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German development bank boosting investment support for renewables in Africa

Out-Law News | 05 Aug 2015 | 12:34 pm | 1 min. read

Germany’s government-owned KfW development bank group plans to establish a specific line of credit “to fund renewable and energy-efficient projects” in Africa, according to the African Export-Import Bank (Afreximbank).

Afreximbank said KfW’s pledge, aimed at encouraging the development of solar and wind power projects in particular, followed its commitment to continue support for trade finance business in the region through Afreximbank.

Both institutions “agreed to work together in an environmentally sustainable manner by targeting an initial pipeline of $1 billion commencing in 2016”, Afreximbank said.

The announcement came after Frankfurt-based KfW’s investment and development subsidiary, DEG, said it was financing Berlin-based solar company Mobisol in its expansion in East Africa. DEG said it had also taken an unspecified “financial stake” in Mobisol, which supplies off-grid solar systems to homes in rural areas.

DEG management board member Christiane Laibach said supporting German SMEs such as Mobisol with environmentally-friendly projects in sub-Saharan Africa was part of the institution’s strategic goals.

Mobisol’s technology combines “environmentally friendly technology with an innovative payment system”, DEG said. Customers pay for installations in small monthly payments via their mobile telephones.

DEG said: “Mobisol has already equipped over 21,000 households in Tanzania and Rwanda with off-grid solar power systems. The current financing enables the company to further expand. It is envisaged that 150,000 people in rural East Africa will use Mobisol systems in the future. Moreover, 10,000 micro entrepreneurs are expected to generate an income amounting to $10 million annually.”

In the 2012 update of the Tanzania Power Master Plan (146-page / 2.35 MB PDF), the government said it wanted to see 250,000 new connections to the national grid annually from 2013 to 2017.

Solar power is among a number of energy sources being explored to boost power supplies across Tanzania. The African Development Bank (AfDB) said last January that the Sustainable Energy Fund for Africa (Sefa) had approved a preparation grant for the development of a number of “solar-hybrid mini grids” in rural growth centres in Tanzania.

According to the AfDB, Tanzania’s national electricity coverage is estimated at about 21%, with the transmission grid covering a minor part of the country and leaving out most of the territory, particularly in western and southern regions.

Last March, a new private equity fund was launched dedicated to financing projects by small firms that boost access to energy in sub-Saharan Africa.

The Energy Access Ventures Fund has secured commitments of €54.5m to invest in five-year instruments for about 20 African SMEs, with the aim of expanding infrastructure to provide electricity for the first time to up to one million people in the region by 2020.

The private equity fund is jointly backed by Schneider Electric of France, the UK’s development finance institution CDC, the European Investment Bank, the French Development Finance Institution Proparco, through its investment and support fund for business in Africa FISEA, the Opec Fund for International Development and the French Global Environment Facility.