(March 17, 2020) The federal government has suspended its $22.7 billion external borrowing plan, the Minister of Finance, Budget and National Planning, Zainab Ahmed, announced on Monday.

The minister spoke at the 2020 International Conference on the Nigerian Commodities Market organized by the Securities and Exchange Commission (SEC) in Abuja.

She said the decision to jettison the plan was taken “due to current realities in the global economic landscape.”

Ravaging impact of COVID-19

The breakout of the deadly coronavirus late last year has completely unsettled the world economy, with the price of crude oil plunging to the lowest level since 2016.

With the Nigerian economy dependent on oil revenues to finance the budget, the unprecedented crash in oil prices below the approved benchmark price of $57 per barrel has rendered approved estimates in the budget unrealistic.Mrs Ahmed said the government would not even be keen to proceed with the borrowing plan even if the National Assembly gives the approval for it to go ahead.”The current market indices do not support any external borrowings at the moment, despite that the parliament is still doing its work on the borrowing plan.”One arm of the parliament has completed their work, and the other arm is still working. So, it is a process controlled entirely by the parliament itself. We are waiting,” she said.

PREMIUM TIMES earlier reported how the borrowing plan was approved by the Senate. The House of Representatives is yet to approve the plan.

On Monday, the minister said the government will defer the plan and watch the market till when the timing is right.

She said the government would continue to focus its efforts on its plan to diversify the country’s economy.

The unfolding events of the past few months, especially the coronavirus pandemic and the oil price wars in the international oil market have further reinforced the government’s resolve to diversify the national economy.

The current challenges in the global economy, she noted, have brought to the fore the need for Nigeria to focus its attention on the development of a non-oil attitude to everything.

The federal government, the minister said, would prioritize its expenditure in favour of major capital expenditures that would have greater impact on job creation, visibility as well as enhance the ease of doing business in the country.

“The expenditures that are not critical must be deferred to a later date when things become more normal.

“Several national plans, programmes and projects have been directed at diversifying the production and revenue structures of the economy,” she said.

Noting some achievements in the areas of production and revenue, she stressed the need to do more to boost production and exports base, less vulnerable to external shocks and provide more opportunities to the teeming population.

Driver of diversification

At the event, Vice President Yemi Osinbajo said the government was taking steps towards developing the Nigerian commodities market as a major driver for economic diversification efforts.

Mr Osinbajo said the government was working on diversifying the economy and broaden its revenue sources.

This, he said, would need the government to develop other channels of generating revenue and foreign exchange.

“This need is further underscored by the recent drop in the global price of crude oil, which also constitutes a major threat to achieving the planned government expenditure,” he said.

He said there are other initiatives towards mapping, quantifying and efficiently exploring the nation’s solid minerals deposits.

Such efforts, he said, are equally necessary to diversify the country’s revenue sources from oil and create more opportunities in the regions where such solid minerals are deposited.

Some of these developments in Nigeria’s agriculture and solid minerals sectors present the emerging opportunities to be fully explored to the benefit of everyone in the country, as well as the foreign partners.

The acting Director-General of SEC, Mary Uduk, said the country was well endowed with agricultural, metal and energy commodities, whose potentials are not yet realised.

She said the good news was that the capital market could provide an avenue to unlock these potentials and diversify the nation’s economy, provide jobs, create value and contribute to governments’ revenue.

“We believe if we can develop and institutionalise a vibrant commodities trading ecosystem in Nigeria, we can substantially address problems of lack of storage, poor pricing, non-standardization, and low foreign exchange earnings affecting the country’s agriculture and other commodities sub-sectors,” she said.

(March 9, 2020)

The interest rate cap, imposed by the Central Bank of Kenya in September 2016, was finally removed in November 2019, much to the relief of bankers. What has been the effect on banks and their customers?

It took years of lobbying and protestation by Kenya’s banks and its customers – and not so subtle pressure from the IMF – to persuade Kenya’s parliament to repeal the cap on interest rates imposed since 2016.

The cap, which set interest rates chargeable by banks at 4%, equal to the base rate set by the Central Bank of Kenya (CBK), was intended to address the issue of the affordability of credit for small enterprises and working people, as they had complained for years that high interest rates had locked them out of mainstream bank credit. The initial law to cap interest rates, which won wide popularity, was championed by President Uhuru Kenyatta but in a major volte face, he refused to endorse a renewal of the bill when it came up in November and despite strong support for it, it failed to gain the majority required for the law to remain on the statute books.

Defending his decision, Kenyatta said that while the intentions were good, in practice, the cap had actually reduced credit to the private sector, damaged growth and weakened the effectiveness of monetary policy.

According to analysts, SMEs were reportedly denied loans worth about Kshs300bn ($2.97bn), about 1% of GDP, during the period. Furthermore, credit extension to SMEs as a percentage of total bank loans fell to 15% in 2019, from about 25% before the cap was instituted.

If any further persuasion was needed, the IMF provided it by simple arm-twisting. It told the government that if it wanted an extension of its standby credit, it would have to ditch the cap. With the cap now scrapped, Kenyan banks, and indeed the economy, are expected to perform better in 2020. How well, though?

Stronger earnings and loan growth

Charles Robertson, global chief economist and head of macro strategy at Renaissance Capital, tells African Banker “the effects of the rate cap repeal will start to show up in 2020 consumption and investment data and definitely should support growth – and help to compensate for a tighter government budget.” 

George Mutua, managing director and chief representative officer, Kenya & East Africa at Société Générale, agrees. “Kenya’s GDP growth, projected between 5.5 to 6.0% in 2020, would be driven mainly by increased credit growth, after the removal of the interest rate cap, as banks lend more to the private sector.”

However, “banks will need to monitor non-performing loans (NPLs) closely to ensure they don’t breach acceptable thresholds on the back of this increased lending”, Mutua adds. In December 2019, Fitch Ratings announced a positive 2020 outlook for Kenya’s banking sector, an upgrade from stable in 2019. The repeal of the loan rate cap in November 2019 is a major reason why, as Fitch believes it “will allow banks to take control of their pricing policy and underwrite new business at rates more in line with borrowers’ risk profile.”

Fitch also sees “improving credit conditions” enabling “banks to execute growth strategies.” In fact, Fitch expects over 10% loan growth in 2020, a continuation of the recovery in 2019. 

“Kenyan banks received a huge boost in November when the lending rate cap was repealed by the government,” Mahin Dissanayake, senior director of Europe, the Middle East & Africa (EMEA) at Fitch Ratings, explains further to African Banker. “We believe it will increase earnings and profitability on the back of loan repricing and stronger loan growth, with credit flowing back to key sectors like micro, small and medium enterprises and consumers.”

In the same vein Constantinos Kypreos, senior vice president, financial institutions at Moody’s, tells African Banker “removing the rate cap no longer constrains lending as banks are able to better price their risks without a rate cap. This will mean increased lending to segments of the economy that have had subdued growth and access to credit, primarily small and midsize enterprises.” 

Kypreos tells African Banker, does not expect lending rates or profitability to return to early 2016 levels. Banks’ return on assets declined to 3.4% in 2018 from 3.6% in 2017 and 4.0% in 2016.

Fitch’s Dissanayake shares a similar view. “Margins and earnings are unlikely to return to pre-cap levels. This is partly because banks have indicated that they might limit any increase in the cost of credit to customers and partly because the policy rate is 1.5% points lower than the pre-cap level.”

Contrary views

But not everybody is pleased that the cap has been dropped. There is a worry that banks, freed from the rate constraint, will seek to make up for lost time and profits, jacking up interest rates to the prohibitive 24 to 32% levels before the curb.

The Standard newspaper says: “Repealing this law therefore may have enormous impact on businesses. The increased interest rates will eat into these businesses’ revenues and thus affect their short-term and long-term development goals. Such a scenario would be so serious that some businesses may have to implement some cost-cutting measures such as laying-off staff to be able to service loans.”

Samual Baraka, who sells spare parts in Nairobi agrees with the comments. “The cap allowed us to borrow at a fair rate from banks to carry out daily business. This allowed me to expand my operations and take on more people. Now I worry that the banks will revert to the high rates we had before. How will we be able to afford to borrow? It will lead to many small businesses closing down and laying off people.”

Unemployment is already high in the country and the ranks of the jobless are increasing by the day as more youths join the labour force. The rate cap was actually a device to try and stimulate the SME sector and thus create more employment. There is evidence that this worked and the fear is that the removal of the cap will create a slump at a time when making a living is particularly difficult.

Banks have argued that the cap dissuaded them from lending to the more risky business elements because of the fear of loan defaults and that they need a higher margin to cover the risk. However, few believe that banks will increase their lending to SMEs now that there is no cap, despite the presence of the Credit Reference Bureaux, which provide an assessment of borrower creditworthiness.

It will be interesting to see if having been released from the rate cap, the bankers fulfil their pledge to roll out more loans and boost the economy or if the vital SME sector gets further squeezed. 

(Dec 20, 2019) In 2020 Asia’s GDP will overtake the GDP of the rest of the world combined. By 2030, the region is expected to contribute roughly 60% of global growth. Asia-Pacific will also be responsible for the overwhelming majority (90%) of the 2.4 billion new members of the middle class entering the global economy.

The bulk of that growth will come from the developing markets of China, India and throughout South-East Asia and it will give rise to a host of new decisions for businesses, governments and NGOs. The pressure will be on them to guide Asia’s development in a way that is equitable and designed to solve a host of social and economic problems.

Have you read?

• ASEAN is 50, and it’s come a long way. Here’s why you should care
• This Asian country has the most ‘complex’ economy in the world
• Here’s how Asia can maintain growth, with an ever ageing population

Different countries, different prospects

While these estimates paint a picture of massive growth in consumption, the reality is that consumption patterns will emerge differently across markets, with growth rates dependent on local demographics and other macro factors. For example, as the World Economic Forum’s Future of Consumption in Fast-Growth Consumer Markets work demonstrates, China’s ageing population will negatively impact the population dividend, but rising wages, urban migration, service jobs and an anticipated drop in household savings rates will boost consumption. India’s massive demographic dividend and burgeoning middle class will spur consumption and aid economic growth.

Meanwhile, Indonesia, the Philippines and Malaysia are set to grow their labour forces significantly, leading to a rise in per-capita disposable income. The rapidly advancing digital economy in the region will provide additional access to the previously unserved and deliver on consumer demands for convenience and efficiency.

How Asia’s GDP has grown since 2014 and its growth forecast

A new consumer profile

All these macro forces are leading to a bi-polarization of consumption, where consumers will have more power and simultaneously demand both premium and value-for-money goods and services. The consumer of the future is likely to be far more discerning in everything, from what she consumes (personalized/localized/healthy/sustainable) to where she shops (omnichannel, shopping at her convenience) to how she is influenced (less by companies and more by social communities).

Local and regional players gain ground

One trend that will play an increasingly important role is local and insurgent businesses outgrowing incumbents and beginning to disrupt the market – it’s visible across developed and developing markets alike. Nimble local players are winning as they take advantage of proprietary access and local familiarity. For example, Wardah has captured a 30% market share in Indonesia by focusing on halal-compliant cosmetics.

Another advantage to local companies is a commitment to weather short-term turbulence. At one Indonesian conglomerate, the C-suite view is to take a secular view, invest it and stay the course – and not worry about the quarterly or yearly fluctuations in results.

We are also seeing the continued emergence of Asian multinational corporation – Huawei in technology, DBS in Banking, Unicharm and Kao in personal care; and Suntory, Universal Robina and Indofood in F&B to name a few. Entrepreneurialism is peaking with more than 140 unicorns in Asia as of 2019. China leads in the number of patents held in artificial intelligence and deep learning.

Questions for companies

The Asian era is here and as companies ramp up their ambitions and efforts, they need to ask themselves several basic questions. Among the most important:

• Do we have a “future-back” strategy (imagining the future and then working on the steps required to position a company to compete in 10 or 20 years) that’s right for the dynamic nature of the region?
• Are we building future-proof competitive advantages and business models?
• What do our consumers want, what new products will serve their needs, how best to engage and serve them?
• How do we handle data?
• Do we have a sustainability agenda that will help support this consumption boom without taking away from the planet even more?
• How should we organize ourselves to be extremely agile to make the most of this unprecedented opportunity?

A job market in transformation

Governments in developing countries across Asia-Pacific are in a race to overcome poverty, the lack of infrastructure and other significant obstacles to catch up with the rest of the digital world. The digital transformation and Fourth Industrial Revolution across markets will displace existing jobs and the distribution of jobs across sectors will shift considerably in the process.

Employment is expected to rise in healthcare, spurred by the ageing population, for example. However, labour-intensive sectors such as manufacturing, transport and storage are likely to see a reduction in employment levels as a result of automation. It is expected that 53 million workers will have to be reskilled in ASEAN alone. This dynamic is further complicated by the rise of the gig economy, where qualified graduates are taking on jobs as ride-hailing drivers and food delivery couriers.

The new focus on sustainability

Sustainability and its environmental, social and economic impact will also continue to rise on the agendas of governments and NGOs in the region. Both the institutional definition and scope for business will continue to expand to cover topics from health and wellness to diversity and equality opportunities. Investors will also have to play their part: many large investors in Asia-Pacific have started shifting away from primary industries such as oil and gas, mining and agricultural commodities to business models that address environmental and social needs, such as renewable energy and for-profit hospital networks that offer underserved populations better access to healthcare.

A tricky balance for government

As this future unfolds, governments will need to get a few things right. They will need to create trade and investor-friendly reforms, promote social and financial inclusion, invest in hard and soft infrastructure and institute public-private partnerships. They will need to innovate and reform education to ensure there is a competitive and appropriately skilled workforce. While they make these moves, they will be required to balance technological advancement and job creation and talent reskilling, economic development and sustainability, and scale advantages and concentration of power. South-East Asia’s ability to live up to its growth potential will largely depend on it.

(March 2, 2020) March 2 (Renewables Now) – The International Finance Corporation (IFC) has invested USD 200 million (EUR 179.6m) in green bonds issued by South Africa’s Standard Bank Group Ltd (JSE:SBK) and placed today on the London Stock Exchange.

The IFC privately placed a ten-year green bond facility, the proceeds of which will support Standard Bank Group’s ability to finance renewable energy, energy and water efficiency as well as green buildings projects in South Africa.

Projects funded by this issuance have the potential to cut greenhouse gas emissions by nearly 3.7 million tonnes over a five-year period, according to the IFC’s estimates.

“This bond is a landmark placement for South Africa and will contribute to financing South Africa’s green economy. We hope it will catalyze interest in green investments from other actors in the country,” Adamou Labara, IFC’s Country Manager for South Africa, said in a statement.

(September 28, 2019) Currently, plastic is at the top of the international agenda for waste management. Recent meetings of the Conferences of the Parties to the Basel and the Stockholm Conventions have expressed concerns over the impact of plastic waste, marine plastic litter, and microplastics, and emphasised the importance of reducing consumption and ensuring the environmentally sound management of waste plastics. This study presents the first continental historical analysis of mass importation and consumption of different polymers and plastics (primary and secondary forms, respectively) in Africa and the associated pollution potential. We identified, collated and synthesised dispersed international trade data on the importation of polymers and plastics into several African countries.

Results

The 33 African countries (total population of 856,671,366) with available data for more than 10 years imported approximately 86.14 Mt of polymers in primary form and 31.5 Mt of plastic products between 1990 and 2017. Extrapolating to the continental level (African population of 1.216 billion in 54 countries), about 172 Mt of polymers and plastics valued at $285 billion were imported between 1990 and 2017. Considering also the components of products, an estimated 230 Mt of plastics entered Africa during that time period, with the largest share going to Egypt (43 Mt, 18.7%), Nigeria (39 Mt, 17.0%), South Africa (27 Mt, 11.7%), Algeria (26 Mt, 11.3%), Morocco (22 Mt, 9.6%), and Tunisia (16 Mt, 7.0%). Additionally, primary plastic production in 8 African countries contributed 15 Mt during 2009–2015. The assessment showed that environmentally sound end-of-life management of waste plastics by recycling and energy recovery is in its infancy in Africa, but recycling activities and thermal recovery have started in a few countries.

Conclusions

Globally, the perception is that production and consumption of plastics can only increase in the future. Solutions are needed to tackle this global challenge. Certain policies and plastic bag bans could help reduce plastic consumption in the near future, as demonstrated by Rwanda. Furthermore, there is a need for innovative solutions such as the introduction of biodegradable polymers and other alternatives, especially for packaging.

Background

In recent decades, the production and consumption of plastics have increased owing to increasing applications that rely on the good characteristics of plastics such as light weight, strength, durability, affordability, corrosion resistance and low production costs [1]. Between 1950 and 2015, about 8300 million tonnes (Mt) of virgin plastics were produced across the globe, generating approximately 6300 Mt of plastic wastes, of which around 9% have been recycled, 12% incinerated, and 79% accumulated in landfills [2]. Current worldwide production of plastics is around 300 Mt/year, with 57 Mt/year produced in the European Union [3]. Globally, the yearly average per capita plastic consumption is 43 kg [4]. In India, the consumption of plastics increased from 0.4 Mt/year in 1990 to 4 Mt/year in 2001, and it was expected to rise to 8 Mt/year in 2009 [5] and 16.5 Mt/year in 2017/18 [6]. In Asia, plastic use is 20 kg/capita/year, while in Western Europe and North America the average is 100 kg/capita/year [7]. Plastic consumption increases with GDP [8].^{Footnote 1} Waste plastic represents a considerable proportion of the total waste stream in many countries. The total mismanaged plastic waste globally in 2010 was estimated at 32 Mt [9]. Currently, plastic waste poses human and environmental issues globally and especially for African countries, which have a high proportion of mismanaged waste plastics and lack state-of-the-art recycling facilities [10].

Depending on type and use, plastic contains a wide range of additives such as plasticizers, flame retardants, antioxidants, acid scavengers, light and heat stabilisers, lubricants, pigments, antistatic agents, slip compounds, and thermal stabilizers. These additives are used in plastics for various purposes [2, 11,12,13,14]. Many of these additives have toxic effects and some are classified as endocrine disrupting chemicals [EDCs; e.g. bisphenol A or diethylhexylphthalate (DEHP)]. Several others have been listed as persistent organic pollutants (POPs), including the flame retardants polybrominated diphenyl ethers (PBDEs), hexabromobiphenyls (HBB), hexabromocyclododecane (HBCD), short-chain chlorinated paraffins (SCCPs) and the fluorinated tensides like perfluorooctanoic acid (PFOA). The largest share of plastics however is not flame retarded and does not contain POPs as additives.

Inappropriate use and disposal of waste plastics may result in the release of toxic substances, which is facilitated by open burning of e-waste plastics from vehicles and cables [15,16,17,18]. Hazardous chemicals can also migrate from the plastic matrix leading to exposure via direct contact, for example from toys or kitchen tools that are partly produced from recycled plastic [15] or soft PVC used in toys or medical devices [19, 20]. On the other hand, additives in food packaging plastics or water bottles are controlled and regulated in industrialised countries. In Africa, the regulations on plastic additives and other chemicals in products are weak [21, 22].

Furthermore, most polymers are resistant to degradation, thus most plastic debris may persist in the environment for decades or centuries [22, 23] and may be transported far from the source [1]. An estimated over 4 Mt of plastic waste generated on land entered the marine environment in 2010 alone [9]. Currently this is estimated at 8 Mt/year [4]. The most common monomers used to make plastics are derived from fossil hydrocarbons and the resulting products are not biodegradable [2], hence the high persistence in the environment.

Currently, plastic is at the top of the international agenda for waste management. Recent meetings of the Conferences of the Parties to the Basel and the Stockholm Conventions “encouraged regional and coordinating centres to work, under the Convention, on the impact of plastic waste, marine plastic litter, microplastics and measures for prevention and environmentally sound management” [14]. Mixed plastic waste was listed in the Basel Convention Annexes as hazardous waste to control during international trade [24]. The global problem of increasing plastic waste and the associated pollution, marine litter, biodiversity and human health effects were recognised at each of the first four meetings of the United Nations Environment Assembly (UNEA 4). UNEA 4 addresses the analysis of voluntary commitments targeting marine litter and microplastics pursuant to Resolution 3/7 (UNEP/EA.3/Res.7.).

In a previous study, we compiled primary data on plastic imports into Nigeria [25]. Our study revealed that large amounts of plastics have entered Nigeria over the years, but robust continental-scale information is still lacking in Africa. Many data gaps have been identified in Africa concerning plastics and the associated wastes [10]. We present the first historical analysis of mass importation of polymers and plastics in primary and secondary forms and the associated pollution potential in Africa by identifying and synthesising dispersed international trade data on plastic importation and local production. The connection between trade and inventory data and the waste and pollution potential can eventually be used as a tool to develop counter-measures, improve prevention and management programmes, and calculate recycling quotas [25]. We also assessed the volume of wastes arising from plastic products and the recycling status in African countries.

(Aug 3, 2019) Rabat – As the world’s population increases, countries are facing growing environmental challenges. A big issue is “waste,” and what to do with all of the unwanted products that are being generated by human consumption.

Plastic, paper, food, metal, everything, where does it all go?

The World Bank expects humans to generate a staggering 3.4 billion tons of waste annually by 2050. This would represent an increase of 70% since 2016. 

Morocco is one of the lowest producers of solid waste in the Middle East and North Africa regions, at 550 grams of waste per person per day in 2016. However, with a population of over 35 million people, the waste still adds up to millions of tons a day.

Once Morocco’s waste is collected, where does it all go? Right now, to open dumps, landfills and most recently, under a new government initiative, to “valorization centers.” These modified landfills capture methane that comes from the fermentation of the waste, and burn it to produce heat. Once this is done, the leftover waste is buried.

The concept of a national-scale waste sorting and recycling is still in its infancy. According to a report published by the Moroccan Ministry for Mines and Sustainable Development, in 2015 only 6% of Morocco’s recyclable waste was actually recycled.

This means that, by and large, most of Morocco’s waste ends up in landfill.

Mediouna landfill raises urgent questions

Morocco’s most infamous landfill, the Mediouna landfill, is on the outskirts of Casablanca. Covering an area of over 70 hectares, it receives 1.2 million tons of waste per year. The toxic fumes waft over to neighboring suburbs, poisoning the air and forcing some people to relocate.

For Reda Kabbaj, Mediouna landfill raises urgent questions.

Born and raised in Agadir in southern Morocco, Kabbaj is currently an associate partner at MINA Connect, a management and consulting firm based in Pennsylvania, USA.

The firm provides project management services and operational support for projects in the areas of water, environment and renewable energy, with a particular focus on African initiatives. Kabbaj is interested in waste management solutions.

“Casablanca just throws its waste into the Mediouna landfill. And now the landfill is facing big issues. It’s going to arrive at 99% saturation,” he warns.

“Casablanca is a fast growing city. Landfill is just not suitable for this city anymore.”

Landfills like Mediouna can’t be filled up indefinitely and space around cities for more landfills is limited. So Kabbaj has been thinking about alternatives.

Most of Morocco’s waste ends up in landfill. Mediouna landfill on the outskirts of Casablanca receives 1.2 million tons of waste per year. “It’s going to arrive at 99% saturation,” warns Kabbaj.

He believes the future of Morocco’s waste treatment strategy lies in “waste-to-energy” technology. He wants Morocco’s major cities to stop filling up landfills and to instead build “waste-to-energy” plants. 

Waste-to-energy plants use combustion technology to burn waste in order to generate steam, electricity, and hot water. Hundreds of these plants already exist around the world, transforming waste from major cities across Europe, Asia, the US, and most recently Africa, into energy.

“Other big cities do their treatment through “waste-to-energy plants” because they have a lot of advantages. For example, the plants save on land. A plant only uses four to eight hectares of land, unlike the 100 hectares required for landfill. Also, it treats the waste using the best technology in the world, reducing its volume by up to 90%,” he explains.

What about carbon emissions? Kabbaj says the technology is clean, and plants are subject to strict emission regulations.

Ethiopia’s waste-to-energy facility

In August last year, Ethiopia opened Africa’s first waste-to-energy plant on the outskirts of the capital Addis Ababa. The “Reppie waste-to-energy facility” is built on the Koshe landfill site, which was previously a sprawling open air dump, covering an area approximately the size of 36 football pitches.

The $118 million plant was built through a public-private partnership between Ethiopian Electric Power and a foreign consortium made up of China National Electric Engineering Company (CNEEC), Cambridge Industries Limited from Singapore, and Ramboll, a Danish engineering firm. The plant ceased operations shortly after its inauguration because of a contractual dispute, but some news sources reported in April that Ethiopia Electric Power “is planning to restart operations.”

The plant is designed to incinerate 1400 tons of waste a day, and when it eventually operates, it will do so within the CO2 emission limits of the European Union.

The Reppie facility in Addis Ababa, Ethiopia, is Africa’s first waste-to-energy plant.

“[Ethiopians] show us the way that we Africans need to act,” says Kabbaj.

He believes Morocco is a prime-candidate for Africa’s second waste-to-energy plant. He makes it sound like it is only a matter of time before the technology comes to Morocco.

A few things do stand in the way though, he adds.

Next steps

The government will need to make some changes to Morocco’s legal framework, Kabbaj explains. The public-private-partnership law does not currently allow Moroccan municipalities to enter into these types of public-private contracts. Given municipalities are in charge of waste management, the law will need to be amended so that they can sign these types of contracts, he says.

Then it will be about convincing all the relevant stakeholders about the idea.

“I do remember the first day I introduced the technology in 2016 after the COP22 [international climate change conference] to the main stakeholders and municipalities. I was told it could not be done because the calorific value of Moroccan waste is so low due to high content of organics and it would be too expensive,” Kabbaj explains.

He then explains that his feasibility studies eventually showed decision-makers that the technology was actually a reliable solution. 

“Based on my experience, people working in the ministries realize [waste-to-energy] is the best option, but the challenge is that there are a lot of stakeholders who all need to be convinced,” he says.

“It’s going to take time.”

Funding is also an issue. One small plant costs on average $120 million. But according to Kabbaj, there are plenty of private companies interested in this type of venture: “the method is to partner with someone who has the expertise to build a waste-management plant.”

(Feb 7, 2020) A new Bloomberg New Energy Finance report indicates that $2.8 billion was spent on renewables projects in sub-Saharan Africa (excluding South Africa) in 2018 – a regional record and some $600 million more than the previous year.

The outlet said that more renewables investment flowing to sub-Saharan African countries than ever before is a testament to how cheaper technology, investor familiarity and subsidy schemes are helping clean energy spread across the continent. (BNEF’s figures for 2019, released on January 16, show investment in the region exceeding $2 billion for the third year. The 2019 total is currently estimated at $2.1 billion, but this may be revised up in due course.)

As investors cast a wider net, projects are being built outside of mature markets such as South Africa. Many utility-scale solar projects are being developed in countries that have not built much renewables infrastructure to date. Some 1.2GW of PV are expected to come online in 2021 outside of South Africa – that is more than twice the amount commissioned in 2018.

Figure 1: Renewables investment, sub-Saharan Africa excluding South Africa

Country-level targets and incentives are backed by assistance from multilaterals, which remain a key source of finance and have helped roll out renewable energy auction programs. The World Bank’s Scaling Solar program for instance awarded just under 400 MW of PV capacity over 2015-18, equivalent to 39% of the total installed outside of South Africa over the same period. Such auctions have yielded some of the world’s lowest bid prices for solar power – several projects have won capacity at prices under $0.04/kWh.

But such auctions are double-edged. On the one hand, they prove that large-scale renewables can be procured throughout the region and help develop local familiarity with clean energy. Many are bundled with features designed to reduce project costs and risk, such as pre-secured sites. Yet, as BNEF analyst Antoine Vagneur-Jones points out, “that helps lower prices, but can also lead to government expecting to procure power at the same rates for projects that are not backed by such frameworks.”

Other hurdles remain to be overcome. Several sub-Saharan African countries sport an apparent surplus in installed power generation capacity. Taken at face value, this can weaken the case for adding renewables. But plant availability issues and transmission constraints mean that the gap between supply and demand is often less clear than it would seem.

Meanwhile, a prevalence of take-or-pay contracts means that producers are remunerated for power that is not consumed. Whether by attempting to terminate or renegotiate contracts, governments are striving to reduce their obligations in countries such as Ghana, Kenya and South Africa. Achieving clarity on how to balance future clean energy investments with procurement agreements will be vital if the clean energy is to grow at scale.

The development of regional power markets will allow countries to move beyond such bilateral agreements. Power has long been traded in southern Africa, and nascent power pools in eastern and western Africa will enable countries to exchange surplus electricity across their borders. But a lack of private investment in transmission infrastructure, concentrated power markets and small generation fleets will hinder their growth.

Developers having access to guarantees and hard currency lowers barriers to investment, but risk perceptions are such that access to local financing for large-scale renewables remains a distant prospect. Yet recurrent shortages of hydropower and a shift away from financing coal by such backers as the African Development Bank are increasing the attractiveness of clean energy.   

(October 7, 2019) After a three-year slowdown, increased fundraising suggests private equity investors are bullish about business prospects in African economies once again.

In the first half of 2019, the total value of fundraising closed by Africa-focused private equity firms reached $1.7 billion, according to a report from African Private Equity and Venture Capital Association (AVCA). While not an exact science, the half-year total is on pace to surpass fundraising figures from the last two years and match the $3.4 billion raised in 2016—the second highest total in the last five years.

In one of the largest fundraising totals recorded in the period, Climate Fund Managers closed $850 million for its Climate Investor One fund which will focus on making bets on renewable energy projects across Africa, Asia and Latin America. Amethis, an investment fund manager solely focused on African businesses, closed over $400 million for its Amethis Fund Two.

But while fundraising amounts are inching higher, the total value of deals are not: the 79 private equity deals in the first half of the year totaled $700 million in value, on pace for the lowest value total in the last half decade.

Private equity exits are also on pace to slow down this year with only 19 recorded exits in the first half of 2019. Similar growth in the second half of the year will result in the fewest private equity exits on the continent since 2012. It’ll also be a departure from a strong run over the past decade which has seen sustained flow of private equity exits amid political uncertainty and the downturn in growth (and weakened currencies) in some African economies.

Trade buyers, defined here as other private equity firms, also accounted for more than half of exits in the first half of 2019, a reflection of the lack of options through initial public offerings given the small size of local public equity markets.

(September 13, 2019) Six ASEAN-focused funds have raised $500 million in the first half of 2019.

Fundraising for the private equity and venture capital industry in Southeast Asia has hit new highs e first half of the year, according to financial data and information provider Preqin.

A record 17 venture capital funds focused on the Association of Southeast Asian Nations (ASEAN) region raised $900 million in 2018.While buyout and growth funds have already matched 2018’s total, according to a report from Preqin.

“Southeast Asia presents a wealth of opportunities to private equity and venture capital investors, and clearly many of them are starting to take an increased interest in the region,” Ee Fai Kam, Preqin’s head of Asia research said in a release. “With several large cities on the global stage, and governments that are encouraging entrepreneurship and technological innovation, these countries make fertile ground for venture capital investment in particular.”

The fractured regulatory environment can create a challenge for investors.Political uncertainty in some areas may be dampening larger scale buyout investment.

According to Preqin, there are another 70 ASEAN-focused funds currently in market targeting a total of $8.5 billion in capital. A significant portion of the interest in the region is coming from foreign investors. 84% of the known investors in ASEAN-focused funds are based outside the region.

According to the report, venture capital is one of the key strategies for investors in the ASEAN region as investors remain optimistic, and fundraising has been going well despite the global economic volatility.

“Investors showed a strong appetite for early stage start-up funds in particular, whose share of the total number of funds raised increased from 21% in 2017 to 29% in 2018,” the report noted. The uptick added to the aggregate value of series B and C financings which increased to $1 billion from $600 million over the same period.

There have been 222 deals in ASEAN markets worth $3.4 billion since the beginning of 2019, compared with 220 deals worth $3.1 billion for the first half of 2018. Singapore remains the regional hub for deals, generating $2.4 billion in venture capital deals so far in 2019, which is up sharply from the $1.3 billion generated during the first half of last year. The report cited recent large deals in the venture capital arena, including China-based social media platform YY Inc.’s $1.5 billion acquisition of Singapore-based Bigo Technology in March.

ASEAN-focused buyout and growth funds have together collected $800 million as of June, matching the total amount raised in all of 2018.However, the report notes that fundraising is down from its peak of $6.1 billion in 2015. As of June 2019, there are 19 ASEAN-focused buyout and growth funds in market, collectively seeking $3.6 billion in investor commitments.