Pillar: Financial Markets

Mark Napier: Africa’s leaders seize the climate initiative

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As international headlines chart the terrible suffering caused by flooding, earthquakes and wildfires, a less headline-grabbing, but nonetheless hugely significant, good news story has emerged from Nairobi, Kenya. The African Climate Summit, which concluded on September 6, was a huge success story for Africa and for Kenyan President William Ruto.

Pledges directed to African climate change adaptation and litigation amounting to $26bn have emerged from the summit. That’s not enough to solve Africa’s climate challenges, but even if only a fraction of this sum materialises, it will have a real impact on the ground.

Even more consequential in the long term is the consensus that emerged from the conference around the need for economic growth that delivers both prosperity and environmental benefits. The fact that a consensus was achieved is significant, because it strengthens Africa’s position for the forthcoming COP28 conference in Dubai in November. Furthermore, the admission of the African Union to the G20 means the African voice is getting louder and clearer on the world stage.

Importantly, the summit’s adoption of the Nairobi Declaration, which commits African countries to develop and implement “policies, regulations and incentives aimed at attracting local, regional and global investment in green growth and inclusive economies”, is also a signal that Africa will look for other strategies to support climate action, alongside the $100bn a year promised by developed nations in 2009.

Indeed, the summit was most of all an assertion of African self-determination and specifically the need to mobilise Africa’s domestic private capital in the continent’s climate efforts. Relying on international finance creates a dependency that Africa does not want. Put simply, Africa has determined that its own resources must be channelled, supported by a financial market architecture which ensures that states can absorb climate finance effectively, distributing it where it is most needed.

But if it is to do this, the current situation – in which less than 0.5% of domestic institutional assets under management are invested in alternative assets – cannot continue. As was argued powerfully at the launch of the Pan-African Fund Managers’ Association at the beginning of the summit, we need to think about how we can put in place not only the policy and regulatory incentives but also the instruments and the financial architecture to drive much more of the$1.4tn of institutional capital in Africa towards climate and nature-positive projects.

Crucially, this will mean more use of de-risking strategies such as credit guarantees to persuade pension funds to de-emphasise the easy but less safe option of government securities and to invest in green assets. It will also require sources of donor and philanthropic capital to step up their support for project development, for example through the use of challenge funds or by investing in intermediaries that are closer to the market as a way of reaching the more innovative start-ups and entrepreneurs who will drive the new green economy.

[Current] global prudential regulations can make it economically impossible for large institutional investors to allocate capital to African projects.

Moreover, the summit underlined an important issue that has seen Africa’s financing needs neglected, namely the need for reform of the global prudential regulations, which can make it economically impossible for large institutional investors to allocate capital to African projects. There should be a global review of these constraints, perhaps led by the G20.

Even with such reforms, African governments, many of which are battling with high levels of debt, will need to be both agile and visionary if they are to compete at a time when the world’s biggest economies are offering big incentives to attract green investment. Though deeply political, carbon taxes could be one way to go, but would need to be sensitively introduced. Other green fiscal incentives, balancing out tax breaks for green investment by removing subsidies for dirty industries, are also essential for governments to be able to direct their economies towards a greener future.

The UN Framework Convention on Climate Change has just released its first global stocktake report, highlighting yet again that, despite a major global effort, progress since the Paris Agreement has been inadequate. The report recommends greater commitment to transformation across all sectors and recognises the need for more access to climate finance for developing countries in line with the key recommendations from the Nairobi Summit.

If we get this right, the prize is very significant and the message from the summit is that Africa will not wait. Instead, it is determined to grab the opportunities of a new green growth pathway now, as are an increasing number of investors, and that has to be good for us all.

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

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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

Kenya should stay the low carbon course for green economy growth

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As delegates gather in Nairobi for the Africa Climate Summit, it is a good time to reflect on the implications of a changing climate and ecology for Kenya’s economy.

Climate change poses an existential threat to all of us, and if neglected, its destruction will not exempt economic indices and value chains, particularly in Kenya.

But there’s another Kenyan story to tell – one of great opportunity – if we intervene to defend ourselves against the ravages.

Innovative climate finance strategies that deliver locally-led and domestically financed climate and economic resilience, as well as the mobilisation of green investment, can drive the country’s green transformation agenda and position Kenya to benefit from sustainable economic growth.

It is an unjust but nonetheless indisputable fact that, though Kenya contributes less than one percent of global greenhouse gas (GHG) emissions, she remains highly exposed to the impacts of climate change.

However, global efforts to reduce GHG emissions present accelerated productivity and inclusion opportunities if Kenya maintains a low-carbon development pathway.

Indeed, the country’s progress in meeting the Nationally Determined Contributions (NDC) commitments has the potential to accelerate sustainable economic growth.

The ongoing reconfiguration of global supply chains as well as the continued expansion of green opportunities like carbon markets, have the potential to deliver unparalleled development impact.

Climate-positive investments and policies will contribute to growth and catalyse green sectors – which in turn can reduce operating costs, increase private sector revenues, create green jobs, and generate social benefits.

It’s worth remembering that policy and legislative frameworks that enable access to these pool finances to support implementation already exist.

Crucial to consider also is the fact that, over the medium term, a low carbon economy would improve Kenya’s trade balance and support foreign exchange stability measures, as well as lessen the country’s destabilising exposure to fuel price shocks and supply chain disruptions.

Additionally, the operationalisation of policies and regulations that support positive and urgent climate action will help deliver the government’s commitment to prioritise the lives and livelihoods of Kenyans.

Through the National Treasury, and supported by development partners, a raft of measures including the Green Fiscal Incentives Policy Framework, which seeks to steer Kenya towards a low-carbon climate-resilient green economic development pathway through fiscal and economic mechanisms (incentives and disincentives), will enhance mobilisation of climate finance from various sources to finance the NDC and NCCAPs.

These measures will support the country’s environmental exposure, support national climate change goals, and promote clean energy investments, as well as catalyse development.

The Climate Policy Initiative estimates that it will cost Kenya Sh6.7 trillion (U$ 65 billion) between 2020-2030 to implement mitigation and adaptation actions and strategies.

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Africa’s climate fight gets Sh9bn boost from UK

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The United Kingdom (UK) has announced new funding to support more green projects in Africa.

UK Minister for Development and Africa Andrew Mitchell unveiled a Sh9 billion (£49 million) investment across Africa during his visit to Kenya to coincide with the inaugural Africa Climate Summit, which begins today.

President William Ruto in a group photo with delegates after the first session of Africa Climate Summit 2023 at KICC on September 4, 2023.
President William Ruto in a group photo with delegates after the first session of Africa Climate Summit 2023 at KICC on September 4, 2023.

The new funding will go to initiatives and projects that support environmental conservation and help people cope with the effects of climate change across the continent.

The funding will play a key role in creating jobs, expanding economies and improving the lives of women, farmers and communities that have been affected by the global climate crisis.

The new commitments by London follow the UK Foreign Secretary James Cleverley’s pledge of “honest and reliable investment in Africa” during his visit to Kenya in December 2022.

President William Ruto addresses participants during the Africa Climate Summit in Nairobi on September 4, 2023. Photo credit: Dennis Onsongo | Nation Media Group
President William Ruto addresses participants during the Africa Climate Summit in Nairobi on September 4, 2023.
Photo credit: Dennis Onsongo | Nation Media Group

The Foreign, Commonwealth & Development Office (FCDO) said Sh6.2 billion (£34 million) will go towards new projects in 15 African countries to help women, vulnerable communities and more than 400,000 farmers build resilience to the effects of climate change.

The money will also be spent on early warning systems such as text alerts, radio programmes and social network messages to help hard-to-reach communities take action before extreme climate events occur. These projects will also improve water supply for more than 1.5 million people.

Seven new climate finance projects will also be launched at the summit, with investments worth Sh2.7 billion (£15 million) from UK-backed Financial Sector Deepening Africa (FSD) Africa investments.

These projects will mobilise capital from private sources and create new opportunities for small businesses to secure finance, innovate products, including renewable energy and healthcare, and pioneer inclusive technology solutions.

From left: Deputy President Rigathi Gachagua, President William Ruto and former Ethiopian Prime Minister Hailemariam Desalegn Boshe in attendance during the opening ceremony of the Africa Climate Summit. Photo credit: Francis Nderitu | Nation Media Group
From left: Deputy President Rigathi Gachagua, President William Ruto and former Ethiopian Prime Minister Hailemariam Desalegn Boshe in attendance during the opening ceremony of the Africa Climate Summit. Photo credit: Francis Nderitu | Nation Media Group

“Our partnerships with African countries on green investment and climate resilience are growing economies and improving lives. But more needs to be done as those least responsible for climate change increasingly bear the brunt of its impacts. The UK is working closely with African partners to tackle climate change, build resilience and help those whose lives are most affected,” said Mr Mitchell.

During his visit to Nairobi, the minister also reaffirmed his government’s commitment to spend Sh2 trillion (£11.6 billion) on international climate finance over five years.

UK Minister for Development and Africa Andrew Mitchell unveiled a Sh9 billion (£49 million) investment across Africa during his visit to Kenya. Photo credit: Courtesy
UK Minister for Development and Africa Andrew Mitchell unveiled a Sh9 billion (£49 million) investment across Africa during his visit to Kenya. Photo credit: Courtesy

 

The commitment was originally made by the UK at COP26 in Glasgow and is part of a collective pledge by wealthy nations to provide Sh14 trillion ($100 billion) annually in climate finance to developing countries. The commitment was ratified in 2015, but has yet to be fully implemented.

Mr Mitchell also called for rapid reform of the international financial system to unlock trillions of dollars for climate action.

During his visit to Kenya, he will also visit Nairobi Railway City, a regeneration of the city centre designed by British architects with the latest green technology and £11.5 billion of UK investment.

President William Ruto with James Cleverly, the Secretary of State for Foreign, Commonwealth and Development Affairs of the United Kingdom, Deputy President Rigathi Gachagua, Cabinet Ministers Onesmus Kipchumba Murkomen (Transport and Infrastructures) Alfred Mutua (Foreign Affairs) Moses Kuria (Trade) Governor Johnson Sakaja (Nairobi) and other Government Officials during the Ground-breaking ceremony for the Railway City Project, Nairobi. Photo credit: PCS
President William Ruto with James Cleverly, the Secretary of State for Foreign, Commonwealth and Development Affairs of the United Kingdom, Deputy President Rigathi Gachagua, Cabinet Ministers Onesmus Kipchumba Murkomen (Transport and Infrastructures) Alfred Mutua (Foreign Affairs) Moses Kuria (Trade) Governor Johnson Sakaja (Nairobi) and other Government Officials during the Ground-breaking ceremony for the Railway City Project, Nairobi. Photo credit: PCS

This is one of the six climate investment projects that President Ruto and UK Prime Minister Rishi Sunak will be fast-tracking at COP27.

Groundbreaking for the development took place in December 2022 and when completed will include shops, office blocks and light industrial centres.

Another project underway is the Menengai geothermal project being developed by the Geothermal Development Company (GDC) and Globeleq, with a planned capacity of 35MW.

Other green investment projects included in the agreement are the expansion of the Malindi Solar Power Plant, the Grand High Falls Dam, the United Green agro-industrial processing system and a new guarantee company to de-risk investments in Kenya.

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

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

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

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

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

Championing alternative investments

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

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

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

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

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

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

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

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

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Nairobi, Kenya, September 04, 2023

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

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

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

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

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

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

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

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

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

Mark Napier, CEO, FSD Africa, said:

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

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

Posted on by TIMOTHYRADIER

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

Study on Managing Sovereign Debt in Times of Crisis: Study Summary: Findings & Lessons

Introduction

COVID-19, believed to have emerged in China in December 2019, spread quickly across the globe and was declared a pandemic by the World Health Organization in January 2020. It triggered one of the most devastating global health and economic crises in modern history, attecting all socio-economic facets and permeating through the financial markets. The IMF (2020) estimates that the impact on developing countries was historic and unusual in severity. Among the various consequences, the pandemic in particular induced major debt stresses, while debt management proved complex and challenging, especially for countries that entered the crisis already vulnerable. Sub-Saharan Atrican countries were more exposed, with limited room tor manoeuvre given their narrow fiscal space, as compared to their situation during the 2008/09 global financial crisis, Operational challenges became frequent as the crisis unfolded, making it difficult to manage risks as working remotely became the default practice.

Globally, many countries took remedial measures to limit the socio-economic impact ot the pandemic as well as cushion local financial markets, Those measures, which mainly centred on fiscal, monetary and financial polies, provide useful lessons tor countries on how to prepare in advance for potential future crises. Against this background, MEFMI, with the support of FSD Africa, commissioned a study that documents debt and related policies and practices that countries adopted to manage public debt and support debt markets during the COVID-19 crisis. The study findings and results are outlined in four chapters focused on the following important and interrelated themes: (i) Macroeconomic policy interventions; (ii) External financing operations; (iii) Local currency bond markets; and (iv) Governance and operational risk management frameworks for public debt. These chapters are available as separate documents and can be accessed here. The current paper, which also forms part of the study, provides an extensive summary of the outcome of the whole exercise. Findings from the study come from a combination of desk reviews and feedback from questionnaires

Study on Managing Sovereign Debt in Times of Crisis: Economic Impact of COVID-19, Policy Responses and Implications on Debt Dynamics

Introduction

The COVID-19 pandemic resulted in an unprecedented health and economic crisis across the world. Although sub-Saharan Africa has suffered a smaller death toll compared to the rest of the world, the pandemic has led to a sharp economic downturn in the region. As the pandemic spread, MEFMI member states joined the rest of the world in implementing measures to curb the spread of the virus. Such measures included national lockdowns, overnight curfews, border and port closures, social distancing, and greater rigour in hygiene, such as washing of hands and hand sanitisation.

While such measures have saved lives, they have at the same time severely attected economic activity and negatively impacted the livelihoods of millions of people, leading to declines in aggregate demand and output. The services sectors, which include tourism, transport, education, entertainment, sports and restaurants, were the most affected The economic effects of the pandemic were exacerbated by the presence ot a large intormal sector, which Is prevalent in most MEFMI member states. Besides domestic factors, the region was also affected by a deteriorating external environment, characterised by weak global demand and supply chain disruptions. T his affected tourism, exports receipts, foreign direct investment (FDI) inflows and international reserve positions, and led to a shortage of key imports. As a result, COVID-19 led to a decline in GDP growth rates. This in turn affected local revenue collections, in the face of the increased expenditure required in order to save lives and livelihoods.

As elsewhere in the world, MEFMI countries had no choice but to respond to the crisis. The effect of the pandemic on member countries varies from country to country in view of the diversity of the group. MEFMI countries span three income groups. Four countries are classified as low-income: Malawi, Mozambique, Rwanda and Uganda; seven as lower-middle income: Angola, Eswatini, Kenya, Lesotho, Tanzania, Zambia and Zimbabwe; and two as upper-middle income: Botswana and Namibia. The structures of the various economies in the group also differ. MEFMI includes mineral-rich and oil-exporting countries such as Zambia, Botswana and Angola, while other countries …