Nigeria, with a pipeline of $664m+ foreign direct investment (FDI). The programme supports over 120 companies across 5 countries in Africa, which are mitigating 239,000 tonnes of carbon dioxide, while creating 14,000 new jobs.

British High Commissioner to Nigeria, Richard Montgomery said: “I am delighted to visit MAX Nigeria with our Foreign Secretary James Cleverly. MAX are truly innovative and entrepreneurial, solving a thousand problems at once to bring affordable electric vehicles to West African riders.”

It is fantastic that a combination of UK public and private sector support is helping MAX to create jobs, bring new skills into the market, and solve climate change challenges. We will continue to support companies doing this groundbreaking work on the continent.

Chief Executive Officer and Co-Founder of MAX Nigeria, Adetayo Bamiduro said: “Our mission at MAX is to continue scaling the impact of our vehicle subscription platform across Africa and to deliver on our commitment to provide sustainable income to millions of mobility entrepreneurs by enabling them to access income-generating, energy-efficient, and electric vehicles that meet the essential needs of Africans.”

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FSD Africa, InfraCredit Invests £10 Million In Risk-Sharing Facility

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FSD Africa in collaboration with InfraCredit has invested £10 million in a first-of-its-kind risk-sharing facility, Risk-sharing Backstop Facility (RSBF). The credit line is designed to unlock funding for sustainable infrastructure development in Nigeria.

With the increased accessibility of finance for climate-aligned infrastructure projects, the facility seek to accelerate Nigeria’s economic and social development as well as deliver on its climate goals.

In a statement, RSBF plans to mobilise short and medium-term local institutional investment into critical and climate-aligned infrastructure projects that have a reliable business model and are ready to expand but struggle with a higher perception of risk without this form of credit enhancement.

According to the International Monetary Fund (IMF), an estimated $3 trillion is required by Nigeria to finance its infrastructure deficit over the next 30 years. Despite the large amount of liquidity in the local market to fund a significant portion of this, infrastructure receives relatively little.

According to the statement, “The RSBF will address this perception of high risk by providing backstop support to investors alongside InfraCredit’s guarantees, thereby providing early-stage greenfield climate-aligned infrastructure ventures which are at a construction stage and too early for additional capital to be secured via a bond issue, with more time in which to start generating stable predictable cash flow and demonstrate their status as being long-term bankable.

“The current pipeline demonstrates the breadth and variety of projects this facility will support, with projects ranging from distributed renewable energy services for urban residences to commercial and industrial renewable projects, edge-certified green housing and e-mobility infrastructure. As part of any funding application all projects will be rigorously assessed on their environmental credentials.”

FSD Africa Invest (FSDAi) has disclosed that it is pleased to be undertaking this investment in partnership with an established player in the sustainable infrastructure financing space, InfraCredit – a business with a capitalisation of $209 million, and a series of AAA ratings from local rating agencies.

“Indeed, since its inception in 2017, InfraCredit has built an exemplary record supporting strategic Nigerian infrastructure projects, having written ₦145 billion (approximately $315 million) of guarantees underwriting bond issuances by eleven companies distributed across the power, transportation and logistics, ICT/telecommunications, gas to power, LPG clean cooking and input to infrastructure sectors. All of these issues have been fully subscribed, some by more than 160 per cent by domestic pension funds and insurance companies.”

FSDAi, which is backed by UK aid through the Foreign, Commonwealth and Development Office (FCDO) with a total capital base of $131 million, has a track record of backing innovation and being prepared to take risks to address financial market failures to bring about sustainable economic growth.

According to the statement, FSDAi’s £10 million investment in the RSBF is intended to galvanise finance and direct it to landmark infrastructure projects that will help create exponential economic, social and environmental benefits for Nigeria. This investment, therefore, aligns with one of FSD Africa’s primary objectives – developing capital markets by tackling blockages in the system.

It stated, “The facility has been carefully designed to support sustainable infrastructure initiatives which boast a reliable business model and are ready to expand but lack the necessary capital to do so. This delay or deferral of expansion projects due to unavailable capital creates a bottleneck that slows Nigeria’s progress towards solutions for some of the country’s most pressing, and transformational, infrastructure needs.

“The RSBF will raise funding in series, initially from FSDAi, but eventually from other funders, aiming to reach a total capital base of up to $50 million.”

Also, CIO of FSD Africa Investments, FSD Africa, Anne-Marie, stated that, “FSDAi’s partnership with InfraCredit on the bridge-to-bond facility introduces a de risking financing solution to mobilise short and medium-term local institutional investment into critically needed infrastructure projects that are currently considered un-bankable without alternative credit enhancement. Moreover, as Africa’s economies struggle to mobilise capital to develop key climate mitigation and sustainable power generation projects, this facility comes as a timely and much-needed intervention for Nigeria’s infrastructure landscape.’’

CEO of InfraCredit, Chinua Azubike, also expressed delight saying: “I am delighted to work with FSD Africa on an innovative facility which will support much needed but underfinanced projects realising their ultimate goals and purpose. Smart use of catalytic capital can dramatically increase the role of private capital and local intermediaries in investing in Nigeria’s sustainable infrastructure space and help the country develop responses to the significant challenges which confront it from the deteriorating environment and ecology to an unstable energy mix and severe social inequality.”

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