Pillar: Early-Stage Finance

The African Leaders Nairobi Declaration on Climate Change and Call to Action

Posted on by TIMOTHYRADIER

PREAMBLE

We, the African Heads of State and Government, gathered for the inaugural Africa Climate Summit (ACS) in Nairobi, Kenya, from 4th to 6th September 2023; in the presence of other Global Leaders, Intergovernmental Organizations, Regional Economic Communities, United Nations Agencies, Private Sector, Civil Society Organizations, Indigenous Peoples, Local Communities, Farmer Organizations, Children, Youth, Women and Academia:and Government in the presence of global leaders and high-level representatives on 6 September 2023 in Nairobi Kenya

  1. Recall the Assembly Decisions (AU/Dec.723(XXXII), AU/Dec.764 (XXXIII) and AU/Dec.855(XXXVI)) requesting the African Union Commission to organize an African Climate Summit and endorsing the offer by the Republic of Kenya to host the Summit;
  2. Commend E Dr. William Samoei Ruto, President of the Republic of Kenya, and Chair of the Committee of African Heads of State and Government on Climate Change (CAHOSCC) for providing the political leadership of an African vision that simultaneously pursues climate change and development agenda;
  3. Commend also E Moussa Faki Mahamat, the Chairperson of the African Union Commission (AUC), for his dedication and commitment towards the convening of the Summit;
  4. Further Commend the Arab Republic of Egypt for the successful COP27 and its historic outcomes, particularly regarding loss and damage, just transition and energy, and call for the full implementation of all COP27 decisions;
  5. Acknowledge that climate change is the single greatest challenge facing humanity and the single biggest threat to all life on Earth, demanding urgent and concerted action from all nations to lower emissions and reduce the concentration of greenhouse gases in the atmosphere;
  6. Take Note of the 6th Assessment Report (AR6) of the Intergovernmental Panel on Climate Change (IPCC), stating that the world is not on track to keeping within reach the 1.5°C limit agreed in Paris and that global emissions must be cut by 43% in this decade;
  7. Underscore the IPCC confirmation that Africa is warming faster than the rest of the world and if unabated, climate change will continue to have adverse impacts on African economies and societies, and hamper economic growth and wellbeing;
  8. Recognise that Africa is not historically responsible for global warming, but bears the brunt of its effects, impacting lives, livelihoods, and economies;
  9. Reaffirm the principles set out in the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, namely equity, common but differentiated responsibilities and respective capabilities;
  10. Express concern that many African countries face disproportionate burdens and risks arising from climate change-related unpredictable weather events and patterns, including prolonged droughts, devastating floods, out-of-season storms, and wildfires, which cause massive humanitarian crisis with detrimental impacts on economies, health, education, peace and security, among other risks;
  11. Recall that only seven years remain to achieve the Sustainable Development Goals of the 2030 Agenda, and note with concern that 600 million people in Africa still lack access to electricity while about 970 million lack access to clean cooking;
  12. Further note that extreme weather events and changes in water cycle patterns are making it more difficult to access safe drinking water, resulting in about 400 million people in Africa having no access to clean drinking water and 700 million without good sanitation;
  1. Further recognise that African cities and urban centres are growing rapidly, and by 2050 would be home to over 1.0 billion people. Cognisant of the fact that rapid urbanization, poverty, and inequality limit planning capacities and other urban dynamics which increase people’s exposure and vulnerability to hazards and have thus turned cities into disaster hotspots across the continent;
  2. Concerned that despite Africa having an estimated 40 percent of the world’s renewable energy resources, only $60 billion or two percent of US$3 trillion renewable energy investments in the last decade have come to Africa;
  3. Reiterate Africa’s readiness to create an enabling environment, enact policies and facilitate investments necessary to unlock resources to meet our own climate commitments, and contribute meaningfully to decarbonisation of the global economy;
  4. Recognise that Africa’s vast forests, especially the Congo Basin rainforest are the largest carbon sinks globally, and the important ecosystem services provided by Africa’s vast savannahs, Miombo woodlands, peatlands, mangroves, and coral reefs, it is time that Africa’s natural capital wealth is properly measured by recognizing its contribution to reducing global carbon emissions;
  5. Further recognise the critical importance of the oceans in climate action and commitments made on ocean sustainability in multiple fora such as the Second UN Oceans Conference in 2022, and the Moroni Declaration for Ocean and Climate Action in Africa in 2023;
  6. Emphasise that Africa possesses both the potential and the ambition to be a vital component of the global solution to climate As home to the world’s youngest and fastest-growing workforce, coupled with massive untapped renewable energy potential, abundant natural assets and an entrepreneurial spirit, our continent has the fundamentals to spearhead a climate compatible pathway as a thriving, cost-competitive industrial hub with the capacity to support other regions in achieving their net zero ambitions;

Now hereby identify the following to be critical agendas for urgent collective action at the continental and global level:

  1. We call upon the global community to act with urgency in reducing emissions, fulfilling its obligations, honouring past promises, and supporting the continent in addressing climate change, specifically to:
      • Accelerate all efforts to reduce emissions to align with goals of the Paris Agreement
      • Honour the commitment to provide $100 billion in annual climate finance, as promised in 2009 at the UNFCCC COP15 in Copenhagen, Denmark
      • Uphold commitments to a fair and accelerated process of phasing down unabated coal power and phase out of inefficient fossil fuel subsidies while providing targeted support to the poorest and most vulnerable in line with national circumstances and recognizing the need for support towards a just transition.
  2. We call for climate-positive investments that catalyse a growth trajectory anchored in the industries poised to transform our planet and enable African countries to achieve stable middle-income status by
  3. We urge global leaders to join us in seizing this unprecedented opportunity to accelerate global decarbonization, while pursuing equality and shared prosperity.
  4. We call for the operationalization of the Loss & Damage fund as agreed at COP27 and resolve for a measurable Global Goal on Adaptation (GGA) with indicators and targets to enable assessment of progress against negative impacts of climate change.

In recognition of the scale, urgency and importance of these collective actions, we commit to:

  1. Develop and implement policies, regulations and incentives aimed at attracting local, regional and global investment in green growth, inclusive of green and circular economies;
  2. Propel Africa’s economic growth and job creation in a manner that reflects our commitments to the Paris Agreement and also aids global decarbonization efforts, by leapfrogging the traditional progression of industrial development and fostering green production and supply chains on a global scale;
  3. Focus our economic development plans on climate-positive growth, including expansion of just energy transitions and renewable energy generation for industrial activity, climate smart and restorative agricultural practices, and essential protection and enhancement of nature and biodiversity;
  4. Promote clean cooking technologies and initiatives as a just energy transition and gender equality for African rural women, youth, and children;
  5. Strengthen actions to halt and reverse biodiversity loss, deforestation, and desertification, as well as restore degraded lands to achieve land degradation neutrality; and implement the Abidjan declaration on achieving gender equality for successful land restoration;
  6. Strengthen continental collaboration, which is essential to enabling and advancing green growth, including but not limited to regional and continental grid interconnectivity, and further accelerating the operationalization of the Africa Continental Free Trade Area (AfCFTA) Agreement;
  7. Advance green industrialization across the continent by prioritizing energy-intense industries to trigger a virtuous cycle of renewable energy deployment and economic activity, with a special emphasis on adding value to Africa’s natural endowments;
  8. Promote investments in reskilling to unlock the human capital that will power for Africa’s inclusive green transition;
  9. Redouble our efforts to boost agricultural yields through sustainable agricultural practices, to enhance food security while minimizing negative environmental impacts;
  10. Contribute to the development of global standards, metrics, and market mechanisms to accurately value and compensate for the protection of nature, biodiversity, socio-economic co-benefits, and the provision of climate services;
  11. Finalise and implement the African Union Biodiversity Strategy and Action Plan, with the view to realizing the 2050 vision of living in harmony with nature;
  12. Provide all the necessary reforms and support required to raise the share of renewable energy financing to at least 20 percent by 2030;
  13. Promote the production of green hydrogen and hydrogen derivatives such as green fertilizer and synthetic fuels;
  14. Integrate climate, biodiversity and ocean agendas into national development plans and processes to increase resilience of local communities and national economies;
  15. Promote regenerative blue economy and support implementation of the Moroni Declaration for Ocean and Climate Action in Africa, and the Great Blue Wall Initiative, whilst recognising the circumstances of Africa’s Island States;
  16. Support smallholder farmers, indigenous peoples, and local communities in the green economic transition, given their key role in ecosystems stewardship;
  17. Identify, prioritize,  and  mainstream  adaptation  into development policy-making and planning, including in the context of Nationally Determined Contributions (NDCs);
  18. Build effective partnerships between Africa and other regions, to meet the needs for financial, technical and technological support, and knowledge sharing for climate change adaptation;
  19. Promote investments in urban infrastructure including through upgrading informal settlements and slum areas to build climate resilient cities and urban centres;
  20. Strengthen early warning systems and climate information services, as well as taking early action to protect lives, livelihoods and assets and inform long-term decision-making related to climate change risks. We emphasise the importance of embracing indigenous knowledge and citizen science in both adaptation strategies and early warning systems;
  21. Support implementation of the Africa Water Investment Programme (AIP), which aims to close the Africa water investment gap by mobilising US$30 billion by 2030;
  22. Enhance drought resilience systems to shift from crisis management to proactive drought preparedness and adaptation, to significantly reduce drought vulnerability of people, economic activities, and ecosystems;
  23. Further enhance our inclusive approach including through engagement and coordination with the children, youth, women, persons living with disabilities, indigenous people, and communities in climate vulnerable situations;
  24. Accelerate implementation of the African Union Climate Change and Resilient Development Strategy and Action Plan (2022-2032)

CALL TO ACTION:

  1. We call upon world leaders to recognise that decarbonizing the global economy is an opportunity to contribute to equality and shared
  2. We invite Development Partners from the global north and south to align technical and financial support to Africa for sustainable utilization of Africa’s natural assets for low carbon development that contributes to global decarbonization.
  3. To accomplish this vision of economic transformation in harmony with our climate needs, we further call upon the international community to contribute to the following:
    • Increase Africa’s renewable generation capacity from 56 Giga Watts (GW) in 2022 to at least 300 GW by 2030, both to address energy poverty and to bolster the global supply of cost-effective clean energy for industry.
    • Shift exports of energy intensive primary processing of Africa’s raw material back to the continent, to serve as an anchor demand for our renewable energy and a means of rapidly reducing global
    • Access to, and transfer of environmentally sound technologies, including technologies to support Africa’s green industrialisation and transition.
    • Design global and regional trade mechanisms in a manner that enables products from Africa to compete on fair and equitable
    • Request that trade-related environmental tariffs and non-tariff barriers must be subject to multilateral discussions and agreements and not be unilateral, arbitrary or discriminatory measures.
    • Accelerate efforts to decarbonize the transport, industrial and electricity sectors through the use of smart, digital and highly efficient technologies such as green hydrogen, synthetic fuels and battery storage.
    • Design industry policies that incentivize global investment to locations that offer the most and substantial climate benefits, while ensuring benefits for local communities.
    • Implement a mix of measures that elevate Africa’s share of carbon markets.
  4. Reiterate the decision 1/COP27 that states that global transformation to a low-carbon economy is expected to require investment of at least USD 4 – 6 trillion per year and delivering such funding in turn requires a transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors.
  5. We call for collective global action to mobilise the necessary capital for both development and climate action, echoing the statement of the Paris Pact for People and the Planet, that no country should ever have to choose between development aspirations and climate action.
  6. Call for concrete, time-bound action on the proposals to reform the multilateral financial system currently under discussion specifically to:
    • Build resilience to climate shocks, including better deployment of the Special Drawing Rights (SDRs) liquidity mechanism and disaster suspension clauses.
    • Re-channeling of   at   least   $100billion   of SDRs to Africa, including through institutions such as the African Development Bank which will be able to leverage the SDRs by three to four times. We also call for the formation of a group of SDR donors to expedite this re- channeling ahead of COP28.
    • Propose for consideration a new SDR issue for climate crisis response of at least the same magnitude as the Covid19 issue (US$650 billion).
    • Better leverage of the balance sheets of MDBs to scale up concessional finance to at least $500b per year.
    • Improve debt management, including:
      • the inclusion of ‘debt pause clauses’, and
      • the proposed expert review of the Common Framework and the Debt Sustainability Analysis.
    • Provide interventions and instruments for new debt relief to pre-empt debt default to:
      • extend sovereign debt tenor, and
      • include a 10-year grace
    • Decisively act on the promotion of inclusive and effective international tax cooperation at the United Nations with the aim to reduce Africa’s loss of US$ 27 billion annual corporate tax revenue through profit shifting, by at least 50% by 2030 and 75% by 2050.
      1. Put additional measures to crowd in and de-risk private capital, such as blended finance instruments, purchase commitments, partial foreign exchange (FX) guarantee and industrial policy collaboration, which should be informed by the risks that drive lack of private capital deployment at
      2. Redesign MDB governance, to ensure a “fit for purpose” system with appropriate representation, voice, and agency of all countries.
  1. Note that multilateral finance reform is necessary but not sufficient to provide the scale of climate financing the world needs to achieve 43 percent emission reduction by 2030 required to meet the Paris Agreement goals, without which keeping global warming to 1.5 degrees celsius will be in serious jeopardy.
  2. Further note that the scale of financing required to unlock Africa’s climate-positive growth is beyond the borrowing capacity of national balance sheets, or at the risk premium that Africa is currently paying for private capital.
  3. Draw attention to the finding that inordinate borrowing costs, typically 5 to 8 times what wealthy countries pay (the “great financial divide”), are a root cause of recurring debt crises in developing countries and an impediment to investment in development and climate action.
  4. We call for adoption of principles of responsible sovereign lending and accountability encompassing credit rating, risk analysis and debt sustainability assessment frameworks and urge the financial markets to commit to eliminate this disparity by 2025.
  5. Urge world leaders to consider the proposal for a global carbon taxation regime including a carbon tax on fossil fuel trade, maritime transport and aviation, that may also be augmented by a global financial transaction tax (FTT) to provide dedicated, affordable, and accessible finance for climate-positive investments at scale, and establish a balanced, fair and representative global governance structure for its management, with an assessment of the financial implications on socio- economic impacts on Africa.
  6. Propose to establish a new financing architecture that is responsive to Africa’s needs including debt restructuring and relief, and the development of a new Global Climate Finance Charter through UNGA and COP processes by 2025.
  7. We call for revaluation of the Gross Domestic Product of Africa through the proper valuation of its abundant natural capital and ecosystem services including but not limited to its vast forests that sequester carbon to unlock new sources of wealth for Africa. This will entail the use of natural resource accounting and development of national accounting standards.
  8. Note that the first Global Stocktake which will conclude at COP28 offers a pivotal opportunity to correct course by including a comprehensive outcome, both backward and forward looking.
  9. Resolve to establish the Africa Climate Summit as a biennial event convened by African Union and hosted by AU Member States, to set the continent’s new vision, taking into consideration emerging global climate and development issues.
  10. Resolve also that this Declaration will serve as a strong contribution from the African continent to the global climate change process including COP 28 and beyond.
  11. Welcome the pledges and commitments made at the Summit to a tune of USD 26 billion from Development Partners including the European Union, the United Arab Emirates (UAE) as COP28 President- Designate, the Government of the United States, MDBs, Philanthropic Foundations, and Private Sector, to support Africa especially in the areas of renewable energy and adaptation.
  12. Appreciate the efforts of the United Arab Emirates as the COP28 President-Designate in the preparation of COP28 and affirm Africa’s full support for a successful and ambitious outcome of COP28.
  13. Request African Union Commission to develop an implementation framework for this Declaration and to make Climate Change an AU theme for the Year 2025 or 2026.
  14. Thank the Government and People of the Kenya for successfully hosting the inaugural Africa Climate Summit, and the warm hospitality accorded to all delegations to the Summit.

In witness of which we the African Heads of State and Government assembled in the (venue) of the Kenyatta International Convention Centre in Nairobi now make this declaration in the presence of global leaders and high-level representatives on this 6th day September 2023, in Nairobi, Kenya

Using Direct Air Carbon Capture Technology to Address Emissions

Posted on by TIMOTHYRADIER

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.

Saudi companies building confidence in African carbon markets – Nairobi’s voluntary carbon market auction

Posted on by Kihingu Inc

A rather extraordinary thing happened in Nairobi on Wednesday (14 June) which was that there was a voluntary market auction of carbon credits, the vast majority from Africa, in which the buyers were some 15 Saudi companies, including Aramco, and the national airline Saudia – all looking for offsets as part of their decarbonisation strategies. 2.2m credits were sold at an average price of $6.27 per tonne and, while the full details of this closed auction were not made public, the credits being sold came mostly from quite a large group of African countries (including Kenya, Egypt and Rwanda), with some from the Middle East and elsewhere.

The auction was the brainchild of Saudi company, the Regional Voluntary Carbon Market Company (RVCMC) and its CEO, Riham ElGizy. Having conducted a first, successful auction in Riyadh in 2022, ElGizy was determined to conduct the second in Africa.  Inspired by President William Ruto’s speech at the Africa Carbon Markets Initiative (ACMI) launch at COP27, ElGizy chose Nairobi and persuaded 15 Saudi companies to travel with her to take part in the auction, offsetting the emissions from the journey through the purchase of more credits. The auction was taking place against the backdrop of the Saudi Green Initiative which has set ambitious targets such as increasing energy generation from renewables to 50% of the total by 2030.

RVCMC is majority-owned by the Saudi sovereign wealth fund, the Public Investment Fund (PIF), with a minority of the shares held by the Saudi Stock Exchange.  It exists to facilitate voluntary carbon market trading, including – eventually – by investing in carbon-based businesses and setting up a dedicated exchange.

The auction event was, on one level, entirely practical – a professionally run event in which supply (of high quality, well diligenced credits) met demand.  The buyers knew they were going to get something (there was a guaranteed minimum) and they were also given the opportunity to bid for more credits on top.  There was a straightforwardly commercial aspect to it.

On another level, the event was highly symbolic. Here were high emitting companies from the world’s most prominent petrostate buying offsets from Africa, the continent that contributes the least to global emissions and yet experiences the damaging effects of climate change more than any other. Saudi Arabia’s annual C02 emissions are 19 tonnes per capita while Kenya emits a mere 0.4 tonnes per capita.

RVCMC, it would appear, had brought the Saudi buyers to Kenya to emphasise two things in particular: first, that Africa had an abundant supply of something that was valuable to them (carbon credits) and was therefore a place where business like this could and should be done.

Secondly, that there is a human, or societal, imperative to decarbonisation that underpins why well-functioning carbon markets matter.  We should be concerned, and even offended, not only that African countries bear enormous economic costs as a result of climate change but that it is the poorest or most vulnerable in these countries that suffer the most. And it is an unfortunate fact that Africa is able to illustrate these points more starkly than anywhere else.

For those who were present at this auction, this unusual display of both commercial competence – through the delivery of a marketplace where globally significant companies could safely transact – and organisational purpose, centred on people and planet, was striking and inspiring.

There were a number of other takeaways.  First, the close alignment of this event with the broad objectives of the upcoming Africa Climate Summit to be hosted by Kenya and the African Union on 4-6 September.  These objectives include presenting Africa not as the perpetual planetary victim but as part of the climate change solution – with some of the world’s most significant carbon sinks in its forests and savannahs, and abundant renewable energy capable of driving the green industrialisation strategies that will produce tomorrow’s carbon unicorns. This could have been a Government of Kenya promotional event – only, remarkably, it wasn’t.  This was entirely a RVCMC initiative. So perhaps this auction was more proof that attitudes towards Africa are shifting, both inside and outside Africa, and starting to coalesce around a vision for Africa that celebrates the opportunities the continent offers and doesn’t obsess about its needs.

On pricing, the achieved price of $6.27 per tonne, is consistent with what is available on the market.  It is a reasonable reflection of the challenges that voluntary carbon markets are going through, as a result of regulatory uncertainty, macroeconomic conditions that are unhelpful to carbon markets and shocks that have come out some projects that keep raising concerns about market integrity.

While we are told that the prices achieved were very much in line with the organisers’ expectations, there obviously needs to be a massive increase in both prices and volumes for voluntary carbon markets to contribute meaningfully towards the shortfall in climate finance in Africa which is about $250bn per annum (as calculated by Climate Policy Initiative in last year’s Africa Landscape of Climate Finance).

The price achieved by this auction is an expression of just how nascent this market is and how we still need to go through a lot of hard market building graft (putting place market-leading regulation, building a much bigger pipeline of investible carbon projects etc.) before prices start to rise – as most observers believe they inevitably must.  In that sense the auction was a useful reality check. It is possible to get higher prices through highly bespoke transactions or for specialised sectors such as Direct Air Capture but, generally, prices still have a way to climb.

FSD Africa, with its strategic focus on driving more innovation in African financial markets, is committed to carbon market development not just because carbon markets are good for the planet and good for communities (often rural) who stand to benefit when carbon finance flows – but because they will also make financial markets more innovative through the de-risking and cash flow that carbon finance brings.

In other words, carbon finance is highly leverageable – but, for it to play that role, other investors need to believe that it is real – as real as cash. Blockchain and other technologies may eventually be able to make carbon markets work more efficiently but the core challenge today is to make them believable.

That is why market integrity, underpinned by permissive regulation that is also clear and robust, is so essential and why FSD Africa is lending its support to the Africa Carbon Markets Initiative (ACMI) and others working hard to build the soft infrastructure, and capacity, that these new markets clearly need.

It is also why successfully completed transactions, such as we saw from RVCMC earlier this week, are also so important, a signal of growing confidence and of even bigger and better things to come.

Building trust in digital payments in Africa

Posted on by TIMOTHYRADIER

While cash and mobile money remain the dominant payment methods in Africa, they come with significant challenges. Cash is inefficient, insecure, and expensive, while mobile money services often lack the necessary regulatory support to operate independently. However, key emerging trends in the sector are helping to drive meaningful financial inclusion across the continent, notes Mark Dankworth, President of Business Development Africa at leading Banking as a Service and embedded finance enablement partner, Ukheshe.

One of the most significant trends in the African payments sector is the increasing collaboration between banks and fintech companies. Banks, as regulated entities, play a critical role in processing funds, which then flow into digital wallets where fintechs are best positioned to provide digital services. There is scope to offer even more functionality and convenience that answer specific market challenges and pain points, including bill payments, airtime top-ups, or public transport payments, among others. By providing incentives for users to keep their funds in these wallets and use them for digital payments, the adoption of digital payments can increase rapidly and reduce the reliance on cash on the continent.

Closer collaboration between banks and fintech companies is a positive development and has the biggest potential to drive financial inclusion in Africa. In many African countries, regulators are paying closer attention to new players in the sector. While fintech companies often lack the necessary licenses to operate independently, banks can provide the necessary regulatory support with the end goal of offering a broader range of services to their customers. By working together, banks and fintechs can help to promote financial inclusion and make digital payments more accessible, and, crucially, more trusted.

Another trend that is driving the growth of digital payments in Africa is the explosion of cross-border remittances alongside the urgent need for these to improve. South Africa to Zimbabwe is one of the largest corridors of cross-border remittances globally, and a staggering 84% of these transactions are still cash-based. According to the World Bank, remittances to low- and middle-income countries grew to USD$626 billion in 2022. These remittances are also an essential source of foreign currency for many African countries, helping to support economic growth and development.

To facilitate cross-border remittances, many companies are developing pool accounts that allow for instant remittances of funds. Associations are also putting in place regulatory frameworks that promote innovation and protect consumers, and these developments will help sustain the growth of the industry and make it more accessible to all Africans.

QR payments are also gaining traction in African markets, offering merchants an affordable and convenient way to accept digital payments without expensive hardware. This payment method has been hugely successful in markets like China, where QR is widely used for everything from buying groceries to paying for public transport. In Africa, QR payments have been slower to take off, but their potential is significant. Visa and Mastercard are investing heavily in SME support to drive acceptance and create more opportunities for digital payments. Obviously, QR offers several advantages over traditional point-of-sale systems. For merchants, QR payments are affordable and easy to use, requiring only a smartphone and an internet connection. For customers, QR payments are convenient and secure, allowing them to make payments without the need for cash. Once again, acceptance is largely a function of the underlying trust and overall convenience of the payment method.

Ultimately, the prevailing dominance of cash in Africa will only be truly upended when payment models are instantly efficient and offer instantaneous value. In the unique African context, customers must have full control over their money with seamless, interoperable, and user-friendly solutions – this is where Ukheshe, and its strategic partnerships, can make the biggest impact.

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FSD Africa Marks 10 Years Of Greening Financial Markets

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“In a short space of time, we have strengthened and developed financial markets and tapped into capital by using new instruments such as green and gender bonds,” says Mr Mark Napier, CEO of FSD Africa.

FSD Africa, a UK Aid funded specialist development agency, on 27th March celebrated a decade of strengthening financial markets across Africa, growing economies, increasing incomes for vulnerable populations and combatting poverty.

FSD Africa has made significant strides over the past decade by advancing policy and regulatory reforms, enhancing financial infrastructure and increasing capacity, all while tackling systemic issues in Africa’s financial markets. These efforts have led to large-scale and long-term change, providing access to financial services to over 10.2 million people and addressing issues related to financial exclusion.

During the Covid-19 pandemíc, FSD Africa observed a remarkable 87% increase in the demand for and use of remittance services, which played a crucial role in protecting families from Covid-19’s financial impacts.

FSD Africa’s market-building initiatives have resulted directly or indirectly in £1.9 billion of long-term capital made available for SMEs, affordable housing and sustainable energy projects, among others. Its support for financial sector innovation has increased access to financial services for close to 12 million Africans, while its support for business growth has improved access to finance for more than 3 million African businesses and led directly or indirectly to the creation of over 35,000 new jobs.

“Celebrating over ten years of our trailblazing work across Africa is special,” said Mr Mark Napier, CEO of FSD Africa. “In a short space of time, we have strengthened and developed financial markets and tapped into capital by using new instruments such as green and gender bonds.”

FSD Africa’s strategy has evolved to address the continent’s expanding needs, with a greater emphasis on identifying innovative methods to mobilise resources for sustainable economic development. The organisation has recently boosted investment into projects that enable an equitable transition to a green future for Africa after several successful initiatives, including developing regulations and assisting green bond issuance programmes in Kenya and Nigeria.

The organisation’s green portfolio and pipeline have expanded because of continuous investments in programmes that provide environmental and social consequences, with close to £50 million being invested in green initiatives.

Ms Jane Marriott, OBE, British High Commissioner to Kenya said the UK is continually working with Kenya to promote green finance and economic growth as part of its strategic partnership with Kenya. FSD Africa is delivering on these priorities in Kenya and across the continent, creating over 35,000 jobs and leveraging more than Ksh300 billion into sectors like renewable energy.

Kenya’s National Treasury Cabinet Secretary Prof Njuguna Ndung’u, said Kenya’s partnership with FSD Africa has created a favourable environment for the growth of local capital markets, resulting in increased interest from both domestic and foreign investors.

“FSD Africa also played a crucial role in establishing the Nairobi International Financial Centre (NIFC), positioning Kenya to receive more financial flows,” Prof Ndung’u said. “We look forward to collaborating more closely with FSD Africa on green finance initiatives to promote sustainable development while addressing climate change challenges.”

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FSD Africa marks 10 years of strengthening, greening financial markets across Africa

Posted on by TIMOTHYRADIER

FSD Africa, a UK aid funded specialist development agency, today celebrated a decade of strengthening financial markets across Africa, growing economies, increasing incomes for vulnerable populations, and combatting poverty.

FSD Africa has made significant strides over the past decade by advancing policy and regulatory reforms, enhancing financial infrastructure and increasing capacity, all while tackling systemic issues in Africa’s financial markets. These efforts have led to large-scale and long-term change, providing access to financial services to over 10.2 million people and addressing issues related to financial exclusion. During the Covid-19 pandemic, FSD Africa observed a remarkable 87% increase in the demand for and use of remittance services, which played a crucial role in protecting families from the pandemic’s financial impacts.

FSD Africa’s market-building initiatives have resulted directly or indirectly in £1.9 billion of long-term capital made available for SMEs, affordable housing and sustainable energy projects, among others. Its support for financial sector innovation has increased access to financial services for close to 12 million Africans, while its support for business growth has improved access to finance for more than 3 million African businesses and led directly or indirectly to the creation of over 35,000 new jobs.

Speaking during the event, Mark Napier, CEO at FSD Africa said: “Celebrating over ten years of our trailblazing work across Africa is special: in a short space of time, we have strengthened and developed financial markets, and tapped into capital by using new instruments such as green and gender bonds. The future is key, and I look forward to continuing our hard work with our collaborative and innovative team. I have no doubt that we will continue to support and address Africa’s expanding needs as we move towards sustainable economic development.’’

Future-focused, FSD Africa’s strategy has evolved to address Africa’s expanding needs, with a greater emphasis on identifying innovative methods to mobilise resources for sustainable economic development. The organisation has recently boosted their investment into projects that enable an equitable transition to a green future for Africa after several successful initiatives, including developing regulations and assisting green bond issuance programmes in Kenya and Nigeria. The organisation’s green portfolio and pipeline have expanded because of continuous investments in programmes that provide environmental and social consequences, with close to £50 million being invested in green initiatives.

Jane Marriott, OBE, British High Commissioner to Kenya said: ‘”The UK is continually working with Kenya to promote green finance and economic growth as part of the UK-Kenya Strategic Partnership. FSD Africa is delivering on these priorities in Kenya and across the continent, creating over 35,000 jobs and leveraging more than KES 300 billion into sectors like renewable energy. I look forward to FSD Africa’s continued work in the years ahead.”

Prof. Njuguna Ndung’u, Cabinet Secretary, Kenya National Treasury said: ‘’Kenya’s partnership with FSD Africa has created a favourable environment for the growth of our local capital markets, resulting in increased interest from both domestic and foreign investors. FSD Africa also played a crucial role in establishing the Nairobi International Financial Centre (NIFC), positioning Kenya to receive more financial flows. We look forward to collaborating more closely with FSD Africa on green finance initiatives to promote sustainable development while addressing climate change challenges.’’

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FSD Africa Marks 10 Years Of Greening Financial Markets Across Africa

Posted on by TIMOTHYRADIER

Key points

  • These efforts have led to large-scale and long-term change, providing access to financial services to over 10.2 million people and addressing issues related to financial exclusion.

FSD Africa, a UK aid-funded specialist development agency, today celebrated a decade of strengthening financial markets across Africa, growing economies, increasing incomes for vulnerable populations, and combatting poverty.

FSD Africa has made significant strides over the past decade by advancing policy and regulatory reforms, enhancing financial infrastructure, and increasing capacity, all while tackling systemic issues in Africa’s financial markets.

These efforts have led to large-scale and long-term change, providing access to financial services to over 10.2 million people and addressing issues related to financial exclusion. During the Covid-19 pandemic, FSD Africa observed a remarkable 87% increase in the demand for and use of remittance services, which played a crucial role in protecting families from the pandemic’s financial impacts.

FSD Africa’s market-building initiatives have resulted directly or indirectly in £1.9 billion of long-term capital made available for SMEs, affordable housing, and sustainable energy projects, among others. Its support for financial sector innovation has increased access to financial services for close to 12 million Africans, while its support for business growth has improved access to finance for more than 3 million African businesses and led directly or indirectly to the creation of over 35,000 new jobs.

Speaking during the event, Mark Napier, CEO at FSD Africa said: “Celebrating over ten years of our trailblazing work across Africa is special: in a short space of time, we have strengthened and developed financial markets and tapped into capital by using new instruments such as green and gender bonds. The future is key, and I look forward to continuing our hard work with our collaborative and innovative team. I have no doubt that we will continue to support and address Africa’s expanding needs as we move towards sustainable economic development.’’

Future-focused, FSD Africa’s strategy has evolved to address Africa’s expanding needs, with a greater emphasis on identifying innovative methods to mobilize resources for sustainable economic development. The organization has recently boosted its investment into projects that enable an equitable transition to a green future for Africa after several successful initiatives, including developing regulations and assisting green bond issuance programs in Kenya and Nigeria. The organization’s green portfolio and pipeline have expanded because of continuous investments in programs that provide environmental and social consequences, with close to £50 million being invested in green initiatives.

Jane Marriott, OBE, British High Commissioner to Kenya said: ‘”The UK is continually working with Kenya to promote green finance and economic growth as part of the UK-Kenya Strategic Partnership. FSD Africa is delivering on these priorities in Kenya and across the continent, creating over 35,000 jobs and leveraging more than KES 300 billion into sectors like renewable energy. I look forward to FSD Africa’s continued work in the years ahead.”

Prof. Njuguna Ndung’u, Cabinet Secretary, Kenya National Treasury said: ‘’Kenya’s partnership with FSD Africa has created a favorable environment for the growth of our local capital markets, resulting in increased interest from both domestic and foreign investors. FSD Africa also played a crucial role in establishing the Nairobi International Financial Centre (NIFC), positioning Kenya to receive more financial flows. We look forward to collaborating more closely with FSD Africa on green finance initiatives to promote sustainable development while addressing climate change challenges.’’

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Why financial inclusion remains crucial in Africa

Posted on by TIMOTHYRADIER

According to data from the World Bank, about 1.4 billion adults globally remain unbanked. Many of these are low-income people in rural areas, especially women and youth and those with little or no financial literacy support.

Financial exclusion exacerbates rural poverty and erodes the capacity of individuals and households to withstand shocks.

Indeed, regions in Africa have been impacted by major climate, political and health-related shocks which not only restrain efforts for wider financial inclusion but also threaten the economic and social development gains achieved in reducing poverty among rural communities.

However, there is a silver lining. Over the last decade, financial inclusion has continued to gain traction and supports many of the United Nations’ Sustainable Development Goals (SDGs).

It is a critical component in reducing poverty and improving the standard of living of millions of people left out of financial systems.

Account ownership in developing economies, for example, grew from 63 percent to 71 percent between 2017 and 2021, driven by services like mobile money.

According to data from the World Bank, about 1.4 billion adults globally remain unbanked. Many of these are low-income people in rural areas, especially women and youth and those with little or no financial literacy support.

Financial exclusion exacerbates rural poverty and erodes the capacity of individuals and households to withstand shocks.

Indeed, regions in Africa have been impacted by major climate, political and health-related shocks which not only restrain efforts for wider financial inclusion but also threaten the economic and social development gains achieved in reducing poverty among rural communities.

However, there is a silver lining. Over the last decade, financial inclusion has continued to gain traction and supports many of the United Nations’ Sustainable Development Goals (SDGs).

It is a critical component in reducing poverty and improving the standard of living of millions of people left out of financial systems.

Account ownership in developing economies, for example, grew from 63 percent to 71 percent between 2017 and 2021, driven by services like mobile money.

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