Country: South Africa

Forecasting Green Jobs in Africa

Read our first of its kind report that forecasts the new direct job creation potential of 12 green sub-sectors by 2030. The report predicts the creation of up to 3.3 million new green jobs across the continent, with the majority in renewable energy, particularly solar.

More about the report

By 2050, expert projections suggest jobs created within the green economy could well approach 100 million. The pioneering study provides detailed forecasts for five focus countries, Democratic Republic of Congo, Ethiopia, Kenya, Nigeria and South Africa, which together account for more than 20% of new jobs, and in key sectors such as e-mobility, agriculture, construction and manufacturing.

View the data set here

Financial sustainability and regulatory proportionality of African capital market regulators

In Africa, capital market regulators are tasked with a dual mandate – both developing and regulating the market. This raises the difficult question of how a regulator might play a dual role, including determining the right strategic focus, activities and capacity to do so effectively. This is particularly important in resource-constrained economies where the regulator operates with a limited team and budget. Its functions must be delivered with constrained financial resources and managed in a way that is proportional to the market context.  The White Paper on Financial Sustainability and Regulatory Proportionality of Capital Market Regulators in Africa proposes an analytical framework to assess the state and stage of a country’s financial market, which guides how the capital market regulator should implement its mandate, focus areas and engage policymakers on appropriate funding models.

In addition, limited resources call for careful identification of regulatory gaps that need to be bridged by capital market regulators to enable them to achieve both their regulatory and developmental mandates.  Gleaning from institutional capacity assessments that we have supported in eight regulators in Africa from 2015 to 2022, the Institutional Capacity Assessment Toolkit for Capital Markets Regulators in Africa is a reference guide to equip regulators in systematically identifying their capacity gaps and developing appropriate institutional strengthening programs to address them.

SADC green finance demand study

Africa is under pressure to develop its green finance market for two crucial reasons. The first is to significantly and sustainably respond to climate change, as the continent is vulnerable to the severe effects of climate change. Secondly, African private and public sectors lag behind other emerging markets in green (and sustainability) bond issuances. The SADC Green Bond Programme serves to address the aforementioned challenges in general, and in particular, the embryonic status of the green finance market in the SADC region.

Since its official launch in March 2021, the Programme has made commendable headway in implementing its core strategic objective of developing the green bond market in SADC – which is demonstrated by the publishing of this SADC Green Finance Demand Study. Considering that the development of the capital market ecosystem depends on timely empirical information, the importance of this study cannot be overstated. Not only does it bridge the existing knowledge gap regarding green investmt opportunities and barriers in the SADC region, but it is also underpinned by one of CoSSE’s mandates, which is to encourage the transfer of securities markets’ intellectual capital and technical expertise among member Exchanges of CoSSE.

Using information as a driver of change: lessons from finscope South Africa

FinScope, a research tool developed by FinMark Trust, is a nationally representative survey of how individuals source their income and manage their financial lives in South Africa. Created in 2002, FinScope arose in response to the dearth of data on financial inclusion in South Africa and has effectively served to fill this information gap ever since. FinMark Trust’s analysis led it to understand that lack of information causes sub-optimal decision-making, by policy makers, advocacy organisation and financial service providers.

The FinScope survey was piloted in 2002 with the objective to increase evidence-based policy and decision making in the financial sector. The survey measured the levels of access to and uptake of financial products (both formal and informal) across income ranges and other demographics. The objectives and the content of FinScope surveys, in South Africa and elsewhere, have widened over time to reflect financial market development and to incorporate analysis of the cultural and attitudinal factors influencing the financial behaviour and needs of the population.

FinScope surveys have an ambitious range of objectives, from tracking access and usage to highlighting product development opportunities and providing insights for policy reform and the regulatory framework. By providing a means to measure financial inclusion, FinScope has a pathway connecting to the ultimate goal and objectives of FinMark Trust. FinScope is widely perceived to have been transformative. It has become a robust methodological framework and a well-recognised brand across Africa and beyond.

FSD Africa invests in Holocene, a Climate Tech Start-up Venture Capital Provider

Posted on by Kihingu Inc

FSD Africa’s Early-Stage Finance Pillar is investing US$150,000 in Holocene Ventures Fund (HVF), a climate tech start-up venture capital provider that seeks to raise an initial US$2 million to invest in 12 high impact climate businesses. HVF I will provide the track record and pipeline to raise a $30M pre-seed to series A climate tech fund in 2025.  The investment by FSD Africa comes alongside investments from other angel investors across Europe, USA and Africa.

Mary Kashangaki, Assistant Manager, Digital Innovations, FSD Africa said:

We need to think differently about how we finance Africa’s green transition. FSD Africa’s investment in Holocene offers an exciting opportunity to work with experts to build a new kind of venture capital fund that is flexible enough to meet the unique financing needs of early-stage climate ventures.

Holocene, based out of South Africa, has created an investment platform for climate conscious individual and institutional investors seeking climate positivity and venture capital returns. Holocene Venture Fund (HVF) will provide innovative pre-seed financing, combining both cash and venture building services, to climate tech start-ups, recognizing the need for diverse financial solutions to scale climate businesses. 

Josh Romisher, CEO, Holocene commented:

“Africa is incredibly important in the global climate conversation. Holocene is very eager to partner with innovative investors such as FSD to prove African climate tech can deliver measurable climate impact and VC returns.”

To date, Holocene has made 6 investments from its permanent capital vehicle as well as another 4 investments from HVF I. It aims to make 5 investments per year infusing them with a catalytic blend of financial & human capital with a focus on commercial outcomes. With concerted effort by diverse players to accelerate green growth in Africa, specialist climate focused investment funds like Holocene are expected to enhance capital flows and innovation in new climate technology led solutions across Africa.

 

New research suggests Africa’s Green Economy could create more than 3 million direct jobs by 2030

Posted on by Kihingu Inc

Nairobi, 24th July 2024 – Shortlist and FSD Africa, with analysis from the Boston Consulting Group, today published “Forecasting Green Jobs in Africa,” a first of its kind report that forecasts the new direct job creation potential of 12 “green” sub-sectors by 2030. The report predicts the creation of up to 3.3 million new direct green jobs across the continent by 2030, with the majority in the renewable energy sector, particularly solar. The study, the first in-depth analysis of workforce needs within major green value chains over the next five years, provides detailed forecasts for five focus countries, Democratic Republic of Congo (DRC), Ethiopia, Kenya, Nigeria and South Africa, which together account for more than a fifth (22%) of new jobs, and in key sectors such as renewable energy, e-mobility, agriculture, construction and manufacturing.

“Forecasting Green Jobs in Africa” underscores the critical importance of a skilled workforce as an input accelerating African green industries, emphasizing the need for substantial investment in skills development and workforce mobilization. Moreover, the millions of jobs created in the green revolution will also contribute to the formalization of African economies, and the inclusion of whole populations in stable systems of remuneration, social security and taxation for the first time.

Based on the findings, the report also outlines key strategies required to cultivate Africa’s green jobs ecosystem: from targeted investments in high-potential sectors and value chains, the fostering of cross-sector collaboration among governments, private sector, educational institutions and investors, to the development of comprehensive support policies for green sectors. The report also calls for further analysis and granularity to labour demand key value chains to identify Africa’s current skilled labour supply and any potential gaps.

While some experts have suggested that up to 100 million green jobs may be created by 2050, this report takes a more near-term, sober, and realistic look at the job creation potential of just 12 specific sub-sectors or value chains and only until 2030. This more conservative analysis is intended to guide near-term investments and policy decisions among universities, workforce development actors, and government as we ensure the mobilization of the right skills and workforce to meet demand.

Significantly it predicts that 60% of the employment generated by the green economy over the coming six years will be skilled or white collar in nature. Within this, 10% constitute “advanced jobs” (highly skilled, requiring university degrees to fulfil), whilst a further 30% are projected to be “specialized” (requiring certification or vocational training) and 20% will be administrative in emphasis. Crucially, these job types tend to attract higher salaries and will, therefore, play a central role in spurring the growth of the middle class in countries hosting these high-growth sectors. Important also is the stability of the unskilled jobs created – which will offer ladders up the employment scale for candidates, whose employability will be enhanced by access to training and experience.

“There is a cross-sector effort across Africa to spur employment and sustainable development,” said Mark Napier, CEO of FSD Africa, “but stakeholders lack a shared, granular understanding of where the green jobs are going to come from. This report offers a methodology for forecasting green jobs which allows us to get practical about where we need to invest to make these jobs happen.”

“This is the first public report that takes seriously the notion that human capital and talent is important as both an input to green economic growth, and as a positive outcome – in the form of millions of new, direct jobs.” says Paul Breloff, CEO of Shortlist. “Now policymakers, and funders, and workforce developers need to step up to meet this near-term demand with effective training, apprenticeships, and job/skill matching, in hopes of achieving Africa’s green promise.”

Other key findings include:

  • South Africa, Kenya and Nigeria represent the highest job creation potential (16%) due to population, gross domestic product (GDP) and industry maturity
  • The renewable energy sector alone is expected to generate up to 2m jobs (70% of the total) of which 1.7m will be in solar
  • Solar is the most important contributor to green jobs in South Africa (140,000 jobs) and Kenya (111,000 jobs)
  • Hydroelectric is forecast to be the leading employer in both DRC (16,000 jobs) and Ethiopia (33,000)
  • Agriculture and nature are forecast to produce up to 700,000 jobs (25% of total), of which more than half (377,000) will come from climate smart agriculture technology

Jobs created by country

South Africa

  • South Africa: between 85,000 to 275,000 new green jobs are forecast by 2030 – mainly in energy and power production, and agriculture and nature
  • The solar sector leads job creation in South Africa with 140,000 jobs projected

Nigeria

  • Nigeria predicted to put on between 60,000 and 240,000 new green jobs by 2030
  • Aquaculture and poultry lead job creation, with 69,000 jobs projected

Kenya

  • Kenya predicted to put on between 40,000 to 240,000 green jobs by 2030
  • The solar sector leads this job creation, with estimates that it will generate 111,000 jobs in the country by the decade’s end

Ethiopia

  • Ethiopia will see between 30,000 and 130,000 new green jobs by 2030, mainly in energy and power production
  • Hydropower generation leads as a job-creating sector, with 33,000 jobs projected

Democratic Republic of Congo (DRC)

  • The DRC is predicted to put on between 15,000 to 45,000 new green jobs by 2030; mainly in energy and power production and distribution
  • Again, hydropower is expected to lead job creation as a sector with 16,000 jobs expected

Click here to download a copy of the report

FSDAi Nyala Facility invests US$ 1 million in Linea Capital to boost funding opportunities for small and growing businesses in South Africa.

Posted on by Kihingu Inc

FSDAi Nyala Facility BV, a facility set up by FSD Africa Investments to invest in emerging local capital providers, is injecting US$1 million into Linea Capital, a South Africa-based financier. Linea Capital specializes in revenue-based finance (RBF), an innovative model that supports the growth of Small and Growing Businesses (SGBs).

Most SGBs on the continent are faced with limited funding options, and this is no different in SouthAfrica. Traditional debt either requires significant collateral or is unaffordable, while equity investments dilute ownership, control and long-term economic value and often involve lengthy negotiations on valuation.

By contrast, Linea Capital’s revenue-based financing solution is a collateral-light and non-dilutive source of capital, with repayments structured around the company’s revenue cycle to reduce the burden of fixed monthly repayments. Although driven by the investee’s revenue growth, the typical term of Linea’s financing ranges between 2 and 3 years. Linea also offers a range of post-investment support services aimed to help businesses manage growth.

FSDAi Nyala Facility’s investment will be through junior funding tranches to enable Linea to raise lower cost senior debt, with the intention of crowding-in local and global institutions seeking lower risk and more liquid non-equity investments.

This is the Facility’s third investment; previous investments include Aruwa Capital Management, a Nigeria-based fund that targets growing companies that either serve the expanding female economy or are led by women or gender-diverse teams, and WIC Capital, a Senegal-based manager that not only provides much needed capital but also technical assistance and access to business networks for female-led businesses in the region.

Speaking during the announcement, FSD Africa Investments’ Chief Investment Officer, Anne-Marie Chidzero hailed the novel financing instrument. “We are excited to collaborate with Linea Capital to accelerate local financing for small and growing businesses. This investment demonstrates FSDAi Nyala Facility’s mandate of backing innovative financing solutions that position these businesses to thrive and drive economic growth,” noted Anne-Marie.

Linea Capital cofounders Julia Price and Colin Hundermark welcomed the investment which will translate to an attractive capital alternative for small and growing South African companies “We are delighted that FSDAi Nyala Facility is making this investment with us. It provides further support for revenue-based financing as an alternative for the owners and founders of SGBs in South Africa, and we are excited about how it will assist us in raising further capital to support the growth of a vital segment of our economy,” they explained.

FSD Africa Investments and Allied Climate Partners collaborate to attract catalytic equity to African funds focused on early-stage, climate-related opportunities

Posted on by Kihingu Inc

FSD Africa Investments and Allied Climate Partners have today entered into an Memorandum of Understanding and will partner to address a critical financing gap for climate infrastructure, mitigation and adaptation in Africa. This aligns with the core missions of both organizations: to increase the number of bankable opportunities for climate-related investment, increase private sector participation, improve livelihoods, and mitigate the effects of climate change across Africa.

FSD Africa Investments (FSDAi) invests to make finance work for Africa by allocating catalytic capital to market shaping instruments, intermediaries and infrastructure and has cumulatively invested US$ 105 million with a portfolio of 19 projects.

Allied Climate Partners (ACP) seeks to aggregate approximately US$ 825 million backed by US$ 235 million in philanthropic capital to support the establishment of third-party funds, platforms, and other investments in early and development stages of climate-related projects in Africa, Southeast Asia, India, and the Caribbean & Central America. Allied Climate Partners invests junior, first-loss equity in regionally focused third-party funds. ACP announced its inaugural investment into the Southeast Asia Clean Energy Fund II, managed by Clime Capital, in January, and is seeking to replicate similar investments in other regions.

Speaking during the MoU signing ceremony on the sidelines of the ongoing AVCA annual summit in Johannesburg, South Africa, FSDAi Chief Investment Officer Anne-Marie Chidzero hailed the collaboration as one that will support Africa to meet her ambitious climate finance goals.

“For the African continent to meet her NDCs, we must raise tenfold current annual climate finance levels to US$ 277 billion, and the share of private capital to at least US$ 100 billion. Working with ACP, we will be able to catalyse and crowd in more innovative and green finance for greater action”, said Chidzero.

ACP Chief Executive Officer Ahmed Saeed noted that this collaboration will drive innovation across the African continent, specifically mobilising more climate finance for Africa.

“There is a critical gap in climate finance, and specifically risk-oriented equity, available for emerging and developing economies to meet climate and energy transition goals. We are thrilled to partner with FSDAi, a pioneering organisation at the forefront of strengthening private sector participation and financial markets in Africa. Together, we hope to attract more risk-oriented capital for early-stage investments in Africa, by establishing new, catalytic, blended finance solutions that will leverage public and private capital to tackle the climate crisis”, explained Saeed.

Working in concert, FSD Africa Investments and Allied Climate Partners will identify, evaluate, and seek to invest in highly catalytic financing solutions in Africa that increase investment for early-stage project development and companies deploying climate-related infrastructure in Africa. The sectors to be targeted owing to their potential to accelerate a low-carbon transition and improve livelihoods include: clean energy generation and transmission; electric transportation; green industry; and, water and waste management. Selected investment managers will seek to invest in high-leverage and catalytic projects, platforms and companies with demonstrable and positive impact on climate in Africa, and which have the potential to mobilise third-party capital at scale.

UK-SA Tech Hub renews funding for South African startups group

Posted on by TIMOTHYRADIER

The UK-SA Tech Hub, an initiative of the British High Commission (Embassy) in South Africa, has announced that it will provide a second round of funding for South Africa’s Startup Act Movement (SUA). “Our role is to support South Africa’s high-growth startups – whether in the tech industry or by enabling SMEs [small and medium-sized enterprises] in rural and township communities to become tech-enabled businesses – to maximise the value and impact they have on the South African economy and job creation,” explains UK-SA Tech Hub director Milisa Mabinza.

The SUA is a grouping of South African startup incubators, accelerators, founders and investors, founded in 2020. Led by a steering committee composed of leading members of the South African entrepreneurship development sector, its objective is the relaxation of governmental red tape and other policies that hinder the growth of emerging businesses. It has succeeded in winning the support of the World Bank and Financial Sector Deepening Africa (better known simply as FSD Africa), as well as the UK-SA Tech Hub.

“The UK-SA Tech Hub is committed to supporting the development of SA’s tech entrepreneurship ecosystem and actively looks for gaps in the market where support is needed,” affirms SUA chairperson Matsi Modise. “The organisation identified a need in the local tech landscape to help us drive policy reform and enable the growth and expansion of emerging businesses. Taking into consideration the policy framework in the country, the structure of the economy, as well as issues with the energy crisis, the SUA recognises that policy reform is at the core of creating a thriving SME ecosystem – but that this is dependent on a framework being implemented that supports high-growth startups in South Africa.”

South Africa’s policy framework lags behind those of, for example, Kenya, Nigeria and Tunisia. There are four main areas which create challenges for local startups.

One of these is that currently, the country’s intellectual property (IP) legislation places restrictions on the overseas transfer of IP that are both onerous and expensive. Yet being able to transfer IP offshore is a necessity for local startups, if they are to access investment from the global venture capital market.

Another challenge is imposed, when a startup sets up its global head office, by exchange control restrictions which are cumbersome and, again, expensive. Setting up a global head office is another necessity if a South African startup is to attract global venture capital investors.

Further, in South Africa, capital gains tax is triggered well before a startup reaches its potential “future liquidity event”. This makes developing a startup in South Africa yet again more expensive than in other countries.

And there is a need for South Africa to create a Startup and Remote Worker visa, which would allow the country to attract founders of high-growth startups and permit local entrepreneurs to employ very small numbers of highly experienced foreigners, to share their expertise and knowledge and so drive the growth of South African enterprises.

The need for such visa reform has been advocated since 2014, and in April this year President Cyril Ramaphosa stated that new visa categories would be introduced, for startups and remote workers.

“Startup visas are firmly on the President’s radar, the Deputy Finance Minister has adopted some of the business case studies that have been shared, and the SUA has also garnered support from the World Bank,” highlights Mabinza. “We believe the country has the potential to cultivate the emergence of the next unicorn on the continent, and through this second round of funding, look forward to being part of these important efforts.”

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FSD Africa Investments backs Africa Climate Ventures

Posted on by TIMOTHYRADIER

The investment represents the first institutional backing for the venture builder, which aims to assemble a portfolio of businesses focused on climate action across Africa, boosting continental participation in global carbon markets.

22 May 2023, Nairobi – FSD Africa Investments (FSDAi) has invested £1 million in Africa Climate Ventures (ACV), a pioneering venture builder working to build a US$45 million portfolio. ACV will catalyse the carbon asset class in Africa by building innovative businesses focused on solving our generation’s greatest challenge and at the same time capturing a significant share of global carbon markets in Africa. The venture represents a series of “firsts” in Africa: from its entirely Africa-based founder team and its permanent capital structure based in Kigali, to its exclusive focus on carbon mitigation, capture and removal, the continent’s fastest evolving sector.

ACV represents a historic evolution in Africa’s carbon ecosystem and will contribute directly to capital mobilisation in climate action. Indeed, by 2030 ACV aims to eliminate one million tonnes of carbon every year while improving the lives of 50 million Africans and creating at least 5,000 jobs on the continent.

The venture builder features a peerless bench of experienced Africa-based founders with a record of pioneering innovation on the continent and championing disruptive enterprises. James Mwangi is a 2022 Climate Breakthrough Award Winner and the founder of the Climate Action Platform for Africa, a non-profit organization that aims to help Africa achieve broad-based economic growth through climate action leadership. James is best known as a co-founder of Dalberg Advisors, the firm’s first elected Global Managing Partner and then Dalberg Group’s Executive Director. Mohamed Cassim is a South African investor best known as an angel investor, the Chair of MFS Africa Board, and the Founder of Abacus Advisory. CJ Fonzi was also a Partner at Dalberg Advisors, with the firm for over a decade he served as the Group Director of Innovation and then founded Dalberg’s Rwanda business in 2017.

This team is working to build a portfolio of climate positive businesses across Africa, with the ultimate aim of launching and scaling 15 ventures in the next four years. ACV is seeking to build this portfolio by investing to: i) bring proven global climate technology to Africa, ii) accelerate and de-risk the continental expansion of technologies and business models that have gained traction in one or a few African market(s), and iii) add carbon revenue streams to existing African businesses with the potential to scale climate positive solutions.

ACV has adopted a structure more in-line with a global north venture studio in which the vehicle is structured as a permanent capital vehicle which sells equity rather than securing fund management mandates. This has allowed ACV to begin building ventures in parallel with fund raising, which the founders believe is paramount given the urgency of climate change, and the need for Africa to quickly establish itself as part of the solution.  There are already two ventures in the portfolio: KOKO Networks Rwanda, a co-venture between ACV and KOKO Networks which already provides sustainable bioethanol cooking fuel to over 900,000 Kenyan families and aims to reach a million Rwandan families by 2027, and Great Carbon Valley, a Kenya based developer of direct-use clean energy applications currently focused on developing a direct air capture and permanent carbon storage site in Kenya.

ACV’s pipeline of further opportunities demonstrates the breadth and versatility of the venture builder. They range from biochar and enhanced rock weathering technologies, to biodigester and e-mobility businesses, to harvesting carbon revenue for green growth across the portfolio of a well-established continental private equity fund. These are businesses and technologies which have the capacity to transform African economies and make a meaningful difference in climate change but they require risk capital and hands on venture builders to scale, attract further investment, and reach their potential.

FSDAi’s investment in ACV takes the form of a convertible loan of £1 million to support the venture builder’s formalisation and build additional ventures as demonstrations to attract investment from larger funds. On top of this investment, FSD Africa will provide £75,000 in grant funding to support the development of premium carbon credits and the marketing of portfolio and pipeline companies. Moving forward, FSDAi has secured the right to invest up to £8 million in ACV’s planned 2024 close.

FSDAi is the investment arm of specialist financial development agency FSD Africa which receives funding from the UK government and provides tools and resources to drive large-scale change in financial markets and support sustainable economic development. ACV is the latest in a series of investments by FSDAi in innovative green investment vehicles including Persistent Energy, a leader and pioneer investor in the off-grid energy and e-mobility sectors in Sub-Saharan Africa, and Nithio, which invests in renewable off-grid energy.

FSDAi has committed to support ACV on the basis that its activities will actively contribute to Africa’s transition to net-zero, the promotion and acceleration of the continent’s green sector, and the creation of quality, skilled jobs (around 600 will be created via this initial £1 million investment) in a strategically vital sector. Ultimately, FSD Africa believes that ACV can help the continent’s businesses participate in global carbon markets and capitalise on the continent’s unrivalled capacity for profitable climate-smart businesses. Moreover, FSDAi’s investment aligns with the emerging priorities of African policymakers who will gather in Kenya in September at the Africa Climate Summit to co-ordinate a unified, collective pan-African approach to the discussions at the next COP in Dubai.

Anne-Marie Chidzero, CIO of FSD Africa Investments, said: “In backing the ACV partners, FSDAi sees a tremendous opportunity to galvanise global investment and finance to promote Africa’s status as the pre-eminent climate investment destination.’’

James Mwangi, CEO of Africa Climate Ventures, said: “We are thrilled that FSDAi has joined us in building ACV.  The involvement of FSDAi has already been invaluable in refining the ACV model. As we work towards ambitious objectives, we believe FSDAi will be a key partner in ensuring our success.”

Rachel Turner, Director, International Finance, Foreign, Commonwealth & Development Office, said: “We are excited to be supporting this enterprising partnership between FSD Africa and ACV. The need to mobilise climate finance for Africa has never been greater, and this can’t happen without innovations that can build the pipeline of opportunities to absorb and deploy capital into productive, sustainable and inclusive uses. Tapping into the developing carbon market ecosystem represents a significant opportunity for Africa to raise capital at affordable terms whilst contributing directly to the climate challenge. This partnership with an impressive African team is pioneering in its approach.”