Africa Climate Summit may have culminated in the Nairobi Declaration, but last week’s inaugural talks were not short of conflicting views and competing agendas. One thing not for debate, however, was the private sector’s critical role in helping to deliver a just energy transition across Africa and the urgent need to leverage increasingly limited public resources to mobilise private finance at scale.

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By Camco’s Ieva Indriunaite, Brian Lukera Wambani & Laura Lahti

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When Nairobi hosted the Africa Climate Summit (ACS) last week, its key aim was to agree on a common African vision for accelerating action across the continent and to identify how this can be achieved in a way which does not compete with economic development priorities. Sound like a challenge? Or maybe an opportunity? According to Kenyan President William Ruto, the focus of the talks needed to be on the power of the continent’s potential to use the climate crisis as an opportunity to leapfrog traditional development pathways and become a leader in green growth.

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The inaugural summit – to be held biannually hereafter - was run in tandem with Africa Climate Week and the Green Climate Fund Global Private Investment Conference, also taking place in Nairobi. For a week, the Kenyan capital served as a focal point for climate talks, with President Ruto intending to use the events to galvanise support from other African countries and leaders to ensure the continent’s position on climate issues was well and truly heard.

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The events proved to showcase the continent's senior politicians' increasing leadership on climate issues, setting a confident and determined tone in the build-up to COP28 on the important role Africa can play in solving the global climate challenge and what African countries should expect in return.

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But driving green growth and climate solutions in Africa at the scale and pace needed is a formidable challenge, even at the best of times. Now, set against the turbulent backdrop of today's global economic and geopolitical landscape, it is all the more difficult – not least with the war in Ukraine diverting much needed donor resources from Africa. And this is at a time when African nations are already having to prioritise limited public resources to other urgent challenges like the ongoing cost of living crisis, as well as healthcare, education and access to energy, all the while under the increasing weight of foreign debt and weakening currencies.

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It is estimated that USD 2.8tn is needed between 2020 and 2030 to effectively implement African countries’ Nationally Determined Contributions (NDCs); however, current climate finance flows are a very long way off the pace, with just USD 30bn mobilised from domestic and international sources in 2020. With increased competition for the limited public funding in circulation, the challenge for the ACS was to find plausible solutions for mobilising the necessary capital for climate mitigation and adaptation efforts, while providing African countries with the fiscal breathing space to prioritise climate and development action. Or as President Ruto put it in his opening address, “a fair playing ground for our countries to access the investment needed to unlock the potential and translate it into opportunities”.

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The urgent need to mobilise private capital at scale

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The Nairobi Declaration, adopted by twenty African Heads of State and Government, proposes that a new financing architecture be established that responds to Africa’s needs, including debt restructuring and relief – the savings from which would enable more government resources to be channelled towards adaptation and mitigation efforts. This is hardly surprising given that African nations are responsible for a very tiny fraction of cumulative global emissions (Africa as a whole accounts for less than 4%), yet they are already facing the consequences of climate hazards. And that’s not to mention that wealthier nations are still failing to deliver on their promise of providing USD 100bn annually to developing countries to help them mitigate and adapt to the impacts of climate change.

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But even if this is achieved, public finance will not be enough to address the climate challenge. It is critical that the scarce concessional funding is used smartly, achieving more with less, and making sure we are leveraging the very most out of every public sector dollar, thereby catalysing significant private resources to maximise the impact of public funds.

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The mobilisation of private finance has never been more urgent or important, making it encouraging to see the Nairobi Declaration note the critical role of the private sector in driving green growth within African economies while contributing to equality and shared prosperity. We hope this acknowledgment by African leaders will lead to stronger collaborations between the public and the private sectors, bridging the gaps in this dialogue which have often been often slowing down green infrastructure development and innovation on the continent.

 

Our own highlight on this front was a meeting with the Nigerian Government delegation, led by Salisu Dahiru, the Director General of the Nigeria National Council on Climate Change, as part of our work with the Green Climate Fund. Our discussion focused on the role of the private sector in supporting NDC implementation, the importance of effectively monitoring and accounting for the impacts of private sector-led climate action, as well as the use of blended finance to de-risk investments and attract private capital to projects benefiting those most in need.

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Many panel discussions and conversations during the week acknowledged the role of blended finance and guarantee mechanisms in mobilising private capital to support climate action and green growth in African markets which would otherwise be considered too high risk. Yet there was also a widespread acknowledgement that the concessional capital required to anchor effective blended funds takes a long time to secure. If donors are serious about private finance mobilisation, it is important that they stay on the pulse of the current market conditions and timelines. Part of the solution to accelerating funding mobilisation is focusing more on collaborative approaches and on deploying capital to existing blended finance vehicles rather than resetting the dial and coming up with new ones from scratch.

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Enabling environment

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With all eyes on finance mobilisation through innovative financing mechanisms, the important role of an attractive investment environment is often forgotten. Clear, transparent and effective policies, regulations and processes promoting green growth can reduce the perceived level of risk in a given market (thus lowering the cost of capital) and send clear signals to the market, thereby fostering and supporting the sustainable growth of businesses at the local level.

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It was pleasing to witness during our participation at last week’s talks how governments are acknowledging the importance of providing the right enabling environment and their central roles in its delivery. However, there is a clear need for more support for capacity strengthening at all levels – from businesses to support the development of bankable investment pipelines (particularly in the adaptation space) to local financial institutions and governments.

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What next?

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The perception of ACS’s success, or otherwise, will depend on who you ask. With major economies South Africa and Nigeria not sending presidential representation and some arguing that the voice of civil society was missing in the discussions, it was certainly not without its confrontations and controversies.

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A lot has been made of the tangible outcomes from the event, too, with the widely reported USD 25bn of capital commitments being purported by many at the talks as already committed investments repackaged as new. But despite the naysaying, there were certainly many moments to be celebrated, from the launch of Virunga Power ’s (a REPP (Renewable Energy Performance Platform) investee) new country-scale distribution utility in Burundi to several climate adaptation investments, such as the first close of Catalyst Fund’s pre-seed venture capital strategy focused on companies building a climate-resilient future. We were delighted to play our own part, announcing nearly USD 25m in investor commitments for Spark Energy Services, the innovative financing platform we created to support energy efficiency and captive generation initiatives in Sub-Saharan Africa’s commercial and industrial sector.

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Plus, of course, ACS resulted in the Nairobi Declaration, a document that puts African leadership’s requests and position firmly on the table ahead of COP28 and shows the world that the continent is increasingly united on climate issues while calling for others to play their part and do so at an accelerated pace.

 

How much influence the declaration will wield remains to be seen, but as Equity Bank CEO James Mwangi told the audience at a European Investment Bank (EIB) side event last week: “There is nowhere to hide. From Nairobi to the UN, from the UN to the World Bank meeting in Marrakesh, from there to Dubai, there is nobody who cares who will not get this message from Nairobi in the next two months."