Sustainable finance is said to be a critical component in helping drive Africa’s recovery from the COVID-19 plight while also incentivizing much-needed investments in the green economy and social development. These were remarks made this week by the Executive Head of Sustainable Finance at Standard Bank Group, Nigel Beck.
Sustainable finance refers to the process of taking due account of environmental, social and governance (ESG) considerations when making investment decisions in the financial sector leading to increased longer-term investments into sustainable economic activities and projects.
The global pandemic has set back the continent’s growth and demanded new approaches to economic development. It has also highlighted the importance of sustainability and highlighted environmental, social and corporate governance issues.
Even before COVID-19, the sustainable finance market was flourishing. In 2019, sustainable debt issuance reached a record high of $415 Billion globally- up 60% from the prior year. Beck indicated that green bonds still dominate the sustainable finance market, but other products, including green loans, social bonds and sustainability loans, are fast playing catch-up, with the market becoming increasingly diversified to meet growing demands.
Beck says for the time being Africa accounts for negligible share of the global sustainable finance market, further indicating that the continent is starting to play catch-up as more corporates and investors recognize the benefits that these funding solutions offer. Giving an example, Beck noted that corporates can benefit from lower funding rates if they achieve various predetermined ESG outcomes.
“We believe that Africa is primed for a sustainable finance boom, given its immense potential in the renewable energy space and its ongoing developmental challenges.” The Standard Bank Group launched its first ever-green bond, via a private placement with the International Finance Corporation in March this year. The $200 Million bond, according to the group, will be used by the group’s Sustainable Finance Business Unit to fund eligible green assets- renewable energy, energy efficiency, water efficiency and green buildings-aligned to the group’s Sustainable Bond Framework.
According to Standard Head of Sustainable Finance, the COVID-19 pandemic is boosting demands for bonds that fund social projects, and this trend is expected to last well into the future. He says corporates are increasingly expected to maximize their social impacts and uplift the communities.
Given Africa’s immense unmet energy needs, Beck says as the Bank, they expect to see a wave of decentralized green energy projects as corporates and municipalities look to secure reliable and affordable power supplies while also furthering their ESG agendas.
“Africa governments will also need to procure more power in the months ahead of demand recovers and the supply shortfall widens. The fastest and most cost-effective way to address the supply gap is through renewable power projects, which are now the most economically viable source of energy in most countries. Further, advances in battery storage technologies, coupled with cost declines, mean renewables are becoming increasingly attractive and viable.”
Technologies such as hydro, wind and solar, Beck says, have proved their resilience in the face of the COVID-19 crisis, having allowed national grids to become more flexible to fluctuations in demand.
He further stressed that Africa is well placed to become a major player in the global sustainable finance market, saying, given the continent’s massive funding needs, sustainable finance will play a major role in shoring up global and local capital for high-impact projects.
The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.
Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.
According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.
The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.
Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.
Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the companyâ€™s market capitalization.
Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana. Â The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.
African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).
AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.
The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.
The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.
To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. â€śOur wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,â€ť said BĂ¸rge Brende, President, and World Economic Forum. â€śThe Forumâ€™s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.â€ť
Given the continentâ€™s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. â€śThe promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,â€ť said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.
The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.
â€śMacro trends in the four key sectors and across Africaâ€™s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,â€ť said Wamkele Mene, Secretary-General, AfCFTA Secretariat.
The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.
About the World Economic Forum Annual Meeting 2023
The World Economic Forum Annual Meeting 2023 convenes the worldâ€™s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,