The Sustainable Energy Fund for Africa (Sefa), a joint initiative of the Danish Government and the Energy, Environment and Climate Change Department (Onec) of the African Development Bank (AfDB) has approved its first grant of $825 000 (about K2. 3 billion) to finance the concept phase of the Green Tech Financial Facilityâ€” a vehicle for investments in private sector-driven green technology projectsâ€” including market scoping and positioning studies, fund conceptualisation and fund manager selection.
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.
African countries are embracing the “green growth” development paradigm to address their economic, environmental and social challenges. There is, however, an absence of a coherent investment framework to support this agenda in Africa and elsewhere.
Climate-oriented facilities designed to address this problem channel capital from predominantly public contributions. While multilateral development banks have achieved some success leveraging private finance using a variety of instruments, mainly through climate investment funds, these initiatives lack sufficient scale to meet global climate finance needs.
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.
This Sefa grant will therefore support the AfDB in structuring and launching an investment facility aimed at increasing private capital flow channeled to private sector-led projects that implement carbon-reducing and clean technologies for Africa.
“African economies need better access to various sources of international funding. It will help them create more sustainable economies and green and inclusive growth on the whole continent,” said Mthuli Ncube, chief economist of AfDB in support of Africaâ€™s green path recently.
AfDB has been supportive to a green path and its medium-term strategy for 2008 and 2012 identified climate change as a cross-cutting issue, and part and parcel of the AfDBâ€™s broader accelerated development plan.
“Africa contributes only four percent of global greenhouse gas emissions, but as the continent develops that proportion could increase unless broad and significant action is taken,” he said during the opening session of the 6th African Economic Conference last year.