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The International Finance Corporation (IFC), a unit of the World
Bank, recently inked its first certified green loan in Africa,
which will boost funding for biomass and other renewable projects
in South Africa.
The $150 million loan to Absa Bank will support the country's
hobbled power generation sector and economic recovery from the
COVID-19 pandemic.
The loan is the IFC's fourth green finance investment in South
Africa, but the first that complies with the Loan Management
Association's Green Loan Principles
(GLP).
As a result, lending by Absa for green projects will be
disclosed, improving transparency, and encouraging other banks to
follow the principles, the multilateral agency said. In addition to
the $150 million, the IFC will provide technical advice and share
knowledge with the bank to "develop a green, social, and
sustainable bonds and loans framework."
An IFC spokeswoman told IHS Markit the IFC has provided more
than $1 billion globally in loans that meet the GLP guidelines.
The IFC made climate-related investments totaling $3.3 billion
in the 2020 financial year.
So far in 2021, the Azeri government and IFC signed a memorandum
of cooperation in April on the development of offshore wind energy
in Azerbaijan, aiming to expand green energy sources and reduce
carbon emissions by 2030. A month earlier, the IFC granted KCB Bank
Kenya a $150-million loan to finance projects, including
environmentally friendly ones. And in January, the IFC approved
some $212 million in financing for climate-related projects in
Vietnam.
The World Bank expects that over the next five years 35% of its
financing will have climate co-benefits on average, the spokeswoman
said.
South Africa
The IFC estimates there is a $588-billion investment
opportunity in climate mitigation across selected sectors in
South Africa between now and 2030.
South Africa plans to reduce its GHG emissions by 42% by 2025.
Currently, 90% of the country's electricity is generated by
coal-fired facilities.
In March, the South African government issued an RFP seeking 2.6 GW of renewable generation,
split into 1.6 GW of onshore wind and 1 GW of solar photovoltaic
capacity. The government's RFP was the fifth phase of a program to
increase the size and reliability of the country's generation fleet
as well as decrease its GHG emissions. Bids in response to the
2.6-GW tender by the Department of Mineral Resources and Energy are
due 16 August.
Absa, the IFC says, is the leader in arranging financing for
South Africa's Renewable Independent Power Producer Programme
(RIPPP), having structured and arranged financing for approximately
46% of projects concluded under the program to date.
The government's 2.6-GW RIPPP RFP was issued the same day as the
ministry announced the preferred bidders
for its Risk Mitigation Independent Power Producer Procurement
Programme, another key part of long-running government efforts to
shore up energy security. The latter tender was issued specially to
fill a near-term power supply gap of 2 GW identified by 2019
government plans.
IHS Markit expects 560 MW of new South African utility-scale
solar PV additions on average annually through 2050 and 700 MW/year
of wind newbuild, along with more than 400 MW/year of residential
and small commercial systems.
The South African renewable generation push will not be unique
in Africa. IHS Markit expects renewable generation to account for
at least 35% of the continent's generation stack by 2050.
According to the IFC, commercial banks currently provide 67% of
the financing for renewable energy projects in South Africa.
"Financial institutions and the private sector have an important
role to play helping South Africa to rebuild greener and more
sustainably from the impact of COVID-19," said Adamou Labara, IFC
country manager in South Africa. "By increasing funding for
renewable energy and climate smart projects we can help South
Africa strengthen its climate change resilience and increase
climate change adaptation."
Absa Bank is a subsidiary of Johannesburg-listed, diversified
financial services company Absa Group. The parent group owns
majority stakes in banks in Botswana, Ghana, Kenya, Mauritius,
Mozambique, the Seychelles, South Africa (Absa Bank), Tanzania,
Uganda, and Zambia.
