French Agency Loans €120m for Small Renewable Energy Businesses in South Africa

One hundred and twenty Euros ($175 million) has been made available to fund renewable energy and efficiency improvement projects of small and medium sized businesses in South Africa.

The funding

French development bank Agence Française de Développement (AFD) announced, at the end of September 2009, that it would be extending a €120-million credit facility to commercial banks in South Africa, to be used for smaller energy efficiency and renewable energy projects.

South African banks Absa, Nedbank and the Industrial Development Corporation are to distribute the credit as loan capital for the projects of small and medium sized enterprises (SMEs).

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AFD aims to help banks to increase their activity in the SME sector where the profitability of renewable energy investments is probably not as attractive as for larger projects.

The banks will offer a 12-year reimbursable credit facility up to €10 million, with no minimum amount specified. It is expected that suitable projects will be identified by early 2010, as the final terms are still under discussion.

Addressing Climate Change in Development

AFD will spend some €700 000 on technical assistance to the banks to address capacity building and technology transfer. Part of this will involve the use of AFD’s carbon footprint tool in investment evaluation.

This tool is a simple and pragmatic carbon calculator tool which is available on the AFD website. It was introduced in 2007 and was designed so that it could be used by every manager at AFD. Data on project emissions and emission reductions provided feedback to AFD’s investment decisions.

In South Africa the AFD will work with the commercial banks to transfer the carbon calculator tool technology as well as the knowledge required to use it. In this way they will be better placed to assess the climate change impact of the development projects they put in place.

In 2008 one third AFD’s funds went towards “low-carbon” projects which sought to address climate change and development. These funds contributed towards fuel switch projects; renewable energy projects such as the Bujagali hydropower dam in Uganda, and a 30-MW wind farm in China; energy efficiency projects such as a public lighting project in Dakar in Senegal; and credit lines such as the one being made available to South African banks.

This is the fourth in a series of posts that aim to provide information on the development of renewable energy in Sub-Saharan Africa and South Africa in particular. These are

• Big Opportunity in Renewable Energy Identified in South Africa - Start of a Series of Posts
• Lesedi Biogas to Build $15m Manure-to-Power Plant in Heidelberg, South Africa
• South African Company to Import Waste Vegetable Oil to Produce Biodiesel
• French Agency Loans €120m for Small Renewable Energy Businesses in South Africa

Photo Credit: Composite by Dave Harcourt using open source images by Martin Pettitt in Flickr and Vortexrealm, afloresm & U.S. Army Corps of Engineers in Wikimedia Commons.

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