The African Development Bank is developing mechanisms to increase access to local-currency debt that the continent needs to underpin a new drive to bring electricity to 300 million people by 2030, according to the lender’s head, Akinwumi Adesina.
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(Bloomberg) — The African Development Bank is developing mechanisms to increase access to local-currency debt that the continent needs to underpin a new drive to bring electricity to 300 million people by 2030, according to the lender’s head, Akinwumi Adesina.
The program, which Adesina unveiled alongside World Bank President Ajay Banga at a conference in Dar es Salaam in Tanzania this week, envisages tens of billions of dollars of investments in energy projects being rolled out across the continent.
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Previous electrification attempts in Africa have stalled because developers need to borrow in hard currency to pay for equipment, while their revenue streams expose them to some of the world’s most-volatile exchange rates. The new plan — dubbed Mission 300 — will utilize funding instruments to try and avoid that pitfall, according to Adesina.
“There is a mismatch in terms of the currency-market risk,” he said in an interview after the conference this week. The bank, which Adesina says has a $393 billion capital base, will deploy hedging instruments and set up local-currency financing facilities to counter the problem.
Mission 300 aims to tackle one of sub-Saharan Africa’s most intractable problems — the fact that the region is home to 84% of the world’s 680 million people who lack electricity. That dulls productivity and limits access to education and healthcare.
“That is not a gold medal that I want Africa to have,” Adesina said.
The African Guarantee Fund, which was established by the AfDB and the governments of Denmark and Spain in 2011, said it will spearhead an initiative to mobilize $5 billion to help fund companies that provide distributed renewable energy services. That refers to off-grid power supplies, such as solar home systems and mini grids.
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The aim is to help companies deal with “currency mismatches,” high-collateral requirements and a lack of access to long-term financing, the fund said in a statement.
A dozen African countries that signed up to Mission 300 showcased their electrification programs this week, with envisaged investment from public and private sources totaling more than $115 billion. Budgets ranged from $1.77 billion in Niger to $36 billion in the Democratic Republic of Congo.
Planned projects included building new power plants and transmission lines, fixing regional power pools, facilitating off-grid solutions for remote communities and cutting reliance on firewood and charcoal for cooking. Other countries are expected to come forward with their plans in coming months.
The AfDB will avail $4.1 billion to the first 12 signatories to Mission 300 and the World Bank $8.2 billion, Adesina said. The World Bank’s Banga said in an earlier interview that as much as $85 billion may be sourced from various institutions as well as the private sector for the program for all of sub-Saharan Africa by 2030.
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Additional partners have committed money to the program, with the Islamic Development Bank pledging $2.5 billion, the OPEC Fund for International Development $1 billion, the Asia Infrastructure Investment Bank $1.5 billion and Agence Francaise de Developpement €1 billion ($1.04 billion).
Heads of state or senior officials from 27 nations attended the conference in Tanzania, as did private sector chief executive officers including Patrick Pouyanne, the head of TotalEnergies SE.
“We want to make sure that the policies and the regulations are so that they can actually encourage the private sector to make those investments,” Adesina said. “It’s a very clear line of sight of exactly how we would get to those numbers by 2030.”
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