Africa: developping access to low-cost energy
published on 07 April 2016
The AFD Group and the French Facility for Global Environment (FFEM) are supporting the initiative of the Energy Access Ventures Fund (EAVF) to provide assistance to SMEs in the energy sector in Africa.
The EAVF fund was launched in 2015 and invests in SMEs which offer low-carbon and low-cost solutions to rural and peri-urban communities in Sub-Saharan Africa. Its objective is to provide a million people on low incomes with access to electricity over the next 10 to 12 years. This new technical assistance mechanism will also help strengthen the companies which benefit from investments and thereby increase their efficiency and social impact.
Supporting off-grid or micro-grid energy infrastructure
In Africa, over 600 million people do not have access to electricity. Off-grid or micro-grid infrastructure has a key role to play in connecting people in Africa to electricity. It accounts for a significant proportion of investment needs in the energy sector, but the SMEs which lead these projects are often left out of traditional financial circuits.
The EUR 54.5m EAVF fund targets this high-growth segment. Its priority area of operation is East Africa, with a focus on Kenya, Rwanda, Tanzania and Uganda, as well as West Africa, with a focus on Côte d’Ivoire, Ghana, Nigeria and Senegal.
First investment in solar system company OGE
In November 2015, EAVF made a first USD 2m investment in the company Off Grid Electric (OGE). OGE offers affordable solar energy solutions to people who are excluded in East Africa. The company develops and markets solar systems which are combined with batteries to connect LED lamps, telephone chargers and small electronic equipment. It also provides leasing-based financing for these systems and uses a mobile phone payment system for the energy consumed. Every month, OGE provides over 10,000 new people with lighting. It plans to reach a million people in Tanzania by 2017 and develop in the other countries in the region.
Comprehensive mechanism to support SMEs in the energy sector
FISEA, the African fund held by AFD with PROPARCO as advisor, and FFEM have allocated EUR 300,000 and EUR 500,000, respectively, to finance EAVF’s technical assistance facility. This will allow the local companies which benefit from investments to receive training, as well as expert missions in key areas, such as management, governance, energy efficiency and environmental and social practices.
FFEM’s operation will focus on maximizing the social and environmental impacts of the companies which benefit from investments, whereas FISEA’s assistance will be dedicated to managerial capacity-building. Schneider Electric, the fund’s sponsor, is completing this mechanism by making its staff available pro bono (engineers, marketing experts, study managers, etc.) for 1,000 man-days a year. FISEA and FFEM’s technical assistance financing is completing an initial equity investment in the fund in 2015 of EUR 5m and EUR 1.5m, respectively.
The EAVF initiative, by supporting companies which offer affordable alternative solutions to the use of fossil fuels for various domestic and professional uses, will also contribute to reducing pollution and mitigating climate change.
ABOUT
The Investment and Support Fund for Businesses in Africa (FISEA) was set up in 2009. It is held by Agence Française de Développement (AFD) and advised by PROPARCO. It aims to support economic development and poverty reduction in Sub-Saharan Africa. FISEA is a EUR 250m fund and one of the main mechanisms for France’s initiative for growth and employment in Africa. It makes equity investments in companies, banks, microfinance institutions and investment funds in Sub-Saharan Africa. The fund is a complementary mechanism to AFD Group’s instruments and aims to support projects which have a strong impact on development and job creation. It particularly focuses on the development of small and medium-sized enterprises (SMEs).
The French Facility for Global Environment (FFEM) is a financial instrument of France’s cooperation and development policy dedicated to protecting the global environment in developing and emerging countries. FFEM has a EUR 90m budget for 2015-2018 and supports innovative actions in the fields of climate, biodiversity, international waters, land degradation, persistent organic pollutants and the stratospheric ozone layer. At the end of 2015, FFEM’s financial commitments stood at EUR 331m, with a portfolio of 285 projects, with 67% located in Africa and the Mediterranean.
