private sector funding
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As the need for private sector funding and participation in climate mitigation in Africa increases, international investment institutions are also expected to play an increasingly important role in helping Africa to accelerate its energy transition.

A new partnership reached between the African Development Bank (AfDB) and the European Bank for Reconstruction and Development (EBRD) aims to ensure increased participation of the private sector in financing and implementation of sustainable projects.

Following the issuance of a $114 million package for the development of Egypt’s largest solar project in April 2021, the EBRD and AfDB are partnering to encourage, source and provide new funding to help bridge the $2.5 trillion annual financing gap for development in Africa.

The EBRD and AfDB will leverage their experience in global and regional financing to increase private sector financing in climate change mitigation, green and resilient infrastructure, and capital markets developments.

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Dr Akinwumi A. Adesina, president of the AfDB, said: “The new partnership agreement between our two institutions will pave the way for us to do more together, especially in supporting the growth of Africa’s private sector. The impact of COVID-19 on government resources is huge and we need to mobilise more private resources to help African countries build back stronger.”

With COVID-19 disrupting Africa’s progress towards reaching the UN Sustainable Development Goals through its negative impacts on businesses and economies, partnerships between financing institutions especially large banks is vital to speed up recovery.

In early May, South African bank Absa signed a deal to receive the continent’s first certified green loan, in the form of a $150 million loan from the International Finance Corporation.

Commenting on the development, Jason Quinn, Absa interim group chief executive, said: “Africa’s green transition requires considerable mobilisation of funds. The agreement with IFC bolsters our funding available for green projects and strengthens Absa’s position as a leader in financing renewable projects in South Africa.”

The loans will be directed towards the funding of renewable energy projects and other carbon emissions reduction initiatives.

The participation of the private sector in infrastructure development projects in developing countries saw a huge decline in the first half of 2020 as a result of the pandemic, according to a World Bank report. The report found a 52% decline in private participation in infrastructure in developing countries with almost $45.7 billion in investments being directed towards some 252 projects. {Read more to find out how Africa performed.}

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