Africa must address six barriers to unlock greater climate funding

Africa is not receiving sufficient climate funding from the available pool and there are six key enablers that must be focused on to unlock that funding, GFA Climate and Infrastructure MD Jonathan First said on October 25 during the Africa-Europe Dialogue on African Climate Finance Priorities for COP26.

Firstly, he emphasised that everything done in Africa in terms of funding must align to the United Nations Sustainable Development Goals (SDGs) and environmental, social and governance (ESG) impacts.

Secondly, he said, Africa does not comprise of homogenous countries. Instead, he said, funders look at the continent in terms of five different regions – East Africa, North Africa, Southern Africa, West Africa and Central Africa – and target it on a regional basis according to the relevant entertwined political, economic and business aspects.

Therefore, he said, there was a need to take a regional approach when approaching funders, especially with regard to climate finance.

Thirdly, First said the two most important areas that funders were looking at for Africa were infrastructure and small and medium-sized enterprises.

He noted that funders preferred infrastructure as an asset class owing to identifiable assets and cash flows for projects. First said this was attractive for funders, especially private sectors ones.

Moreover, he noted that infrastructure would always be a priority for governments in Africa.

Fourth, First said only three countries in Africa were investment grade, therefore, normal investment criteria could not be applied in terms of the continent.

Owing to this, he indicated the need to look at things on a project finance basis, as this was what funders were doing. He elaborated that funders were largely ignoring the investment-grade rating, and instead were focused on a project finance approach in terms of how they structure finance, and therefore, countries on the continent must also follow suit.

Fifthly, First said people in Africa need to take responsibility and create a conducive regulatory and legal environment to give funders confidence to invest their money. Further to this is political will, he stressed.

Lastly, First said African countries must be mindful of how they use concessional funding, and must use this to catalyse private sector funding.

In terms of attracting more private sector funding, First emphasised the need for a pipeline of bankable projects, which he said was a challenge on the continent.

He also mentioned the importance of developing impact frameworks, with funders insisting on impact reporting.

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