Category: News

UWASA Tanga issues 53bn/- DSE listed water green bond

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The first ever sub-national water infrastructure green bond in East Africa, valued at 53.12bn/- has been issued by Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA), an autonomous water utility.

The transaction is expected to finance expansion and improvement of the water supply infrastructure and environmental conservation within Tanga city and nearby townships.

The 10 year project revenue bond is to be listed at the Dar es Salaam Stock Exchange (DSE), offering an attractive interest rate of 13.5 percent per annum to be paid semi-annually.

Key stakeholders involved in preparing the water green bond includes NBC Bank as the lead transaction advisor, FSD Africa a UK-backed Africa green financing framework, FIMCO (a financial investment management company that offers professional assistance to clients looking to navigate local financial markets) and Global Sovereign Advisory (GSA), a Rockefeller Foundation linked firm advising governments on strategic, economic and financial issues which took the role of financial and investment advisory, ALN (T) a commercial law firm that acted as legal advisor, Innovex (reporting accountant), Vertex International Securities (stockbroker) and ISS Corporate Solutions (second-party opinion provider).

Water minister Jumaa Aweso said at the event that the general public, investors, institutions and individuals are welcome to visit any NBC Bank branch or authorized brokers to invest in the scheme within the offer period of six weeks.

A key stakeholder, FSD Africa in the past two years obtained a £90m commitment from the British government to initiate a new phase of financial sector development.

It said at the time that the £90m commitment from UK Aid, part of a £320m package, would help initiate an ambitious new phase of financial sector development across the African continent.

The UK Aid package includes funding for eight existing local financial sector development programmes and to set up and scale new FSDs in high-priority markets.

There is also the African Guarantee Fund (AGF), a leader in promoting financing of small and medium-sized enterprises (SMEs) across Africa and FSD Africa, a pioneering development agency committed to reshaping Africa’s long-term financial landscape.

The two signed a strategic cooperation agreement aimed at propelling the growth of Green SMEs by providing critical financial support, technical assistance, and capacity building.

The government adopted the Alternative Project Financing (APF) strategy in 2021 owing to the need to broaden its domestic revenue base to finance various development initiatives including water, energy, healthcare, agriculture, and other productive infrastructure projects.

Vice President Dr Philip Mpango praised the financing of strategic revenue generating projects through a revenue bond such as the Tanga Bond, noting that it will reduce pressure on the government budget and provide an opportunity to focus on priority social initiatives that can’t be financed via commercial windows.

He said that it was vital for the Treasury Registrar to oversee public institutions, including those serving regions, municipalities or cities to explore ways to tap long term finance via corporate revenue or municipal bond issuance.

Hamad Chande, the Finance deputy minister, noted that the bond issuance was part of the government’s Alternative Project Financing strategy which needs to be used by more public entities to finance local development projects.

They should not rely on government grants, in the same manner as the private sector and corporate entities operating in the same market.

Mark Napier, the FSD Africa CEO said the successful launch of the Tanga UWASA Water Green Bond is testimony to the power of innovative financing in driving sustainable development in East Africa.

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Landmark $20.8m Sub-national Water Infrastructure Green Bond Issued in EA

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  • This project is expected to improve and increase water supply from 96 per cent to 100 per cent in Tanga City.
  • The government of Tanzania adopted the Alternative Project Financing (APF) strategy in 2021
  • Mark Napier, CEO of FSD Africa, commended the collaborative effort behind the Tanga UWASA Green Bond.

The first ever Sub-national Water Infrastructure Green Bond in East Africa, worth $20.8 million, has been issued by Tanga Urban Water Supply and Sanitation Authority (Tanga UWASA), an autonomous water utility.

This landmark transaction would fund the expansion and improvement of sustainable water supply infrastructure and environmental conservation within Tanga City and nearby townships. The 10-year project revenue bond listed at the Dar es Salaam Stock Exchange (DSE) offers an attractive interest rate of 13.5 per cent per annum to be paid semiannually.

The government of Tanzania adopted the Alternative Project Financing (APF) strategy in 2021 because of the need to broaden its domestic revenue base to finance various national development initiatives, including water, energy, health care, agriculture, and other productive infrastructure projects.

The Tanga bond is the first significant transaction demonstrating that municipalities, cities, and sub-national entities can use the existing regulations and frameworks to raise substantial capital from domestic capital markets in local currency to finance development.

Jumaa Aweso, the Minister for Water, emphasized the government’s mandate to improve water accessibility, particularly in urban and rural areas. He stressed the importance of deploying innovative financing mechanisms, similar to the Tanga UWASA initiative, to achieve ambitious water supply targets by December 2025.

” This project is expected to improve and increase water supply from 96 per cent to 100 per cent in Tanga City and reliability of water for 24 hours, by June 2025. Similarly, increase water supply network from 70Per cent to more than 95Per cent in the townships of Muheza and Pangani respectively by June 2025,” said Aweso.

Government officials, including Philip Mpango, Vice President of the United Republic of Tanzania, emphasized the importance of strategic revenue-generating projects like the Tanga Bond in alleviating pressure on the government budget. They underscored the significance of redirecting resources towards priority social initiatives that cannot be adequately financed through commercial means alone.

“Am directing the Treasury Registrar’s Office which supervises public institutions and the Minister of State, President Office, Regional Administration and Local Government (PORALG), to explore eligible public institutions, Local Governments, cities and municipalities to prepare to tap long term finance via revenue and municipal bond issuance,” said Mpango.

Mark Napier, CEO of FSD Africa, commended the collaborative effort behind the Tanga UWASA Green Bond, emphasizing its role in driving sustainable development across East Africa. Napier highlighted the transformative impact of strategic partnerships in reshaping the region’s financial landscape and fostering inclusive growth.

First Water Infrastructure Green Bond

“We are excited to witness the successful launch of the Tanga UWASA Water Green Bond, a testament to the power of innovative financing in driving sustainable development in East Africa. This milestone achievement not only underscores FSD Africa’s commitment to making finance work for Africa but also highlights the immense potential of collaborative efforts in transforming the region’s financial landscape,” said Napier.

“The Tanga UWASA Green Bond represents a significant step towards inclusive growth, and we are proud to have played a role in facilitating this historic initiative. It reinforces our belief in the transformative impact of strategic partnerships and underscores our unwavering commitment to driving positive change for communities across the continent,” he added.

Deputy Minister of Finance, Hon. Hamad Chande, highlighted that the Government of Tanzania is committed to ensuring that more public entities use its Alternative Project Financing strategy to finance local development instead of relying only on government grants, a leaf to be borrowed from the Private Sector and Corporates who operates in the same market.

Other stakeholders involved in preparations of the Tanga water green bond include NBC Bank (lead transaction advisor), FSD Africa (supported green framework), FIMCO and Global Sovereign Advisory (financial & investment advisory), ALN Tanzania (legal advisor), Innovex (reporting accountant), Vertex International Securities (stockbroker) and ISS Corporate Solutions (second-party opinion provider).

The general public, investors, Institutions, and individuals are welcome to visit any NBC Bank branches or any other authorized brokers to invest in the Tanga water green bond within the offer period of 6 weeks.

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African Guarantee Fund partners FSD Africa to boost Green SME Financing

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The African Guarantee Fund (AGF), a leader in promoting financing of Small and Medium-sized Enterprises (SMEs) across Africa and FSD Africa, a pioneering development agency committed to reshaping Africa’s long-term financial landscape, have today signed a strategic Cooperation Agreement aimed at propelling the growth of Green SMEs by providing critical financial support, technical assistance, and capacity building.

The Cooperation Agreement outlines a detailed framework collaboration between the organizations in boosting sustainable development in Africa. The main aspects of this partnership involve assisting in the development of financial products for institutions, offering partial credit guarantees for bonds and funds raised on behalf of SMEs, and conducting capacity-building events.

Furthermore, by providing financial support and fostering business growth, Green SMEs are expected to play a pivotal role in reducing CO2 emissions. This active contribution aligns with the overarching goal of preserving the environment and facilitates access to finance for business growth and empowering SMEs to generate and sustain employment opportunities, especially for youth and women.

Speaking during the agreement signing, Mark Napier, Chief Executive Officer of FSD Africa said: “This partnership represents an important milestone in our efforts to foster sustainable economic development in Africa. By leveraging the strengths of FSD Africa and the African Guarantee Fund, we will actively create a robust ecosystem that empowers Green SMEs. This collaborative effort aims at facilitating access to affordable long-term funds, thereby accelerating the transition towards a greener and more resilient economy.”

Jules Ngankam, AGF Group Chief Executive Officer said: “Fostering a green economic transformation in Africa is one of our key priorities. Through this partnership, AGF will provide financial institutions with bank fundraising guarantees to enable them access affordable funds aimed at facilitating loans to SMEs investing in low carbon and climate resilient businesses”.

Additionally, AGF will extend partial credit guarantees to lenders in a bid to enhance credit accessibility for Green SMEs, empowering them to flourish and make meaningful contributions to environmental conservation.

The two organisations will also provide technical assistance on green financing initiatives, which is critical in building the capacity of key stakeholders such as Governments, Financial Institutions, and Green SMEs.

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Catalyst Fund invests $1.8 million in nine African climate startups

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Catalyst Fund, a pre-seed VC and accelerator, backs nine African early-stage climate tech startups with a $1.8 million investment to bolster their impact and growth trajectory.

The nine startups benefiting from the investment include Mazao Hub and Medikea from Tanzania, Earthbond, Zebra Cropbank, and Scrapays from Nigeria, Keep It Cool from Kenya, NoorNation from Egypt, Thola from South Africa, and Tolbi from Senegal.

In September 2023, Catalyst Fund achieved its first close, securing $8.6 million out of its $40 million target for investments in African climate startups. Notable investors include FSD Africa, FSDAi, Cisco Foundation, USAID Prosper Africa, and Andrew Bredenkamp.

The Catalyst Fund, established in 2016 and overseen by BFA Global, supports startups in accessing capital, talent, and market opportunities. This marks the fund’s second round of investments in African startups addressing climate change challenges.

In January 2023, Catalyst Fund allocated $2 million to ten startups focused on developing solutions for Africa’s climate-vulnerable communities.

As a result, this latest investment broadens Catalyst Fund’s portfolio to encompass 19 companies operating in eight diverse markets: Kenya, Egypt, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda. The Catalyst Fund team will offer comprehensive venture building support to these startups, effectively integrating them as extensions of their own teams.

These startups are actively addressing climate-related challenges within various sectors, including agriculture, healthcare, energy access, and waste management.

In 2023, a survey revealed that over 110 million Africans faced direct consequences from weather, climate, and water-related hazards in 2022, resulting in economic damages surpassing $8.5 billion.

In discussing the investment, Maelis Carraro, Managing Partner at Catalyst Fund, highlighted that the models utilized by the startups “empower farmers, healthcare providers, waste workers, and small and medium businesses to effectively adapt to the impacts of climate change, thus fostering economic growth with a positive climate impact.

Additionally, Maxime Bayen, Operating Partner at Catalyst Fund, emphasized that “with these latest investments, [Catalyst Fund] is committed to further diversifying its portfolio across various models, climate adaptation sectors, and geographic regions.

In 2022, Catalyst Fund secured a $3.5 million investment from FSD Africa to enhance its footprint and scalability across Africa. With this funding, its objective is to bolster 40 pre-seed impact ventures focused on developing solutions for marginalized climate-vulnerable communities in Africa, while also offering comprehensive venture-building assistance.

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Develop innovative solutions to help address challenges hampering insurance services delivery

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Insurance Technology companies must develop innovative solutions to help address the challenges hampering insurance services delivery to expand insurance penetration and coverage, Acting Commissioner of Insurance, Mr Michael K. Andoh has stated.

According to him, the difficulty in acquiring Police and Doctor’s report to claim insurance, accessing some remote parts of the country, affected insurance services delivery.

Mr Andoh who stated this in an interview after the opening of a one-day forum on the new Insurance Act ad Innovations in the sector in Accra on Tuesday said the aforementioned challenges if addressed would help prompt claim payment and cost of insurance.

It was on the theme “The New Insurance Act:  Unlocking the Insurance Industry Potential via Innovative Technology.”

It was organised by the National Insurance Commission (NIC) in partnership with Financial Sector Deepening Africa and Myfig.

He said the deployment of technology could reduce the cost of accessing insurance and expanding insurance penetration and coverage.

Mr Andoh said the technology could be a lever to reach a lot of the citizens with insurance.

According to him insurance through digital technology could be sold to people where insurance companies could not go.

He said the objective of the forum was to expose the insurance technology companies to the operations and solutions which would be be needed to boost the industry.

Mr Andoh said the NIC had introduced a sandbox to help insurance technology companies to text their ideas.

Under the sandbox, the NIC had offered two temporal license such as Insurers Innovative License for a period of two years to help insurance technology companies to test their insurance technology products.

The Head of Financial Market and Innovation Unit of the Ministry of Finance, Benjamin Torsah-Klu commended NIC for organising the forum, saying the  Ministry of Finance saw the forum as cutting-edge, as it intends to create a platform for the industry to leverage technology and innovation across the insurance ecosystem for the transformation of the market.

“Government would continue to provide the enabling environment for digitalisation and innovation in order to reduce financial vulnerability. Income inequality and the huge risk protection gap,” he stated.

Mr Torsah-Klu said that the Ministry.of Finance saw the forum as a pragmatic step by the NIC to enhance insurance market development, through innovation and technology.

That, he said, would help accelerate growth and deepen insurance access and penetration, and most importantly, improve livelihood and financial stability of the country.

The Principal in charge of Innovation and Resilience of FSD Africa,  Elias Omondi, said the objective of the FSD Africa was to deepen insurance penetration  in in Africa particularly Ghana. “Our role is how to create the large-scale change within the financial market in Africa and Ghana holds a special dispensation in insurance in Africa,” he stated.

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Ethiopian Securities Exchange Attracts Foreign Investors

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Ethiopian Securities Exchange (ESX) is attracting both domestic and foreign investors in line with its capital-raising objectives. Siinqee Bank recently became the second equity acquirer after Zemen Bank, with other investors also showing interest.

ESX, established as a share company by the government and private sector, aims to limit government ownership to twenty-five percent but may increase it if private sector interest is insufficient. Key players such as Ethiopian Shipping and Logistics, Ethio Telecom, and others have committed as initial investors. ESX has actively engaged in roadshows and aims to launch the secondary market by year-end. Foreign investors, including FSD Africa, are also involved. Individual investors are welcome, with minimum investment set at Birr 10 million. ESX forecasts substantial revenue growth, aiming to turn a profit by 2028. Anticipated members include financial institutions, brokers, and investors, with EIH overseeing major public firms, including Ethiopian Airlines Group and Commercial Bank of Ethiopia.

Zemen Bank became the first private entity to secure an agreement with ESX by investing Birr 47.5 million to acquire a 5% ownership share. This fulfills the minimum requirement set by ESX for investors as of January 11, 2024. The move is part of ESX’s goal to raise a total of Birr 625 million, with recent support from state-owned enterprises and FSD Africa. More banks and private investors in Ethiopia are expected to follow suit in the coming months.

Foreign and domestic investors can purchase 75% of the shares of ESX while the rest of the ownership goes to the Ethiopian Government through Ethiopian Investment Holdings.

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Gender Bonds Toolkit Unveiled In Nairobi To Centralize Capital For Women

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NAIROBI, Kenya, Feb 19 – A new gender bonds toolkit has been introduced in Nairobi to centralize capital for women in the African capital markets.

FSD Network’s gender collaborative program, British International Investment (BII), and the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women) are the proponents of the program.

The toolkit seeks to equip stakeholders with the necessary insights and strategies to foster inclusive and impactful investments, bridging gender gaps in the investment landscape.

Generally, gender-focused bond issuances have been viewed as complex due to the lack of a ‘go to’ reference on the process and procedure.

However, the toolkit will champion the centralization of efforts to mobilize gender smart capital, strategically addressing technical capacity gaps on both the demand and supply sides.

“With the launch of the gender bonds toolkit, FSD Africa together with our partners are catalysing a seismic shift in African capital markets,” Mark Napier, Chief Executive Officer of FSD Africa, said during the launch.

“This initiative not only signifies our commitment to gender equality but serves as a powerful tool to mobilize capital, foster sustainable growth, and empower women across the continent,’’ Napier added.

According to a report by UN Women and UNDP in 2022, sustainable bonds aligned with SDG 5, achieving gender equality and empowering all women and girls, were still 1 percent of the $900 billion issued through green, social, sustainability, and sustainability-linked bonds.

The financing gap was even more evident when gender finance was considered as a proportion of total global assets under management (AUM), making up not even 0.01 percent.

However, as of June 2023, global Assets Under Management for Use of Proceeds bonds dedicated to gender equality and women’s empowerment reached $13.5 billion, underscoring the increasing significance of gender-focused investments.

“As a founding member of the 2X Challenge and a leader in providing gender finance, BII is committed to empowering women’s economic development,” Jo Fry, Investment Director, and Head of Intermediated Financial Services at BII, said.

“This means that we’re constantly looking for new ways in which we can mobilise more capital and better support women,” Fry stated.

“Our goal in producing this guide is to demonstrate and create better understanding of how effective gender impact bonds can be as an investment tool to advance gender equality in Africa.”

Parallelle Finance, an investment research and consulting firm, served as the author of the toolkit.

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Catalyst Fund has backed 6 African climate-tech startups in last 4 months

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Pre-seed venture capital (VC) fund and accelerator Catalyst Fund has made investments in six African climate-tech startups in the last four months, having announced a first close of its US$40 million fund in September.

Catalyst Fund is a pre-seed VC fund and accelerator backing high-impact tech startups that seek to improve the resilience of underserved, climate-vulnerable communities. It partners with mission-driven founders that share our vision of a world where every individual has the tools and opportunities they need to thrive.

Until a year ago, the organisation offered grant capital to selected startups, but in January 2023 it announced a US$2 million investment into 10 startups funded by a US$30 million fund anchored by financial sector development agency FSD Africa.

Focused on startups building solutions to improve the resilience of climate-vulnerable communities in Africa, Catalyst Fund in September of last year announced the successful first close of its targeted US$40 million fund, with over 20 per cent committed.

The fund, which offers US$100,000 of equity investments as well as US$100,000 of hands-on venture-building support, has since then announced six investments. In November, it announced investments in Tolbi, a pan-African climate-agtech startup using satellite imagery and AI to enable climate-smart agriculture practices on the continent with data; and NoorNation, an Egyptian startup providing decentralised solar energy and water solutions tailored for farming businesses and underserved communities.

In December, it backed South Africa’s Thola, which democratises access to certifications to liberate SMEs to catalyse climate resilience and food safety – transforming compliance from an obstacle into an opportunity.

Then, in January, it funded Nigeria’s Zebra CropBank, which provides climate-smart solutions tailored to overcome the interlinked challenges holding smallholder farmers back; and Nigeria’s Scrapays, a waste management startup that enables individuals and small businesses to launch mini-waste enterprises.

And just last week it announced an investment in Tanzania’s Medikea, which makes affordable preventative and primary care, diagnostics, and compliance support more accessible to overlooked Tanzanians, directly empowering vulnerable groups to safeguard their well-being in the face of growing threats.

Catalyst Fund’s climate-focused fund has garnered significant backing from investors including FSD Africa, FSDAi, Cisco Foundation, USAID Prosper Africa, and seasoned tech investor Andrew Bredenkamp.

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ESX equity proves lucrative as authorities prepare for late 2024 launch

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Authorities working to establish the country’s maiden stock exchange inch closer to raising one billion birr in initial capital as domestic firms rush to acquire stakes in the Ethiopian Securities Exchange (ESX).

The management of ESX has managed to raise 90 percent of the targeted capital from banks, state-owned enterprises (SOEs), and other businesses operating in Ethiopia.

This week saw Siinqee Bank, one of the industry’s newer entrants, announce a 50-million-birr equity investment in ESX, granting the former microfinance institution a five percent stake in the Exchange.

It is the second financial institution to make the leap, following Zemen Bank’s announcement of a 47.5-million-birr investment in ESX last month.

In October 2023, the Ethiopian Investment Holdings (EIH) and four SOEs under its wing made public the acquisition of a 25 percent stake in ESX. The SOEs include Ethio telecom, the Ethiopian Shipping and Logistics Services Enterprise (ESLSE), the Ethiopian Insurance Corporation (EIC), and Berhanena Selam Printing Enterprise.

YoditKassa, chief business development officer at ESX, says raising the targeted 75 percent of capital from the private sector has been relatively straightforward.

“I think we’ll be oversubscribed,” Yodit told The Reporter.

Her team wants to see the remaining 10 percent of initial capital raised before the deadline on March 29, 2024.

No foreign businesses or entities have thus far invested in ESX equity, barring Financial Sector Deepening (FSD) Africa, which has been playing a leading role in the formation of the stock exchange. FSD’s support will be repaid with a stake in ESX.

“FSD Africa’s stake is yet to be converted,” she said.

Yodit disclosed there has been increased interest from foreign companies eyeing a piece of the Exchange. However, there are questions that will have to be addressed, according to her.

“They are typical questions that any foreign investor would ask: like foreign currency repatriation. We are working with EIH on that,” Yodit told The Reporter.

The Exchange has yet to disclose a full list of its equity holders. The names on the list so far are the two commercial banks, five government-owned entities, and FSD Africa.

“We have a non-disclosure agreement when we sign contracts with the companies, so we can’t identify them. But we’ve finalized subscriptions of about 90 percent,” said Yodit. “We will disclose who all of our shareholders are after the allotment.”

Shareholders have to pay at least half the subscribed equity up front.

Heads of the Exchange are eyeing October 2024 for the ESX debut. This leaves a little over seven months to finalize procedures such as license acquisition, gathering public consensus on ESX rules, and the establishment of the Central Securities Depository (CSD) by the central bank, as well as the launch of the trading platform.

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New Kenya Bond Exchange Sees Opportunity in Budding Debt Market

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  • Exchange to complete its capital raising in the first quarter
  • EABX will compete with existing Nairobi Securities Exchange

The new East African Bond Exchange, a would-be competitor for the Nairobi Securities Exchange, sees the prospect for exponential growth in Kenya’s bond market as it prepares to start operating in the first half of this year.

While Kenya has the third-biggest economy in sub-Saharan Africa, the value of corporate debt issued is barely 0.2% of its gross domestic product, compared with an average of 20% to 30% Of GDP in Asian nations, according to Terrence Adembesa, chief executive officer of EABX.

Meanwhile, he said the potential for trading the government’s domestic debt is three to four times the 5 trillion shillings ($31 billion) of outstanding liabilities, instead of just the 600 billion shillings traded in 2023.

“For an economy of our size, the debt market should be much deeper than it is and much more developed,” Adembesa said in an interview. “What you expect to see is enhanced liquidity, enhanced transparency and the provision of transparent pricing.”

Kenya sold $14.9 billion worth of bonds in 2023, compared with $14.6 billion a year earlier, according to Bloomberg calculations using official data. There were eight outstanding corporate bond issuers at the end of September, with a total outstanding amount of 28.4 billion shillings, according to data from the markets regulator.

EABX intends to enable issuers to better price their securities, while investors are expected “to have much more visibility around pricing,” Adembesa said. “You also expect to see a cost saving in terms of trading fees and issuing costs.”

Capital Raise

The exchange, which received its operating license earlier this month, also plans to complete its capital raising in the first quarter of this year. The company received bids totaling about 2.6 billion shillings, above its target of 2 billion shillings, Adembesa said.

About 52% of exchange is owned by the Kenya Bankers Association an UK-backed development agency FSD Africa, he said.

“From a system perspective, we are now doing the testing,” Adembesa said. “We are able to see some trades occurring.”

EABX traces its roots back to 2009, when the Bond Market Association, a lobby group for fund managers, stockbrokers, investment bankers and lenders, decided to establish a self-regulatory organization for the fixed-income market.

EABX will ultimately enable trading of fixed-income securities in almost all of the East African Community member nations. Apart from Kenya, these comprise Tanzania, Uganda, Rwanda, Burundi, Democratic Republic of Congo, South Sudan and Somalia.

— With assistance from Bella Genga

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