A Green Tech Financial Facility – which will promote private-sector-driven renewable technology projects – has received the support it needs to begin moving from concept to reality in Sub-Saharan Africa.
On August 17, the Sustainable Energy Fund for Africa (SEFA), a joint initiative of the Government of Denmark and the Energy, Environment and Climate Change Department (ONEC) of the African Development Bank (AfDB), approved its first grant of $825,000 to develop business plans for the new facility.
The grant will be coordinated and monitored by a task team from the Private Sector Department of the AfDB, working closely with the African Biofuel and Renewable Energy Company (ABREC) and the SEFA Secretariat.
During this first phase, the AfDB will execute market scoping and position studies, and then move on to creating a concept for the fund and selecting a fund manager.
African countries are embracing the "green growth" development paradigm to address their economic, environmental and social challenges. Until now, however, there has been no coherent investment framework to support their agenda.
Thus, there remains untapped potential to design an appropriate financing mechanism that systematically channels private capital into environmentally-sound technologies that improve resource efficiency and economic competitiveness while reducing carbon emissions.
The grant also will support the design of a Technical Assistance Facility to provide capacity and implementation support to the investee companies. This grant aligns with SEFA's equity investment window; ABREC's African Biofuel and Renewable Energy Fund could thus become a vehicle for SEFA (as a co-investor) to direct investments to SMEs (small- and medium-size enterprises) along the clean energy value chain.
SEFA was established in 2011 with a commitment from the Government of Denmark of $56 million, and began operations at the start of 2012, currently with two mandates:
Project Preparation Grants to facilitate small- and medium-scale renewable energy (RE) generation and energy efficiency (EE) projects requiring total capital investments of $30 million to $75 million.
Equity Investments seeking to address the lack of access to start-up and growth capital for SMEs, as well as their limited managerial and technical capability, and targeting RE and EE projects in the $10- to $30-million range.
SEFA is structured to be used as a flexible multi-donor/multi-purpose platform to support access to sustainable energy agenda in Africa, and one of Africa's potential instruments under the United Nattions’ Sustainable Energy for All initiative.
Established in 1964 and now headquartered in Tunis, Tunisia, the AfDB provides loans and grants from member governments worldwide to public and private organizations in regional member countries (RMC), with a mandate to reduce poverty and promote sustainable development. Among the non-regional member governments are Argentina, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, India, Italy, Japan, Kuwait, Latvia the Netherlands, Norway, Portugal, Saudi Arabia, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.
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Edited by Braden Becker