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World Bank fund for poor African countries gets record boost

Fifty-two countries and other donors have pledged 23.5 Billion US Dollars in new funds for the world’s poorest states, pushing replenishment of the International Development Association IDA fund to a record 82 Billion US Dollars, the World Bank said on Friday.

That fund, which includes more than 53 Billion for Africa, will help countries work to create jobs, invest in infrastructure, boost economic growth and bolster resilience to climate shocks and natural disasters, top bank officials said. First created in 1960, the fund is replenished every three years. This 19th replenishment covers 2020-2023. The new funding level exceeds the previous level by 7 Billion US Dollars.

‘’There has been an agreement on the largest-ever replenishment of IDA, The World Bank’s fund for the poor,’’ David Malpass, the bank’s president, said, noting that some countries that had previously received money from IDA had increased their donations. Six new countries had joined effort, and others could follow suit in coming weeks, he said. Malpass said this year’s IDA replenishment would support people in 74 countries, home to almost 500 million people, or two-thirds of the world’s poor.

He said the funds would help countries deal with the challenges posed by climate change, gender inequality, and conflict and violence, including in the Sahel, the Lake Chad region, and the Horn of Africa. IDA is one of the largest sources of funding for fighting extreme poverty in the world’s poorest countries. It provides zero-or low-interest loans and grants to countries for projects and programs that boost economic growth, build resilience and improve the lives of poor people around the world. Since 1960, IDA has provided more than 391 Billion for investments in 133 countries.

The World Bank said it would not release a list of individual donor countries and the amounts they pledged until after a board meeting early next year, but said additional countries could join the effort in the near term. In addition to country pledges, IDA is also supported by repayments of outstanding IDA loans, contributions from the World Bank, and financing rose from the capital markets.

Meanwhile, the World Bank has announced 1 Billion US Dollar pledge to Africa’s Great Lakes Region. The new proposed funding is said to help countries in the region to provide better health and education services, generate more cross-border trade, and fund hydroelectricity projects in support of the Great Lakes peace agreement that was signed by 11 countries in February.

World Bank President Jim Yong Kim, who is travelled with the UN Secretary-General, Ban Ki-moon, on a three-day trip to Congo, Rwanda and Uganda said that a secure and developed Great Lake was vital to Africa’s efforts to dramatically reduce extreme poverty and create prosperity for millions who have had little economic opportunity.

‘’We made extraordinary efforts to secure an additional 1 Billion US Dollars in funding because we believe this can be a major contributor to a lasting peace in the Great Lakes region. This funding will help revitalize economic development, create jobs and improve the lives of people who have suffered for far long. Now the leaders of the Great Lakes region, by restarting economic activity and improving livelihoods in boarder areas, can boost confidence, build economies and give new opportunities for millions of people’’

Kim said the new regional pledge, in zero-interest financing from the International Development Association IDA will support two major regional development priorities: recovery of livelihoods to reduce the vulnerability of people living in the Great Lakes whose communities have suffered greatly during conflict in the region and revitalizing and expanding cross-border economic activity to spur greater opportunity and integration in the areas of agriculture, energy, transport and regional trade.

The World Bank’s proposed additional funding includes roughly 100 Million US Dollars for supporting agriculture and rural livelihoods for internally displaced people and refugees in the region 340 Million US Dollars to support the 80 megawatt Rusumo Falls hydroelectric project for Burundi, Rwanda and Tanzania 150 Million US Dollars for the rehabilitation of the Ruzizi I and II hydroelectric projects and financing for Ruzizi III, supplying electricity for Rwanda, Burundi and DRC 165 Million towards building roads in DRC’s North and South Kivu and Province Orientale 180 Million for improving infrastructure and border management along the Rwanda-DRC border and additional millions of dollars for public health laboratories, fisheries and trade facilitation programs among others.

While other parts of sub-Saharan Africa are experiencing high growth rates, countries of the Great Lakes region have had extremely high levels of poverty and very low levels of key services such as access to electricity. Yields from agriculture also are typically quite low. A key part of the World Bank group’s development approach to the region is to increase power generation and interconnectivity to take advantage of low-cost and renewable sources of hydropower and geothermal energy. Developing the hydropower potential in DRC, in particular, will provide Burundi and Rwanda access to low-cost power and a stake in regional stability. Currently, there is no regional grid and very limited interconnectivity between countries in the region.

In announcing its new funding pledge, the World Bank Group said that promoting significantly more trade is in the common interest of all countries in the region and will greatly improve the effectiveness of national development policies. ‘’Together with much more electricity for the Great Lakes, there will be very large economic pay-offs if we can all help to make border crossings easier and faster for people and their goods to move from one country to another’’ said Makhtar Diop, the World Bank’s Vice President for Africa.

‘’Africa’s potential to provide food for its citizens, however, is not yet being realized because farmers in areas like the Great Lakes face more trade barriers in getting their food to markets across the region than farmers anywhere else in the world. Too often borders get in the way of getting plentiful food supplies to homes and communities that are struggling with too little to eat’’ Diop said.

In calling for a regional peace and development solution for the Great Lakes, the World Bank officials said the new financing pledge will help to rehabilitate roads to connect remote trading communities with regional markets. Bank support will focus on rehabilitation of primary cross-border trunk roads, to be complemented through the rehabilitation and opening of secondary roads required to bring goods to markets. The benefits of this approach are two-fold: first, increased trade will significantly increase economic activities, livelihoods and jobs second; connectivity will allow free movement of people and goods, and enable restoration of the state’s regulatory functions.

Within the DRC, the Bank Group’s current roads project (Pro-Routes- 248 Million US Dollars) is having an important impact by contributing to the reopening of 2,176KM of roads in Province Orientale, South Kivu and Katanga. The economic impact of the rehabilitated sections has been significant, reducing transportation costs by as much as 80 per cent in some cases and cutting travel time by more than half. Empirical evidence suggests that insecurity is decreasing in areas where roads have been rehabilitated.

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Debswana Jwaneng underground project to cost P65 billion

27th April 2021
Debswana

Jwaneng Mine— by far the world’s richest diamond mine is not about stop any time soon — plans are underway to ensure more gem stones are birthed from the Prince of mines.

Owners and operators of the mine, Debswana, a 50-50 De Beers- Botswana Government joint venture intends to spend over P65 billion to breathe life into the mine beyond the current Cut 9 project. Cut 9, which is currently transitioning from outsourced contractor to in-house operation, will take Jwaneng to 2036.

Debswana, by far one of world’s leading rough diamond producer revealed in a media briefing on Friday morning that an ambitious project to transition Jwaneng from open pit mining to underground is on the cards.

The company top brass noted that studies are underway to guide this massive project. These entail desktop studies of available geoscience information, hydrogeological surveys to appreciate the underground stratigraphy, water table levels, geotechnical composition and of course kimberlites geology.

Lynette Armstrong, Debswana Acting Managing Director said the company will invest all the necessary resources required for prefeasibility studies to determine the best model for undertaking the multibillion Pula Project. “This is a complex project that will require high capital investment over a period of years, advanced skills and cutting edge technological advancements,” she said.

Armstrong stated that underground mining projects have been undertaken and successful delivered before. “It will not be a completely new thing, we will  benchmark from other operations and learn how they have done it, we have a database of former BCL employees who worked for that underground mine , we will source skills locally,  where there are no required skills in country we will source from outside,” Armstrong indicated.

The Acting MD further explained that the company is getting ready for the highly anticipated mega project in different key aspects required for the successful implementation. “We have seconded some of our employees and top talents to benchmark in our sister operations within De Beers Group, to prepare and ready our workforce mind-sets and also acquire the necessary skills,” she said.
In terms of funding, Lynnette Armstrong revealed that Debswana would look into available options to fully resource the project.

“We have been discussing and exploring other available avenues that we could use to fund our life expansion projects, debt financing is one of them, it will obviously have to go through all our governance structures, internally and all the way to the board for approval,” she said.

Debswana Head of Projects revealed that an estimated cost of P65 billion would be required for the entire project from feasibility studies, engineering and scope development, construction, to drilling, sinking of shafts and all the way to transitioning, extracting the ore and feeding the processing plants. Meanwhile the process of transitioning Jwaneng Cut 9 project from Majwe Mining contract to an in-house hybrid model is underway.

The General Manager of Jwaneng Mine, Koolatotse Koolatotse, revealed that Debswana would not necessarily absorb all employees of the former CUT 9 contractor Majwe Mining. Speaking at the same virtual media briefing, Koolatotse said: “Debswana did not commit to absorbing Majwe Mining employees”

Majwe was in 2019 awarded the multi billon Pula contract to deliver the Jwaneng Cut 9 project, a significant investment by Debswana that intends to extend the life of Jwaneng Mine. The contract was however terminated due to “internal reasons.”

“Our contract with Majwe allowed for such termination , where one party on reasons best known to them could walk away from the contract without necessarily stating to the other party why it’s necessary to terminate.” Koolatotse further explained that Debswana has no obligation to re-hire Majwe Mining employees.

“In recruiting new skills for our new hybrid model we are publicly floating requests for expression of interest , that is to say anyone who has the skills we require for our new in-house model is welcome, it will not be based on whether you worked for Majwe or not,” he said.

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Leading global funders jump into Botswana-Namibia mega solar project

27th April 2021
Mega Solar Project

Top development funding institutions amongst them World Bank investment arms have jumped into the much anticipated Botswana-Namibia Mega Solar Project. The multibillion dollar massive project was confirmed by authorities of the two countries late August last year.

The Southern African sovereigns, both of which enjoy massive natural solar exposure, have partnered with Power Africa- a United States government entity to deliver what will be one of the world’s largest solar power plants. The project will see installations built across both countries and the power produced will be exported to the Southern African region.

This week, information emerged that The African Development Bank, The International Finance Corporation and The International Bank for Reconstruction and Development have signed a Memorandum of Intent to open talks for financing the project.

The International Bank for Reconstruction and Development, and The International Finance Corporation are World Bank private Investment agencies that seek to support private sector growth across developing economies of its member States. According to sources, the Memorandum of Intent would support the pre-feasibility and related studies required to advance the project.

Botswana authorities revealed recently that the capital raising campaign involving the three mentioned financing organisations would help fund the studies and could be involved in supporting the actual project’s development. It is anticipated, based on previous experience on similar projects, that the feasibility study could cost up to P20 million.

Plans for the 5 GW solar energy capacity to be developed over the next 2 decades for both the African nations, Namibia and Botswana, were first formulated and shared by the World Economic Forum’s (WEF) Global Future Council on Energy and the US led Power Africa initiative, in August 2019.

There will be a multi-phased solar procurement program to help these countries get access to secure, reliable, inexpensive solar power at scale.  Under phase 1, the idea would be to procure 300 MW to 500 MW capacity to cover future domestic demand only, phase 2 will see 500 MW to 1 GW capacity to be procured to cover regional demand within the South African Power Pool (SAPP) or through bilateral agreements.

Under phase 3, between 1 GW to 3 GW capacity will be procured to meet demand in SAPP and Eastern Africa Power Pool (EAPP), as per the plans shared last year. All this capacity will be developed through a competitive procurement process.

Botswana and Namibia were specifically chosen for this mega solar project because of their solar irradiation potential, large open spaces and low population density, strong legal and regulatory environment, and low-cost, efficient and smart power-trading potential to meet high regional demand.

“Southern Africa may have as much as 24,000 MW of unmet demand for power by 2040. The market for electricity produced by the mega-solar projects in Botswana and Namibia includes 12 other countries in the region that could be connected via new and/or upgraded transmission infrastructure. As battery storage technology advances and costs of solar storage drop below $0.10 per kilowatt hour, solar power becomes an even more cost-competitive solution,” the World Economic Forum said in 2019.

While the 5 GW capacity will help both the nations diversify their energy mix, it will also help bring down their dependence on South African national electricity utility, Eskom, which has problems of its own in financial and operational terms. Namibia and Botswana will be able to save their resources spent otherwise spent on energy import.

According to the Global Market Outlook for Solar Power 2020-2024 of Solar Power Europe (SPE), Namibia was among the few countries in Sub-Saharan Africa to have installed over 100 MW on-grid PV in 2019, with 130 MW added. The 5 GW project with Botswana, if realized, will help the country in its renewable energy target of 70% for its energy mix to be achieved by 2030.

Botswana and Namibia offer the potential to capture around 10 hours of strong sunlight per day for 300 days per year and have some of the highest solar irradiance potential of any country in Africa, which translates to highly productive concentrated solar power (CSP) and photovoltaic (PV) installations.

Both countries have sizeable areas of flat, uninhabited land not currently used for productive economic activity, which is conducive to building land-intensive solar PV and CSP installations. According to World Economic Forum (WEF) key investment challenge for power projects across sub-Saharan Africa is limited availability of foreign currency to permit repatriation of proceeds.

“Given the active diamond and mining industries in both countries, there should be sufficient foreign exchange available to facilitate outside investment,” a WEF report said in 2019. Botswana and Namibia are also working on conceptualisation of the ambitious ocean water distillation project to supply both counties with drinking water.

“We are happy with the prospects presented by this project, because we need water. However, our ministers and technocrats need to determine what is best for us keeping in mind our governance procedures,’’ aid President Masisi Masisi in one of his working visits to Namibia early this year.

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‘Sub-Saharan Africa records slowest growth in 2021’

27th April 2021

An International Monetary Fund (IMF) report on the Regional Economic Outlook on Sub-Saharan Africa has revealed that the region will be the world’s slowest growing region in 2021, and risks falling further behind as the global economy rebounds.

Speaking at a virtual press briefing on the Regional Economic Outlook recently, Abebe Aemro Selassie, Director of the African Department of the IMF, highlighted that although the outlook of the Sub-Saharan Africa region has improved since October 2020, the -1.9% contraction in 2020 remains the worst performance on record.

Even during these unprecedented times of the pandemic, the IMF report reflects that the region will recover some ground this year and is projected to grow by 3.4 percent. On the other hand, per capita output is not expected to return to 2019 levels until after 2022.

“This economic hardship has caused significant social dislocation. In many countries, per capita incomes will not return to pre-pandemic levels until 2025. The number of people living in extreme poverty in sub-Saharan Africa is projected to have increased by more than 32 million. There has also been a tremendous ‘learning loss’ for young people. Students in the region have missed 67 days of instruction, more than four times the days missed by children in advanced economies,” said Selassie.

This is feared to risk reversing years of progress, and the region falling behind the rest of the world. The IMF report focusing on navigating a long pandemic has shown that financial stability indicators have displayed little change. But the longer the pandemic lingers, the more borrowers may find themselves compromised, with potentially significant implications for nonperforming loans (NPLs), bank solvency, and the triggering of public guarantees.

So far, financial soundness indicators do not point to any major deterioration in the financial system’s health, thanks, in part, to the exceptional policy support provided by local authorities.
Botswana’s supervisory authorities, according to the report, have allowed their banks to use their countercyclical capital buffers to help deal with the crisis, however, the full impact of the crisis is still to be felt with Regulatory Forbearance scheduled to end in 2021.

This has perhaps prevented a number of non-viable loans from being captured properly in existing financial soundness indicators, the report indicated. The outlook for sub-Saharan Africa is expected to diverge from the rest of the world, with constraints on policy space and vaccine rollout holding back the near-term recovery. While advanced economies have deployed extraordinary policy support that is now driving their recoveries, for most countries in sub-Saharan Africa this is not an option.

“As we have observed throughout the pandemic, the outlook is subject to greater-than-usual uncertainty. The main risk is that the region could face repeated COVID-19 episodes before vaccines become widely available. But there are a range of other factors—limited access to the external financing, political instability, domestic security, or climate events—that could jeopardize the recovery. More positively, faster‑than‑expected vaccine supply or rollout could boost the region’s near-term prospects,” the report stated.

The IMF has called out Sub-Saharan nations to focus on policies and the priorities for nurturing recovery; such as saving lives that will require more spending to strengthen local health systems and containment efforts, as well as to cover vaccine procurement and distribution.

Selassie underscored that: “the next priority is to reinforce the recovery and unlock Sub-Saharan Africa’s growth potential. Bold and transformative reforms are therefore more urgent than ever. These include reforms to strengthen social protection systems, promote digitalization, improve transparency and governance, and mitigate climate change.”

Delivering on these reforms, while overcoming the scarring from the crisis will require difficult policy choices, according to Selassie.  Countries will have to tighten their fiscal stance to address debt vulnerabilities and restore the health of public balance sheets—especially so for the seventeen countries in the region that are in debt distress or at high risk of it.

By pursuing actions to mobilize domestic revenue, prioritize essential spending, and more effectively manage public debt, policymakers can create the fiscal space needed to invest in the recovery.
‘‘The sub-Saharan region cannot do this alone; there is a crucial need for further support from the international community,’’ Selassie said.

Along with the international community, the IMF moved swiftly to help cover some of the region’s emergency funding requirements. This included support via emergency financing facilities, increased access under existing arrangements, and debt relief for the most vulnerable countries through the Catastrophe Containment and Relief Trust (CCRT).

“To boost spending on the pandemic response, to maintain adequate reserves, and to accelerate the recovery to where the income gap with the rest of the world is closing rather than getting wider. To do this, countries in sub-Saharan Africa will need additional external funding of around $425 billion over the next 5 years.

However, meeting the region’s total needs will require significant contributions from all potential sources: private capital inflows; international financial institutions; debt-neutral support via (Official Development Assistance) ODA; debt relief; and capacity development to help countries effectively scale up development spending,” said Selassie.
All these issues are expected to be discussed at the forthcoming High-Level International Summit on Financing for Africa in May.

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