The new coalition includes 16 governments, as well as investors such as the Green Climate Fund (GCF), the International Finance Corporation (IFC), the private sector financing arm of the World Bank Group, the UK government’s CDC Group, the Netherlands Development Finance Company (FMO), the Swedish International Development Cooperation Agency (Sida), the Swiss Agency for Development and Cooperation (SDC), the Swiss government’s international cooperation agency, UK Aid, the United States Agency for International Development, which manages the Power Africa initiative, as well as the fund managers Social Investment Managers and Advisors (Sima) and Acumen.
These investors, who are very active in the energy sector in Africa, have joined the Rockefeller, Ikea and Shell foundations in launching the Energy Access Assistance Fund (EARF), which is managed by Sima. This emergency fund has already achieved a first financial closing of $68 million and is expected to raise more than $80 million. The EARF aims to secure access to electricity for at least 20 million people in sub-Saharan Africa and Asia. Despite the improvement in the global Covid-19 health crisis, electricity providers investing heavily in Africa are still facing the consequences of containment.
An industry plagued by Covid-19
According to CDC Group, Covid-19 has broken the supply chain and increased the costs of solar components. This continues to cripple all players in the electricity access industry who provide renewable energy solutions such as solar lanterns, solar home systems, solar mini-grids, and clean cooking kits. These decentralised solutions accelerate access to energy in low-income communities and remote areas.
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“Sima’s analysis of energy enterprises eligible for emergency financing in 50 countries shows that 77% of potential borrowers need emergency financial assistance to stay afloat. Without such assistance, many companies could be forced to take drastic measures such as suspending operations, laying off staff or closing their doors for good, disrupting customers’ access to energy at a particularly difficult time,” says CDC.
Access to finance for over 90 companies
Sima will tap into the new emergency fund to provide low-interest subordinated financing to more than 90 energy access companies in need in sub-Saharan Africa and Asia. The coalition believes that the new fund will help preserve the gains of the once booming energy access sector. Driven by private companies, the sector has grown enormously, providing energy access to 470 million people in 10 years, creating more than 370,000 green jobs and avoiding emissions of 74 million tonnes of CO2 equivalent, according to CDC Group.
Jean Marie Takouleu