Sub-Saharan African countries are facing ever-worsening energy crisis and increasingly serious environmental challenges, which hamper their economic development, reduce their competitiveness, and have particularly strong negative impacts on low-income populations. To address these issues, since 2007, the Agence Française de Développement (AFD) has been helping develop innovative green investments using a targeted support mechanism through environmental credit lines for local financial institutions. This green investment support mechanism, by the name of SUNREF (Sustainable Use of Natural Resources and Energy Financing), involves providing local financial institutions with both technical assistance and credit lines to enable them to finance small- and medium-size private energy-efficiency, renewable-energy and environmental-performance projects. Since its inception in 2007, the SUNREF program has been successfully implemented in Mauritius, South Africa and Kenya, among other countries. Encouraged by these past experiences and being fully aware of Africa’s fast economic growth and its potential negative impacts on energy consumption and pollution, AFD has decided to place a stronger focus on Sub-Saharan Africa’s green credit line development in the next few years.
Econoler and BIO by Deloitte were hired by the AFD to assess the short- and medium-term potential for setting up SUNREF programs to support small- and medium-size investments in sustainable energy and environmental performance projects in a group of 10 Sub-Saharan African countries, namely: Botswana, Cameroon, Ghana, Madagascar, Mozambique, Namibia, Nigeria, Rwanda, Zambia and Zimbabwe.
The assignment consisted of two phases:
Phase 1: The objective was to map the needs related to financial and technical support for sustainable-energy and environmental-performance investments by carrying out the following tasks for the 5 countries assigned to Econoler out of the 10 Sub-Saharan countries targeted by the first phase of this assignment:
- Establishing an overview of the local environmental/energy and banking sectors and the economic and regulatory environments.
- Making a preliminary analysis of the market potential.
- Collecting information and deciding on the countries and themes to target in Phase 2.
Phase 2: The objective was to conduct a feasibility study on setting up SUNREF programs to support medium-size green investments through local financial institutions in Sub-Saharan African countries identified in Phase 1, namely Ghana and Nigeria (assigned to Econoler), and Cameroon and Namibia (assigned to BIO by Deloitte). The specific tasks carried out by Econoler as part of Phase 2 were the following:
- Conducting a detailed market study on potential investments in targeted themes.
- Making a detailed assessment of the barriers to investment (institutional, regulatory, financial, technical, etc.)
- Analyzing past experiences, current local incentives and partner institutions which can help provide technical assistance offered during SUNREF program implementation.
- Making a detailed assessment of potential local financial institutions (LFIs) to partner with under the program.
- Making appropriate recommendations regarding program implementation support for each country selected.
Upon completion of this assignment, it is expected that the AFD will be adequately informed and advised about how to successfully expand the SUNREF program to four additional Sub-Saharan African countries with the most conducive framework for investing in sustainable-energy and environmental-performance projects through LFIs.