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AfDB Approves 570m Rand Loan to Finance Affordable Housing in South Africa

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Akinwumi Adesina - Investors King
  • AfDB Approves 570m Rand Loan to Finance Affordable Housing in South Africa

The Board of Directors of the African Development Bank Group (AfDB) has approved a Senior Loan of ZAR 570 million to South Africa’s Housing Investment Partners Trust 2 -HIP2), also known as Vulumnyango Trust, to help finance affordable housing programmes in the country. The loan will help improve access to long-term affordable housing finance to South Africa’s lower-middle income earners currently with limited opportunities to access affordable mortgages.

It will also consolidate the growth of a strong affordable housing sector within South Africa. The project provides a demonstration effect of tapping local currency capital from Africa’s premier development bank, local asset managers and a State Owned Enterprise to foster South Africa’s economic growth through affordable housing. The project also reduces fiscal pressures on the South African government in respect of housing for a specific market segment and enables HIP2 to mobilize funding from other sources, including eventual access to South Africa’s capital markets.

Although South Africa is one of the more developed economies in Africa, the country still faces acute shortage of affordable housing in its main urban areas, estimated at 3 million units in 2014. This has resulted in more than 2,600 informal settlements springing up around 70 of South Africa’s major urban areas, making it very difficult for the government to reduce inequality and achieve inclusive growth targets.

Despite several government direct interventions in the sector, especially through the Reconstruction and Development (RDP) program which between 1994 and 2015 delivered over 2.9 million low cost houses for vulnerable and low income households, the housing needs of the lower-middle income earning households (otherwise referred to as the Gap Market) remain huge and unaddressed. HIP 2, which has now raised ZAR1.82 billion from National Housing Finance Company, Old Mutual Group, Futuregrowth and AfDB is targeting at offering more than 4,000 affordable mortgages to South Africa’s lower-middle income earners.

The intervention will generate other significant benefits including moving 2,500 – 6,500 out of informal settlements and create about 3,250 permanent jobs mainly for the youth. Overall, financing 4,386 affordable housing units is expected to generate over 10,000 jobs, including 950 – 1,296 direct jobs for women.

Stefan Nalletamby, Acting Vice President for Infrastructure Private Sector and Director, Financial Sector Development Department said: “The approved intervention will assist HIP2 in expanding and deepening South Africa’s housing finance sector and encourage orderly urban development for the provision of basic utilities such as water, sanitation, roads and electricity. In this respect, it will improve the lives of South Africans whilst also assisting in creating new employment opportunities.”

Presenting the project to the Board, Stella Kilonzo, Head of Financial Markets Division noted that “by extending this Senior Loan, the AfDB adds onto its existing initiatives to support affordable housing, development of mortgage finance institutions and deepening of local currency capital markets on the continent.”

“This is an excellent example of how we can intervene in middle income countries, such as South Africa, with developed financial systems where we generate impact through private sector on the quality of life of lower middle income earners in a sustainable manner. It opens up opportunities for the Bank to intervene in the sub sovereign debt markets and offer policy solutions on urbanization. This is hugely important given the fact that, at 3.4%, Africa’s urbanization rate is the fastest globally,” added Senior Vice President Frannie Leautier who chaired the Board meeting.

The Bank’s intervention is in line with its High 5 priorities which build on the Ten Year Strategy for 2013-2022, and specifically the 5th priority of Improving the Quality of Life for the People of Africa. The five focus areas are key to transforming the lives of the African people and therefore consistent with the United Nations agenda on Sustainable Development Goals (SDGs).

It will also have multiplier effects on industries related to the real estate sector and the creation of jobs in the construction industry. The loan will complement South African government’s efforts to develop a self-sustaining long-term affordable mortgage market in the country.

Furthermore, the project fulfils one of the Bank’s priority objectives to support investments that contribute to the widening and deepening of financial markets in Africa, and enabling the private sector to mobilize and access long term-local currency funding from local financial markets. The project will contribute to the growth of bonds backed by affordable housing mortgages as an investible asset class on South Africa’s bond markets.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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IEA Pushes for $1T Investment In Clean Energy By 2030, To Achieve Net-Zero Emission By 2050

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International Energy Agency (IEA)- Investors King

The International Energy Agency (IEA) has said that investment in clean energy in emerging and developing economies need to rise more than seven times, topping $1 trillion per year by 2030, to put the world on track for net-zero emissions by 2050.

A report conducted with the World Bank and the World Economic Forum (WEF) by the IEA stated that without stronger action, energy-related carbon dioxide emissions from those economies – mostly in Asia, Africa, and Latin America – would grow by five billion tonnes over the next two decades.

It said while developing and emerging economies account for two-thirds of the world’s population, they receive only one-fifth of investment in clean energy.

Annual investments across all parts of the energy sector in developing and emerging markets have fallen by about 20 percent since 2016, it added, partly because of challenges including weak regulation and a lack of profitable clean energy projects.

According to the report, last year, $150 billion was put into renewables, adding that unless much stronger action was taken, the 2050 target may not be met.

“In many emerging and developing economies, emissions are heading upwards while clean energy investments are faltering, creating a dangerous fault line in global efforts to reach climate and sustainable energy goals.

“Countries are not starting on this journey from the same place – many do not have access to the funds they need to rapidly transition to a healthier and more prosperous energy future – and the damaging effects of the Covid-19 crisis are lasting longer in many parts of the developing world.

“There is no shortage of money worldwide, but it is not finding its way to the countries, sectors and projects where it is most needed. Governments need to give international public finance institutions a strong strategic mandate to finance clean energy transitions in the developing world,” the IEA Director, Fatih Birol, stated.

The report noted that recent trends in clean energy spending point to a widening gap between advanced economies and the developing world even though emissions reductions are far more cost-effective in the latter.

Besides, it stated that emerging and developing economies currently account for two-thirds of the world’s population, but only one-fifth of global investment in clean energy, and one-tenth of global financial wealth.

“Annual investments across all parts of the energy sector in emerging and developing markets have fallen by around 20 percent since 2016, and they face debt and equity costs that are up to seven times higher than in the United States or Europe,” it said.

Avoiding a tonne of CO2 emissions in emerging and developing economies costs about half as much on average as in advanced economies, according to the report, stressing that it is partly because developing economies can often jump straight to cleaner and more efficient technologies without having to phase out or refit polluting energy projects that are already underway.

Describing the report as a global call to action – especially for those who have the wealth, resources and expertise to make a difference – and offers priority actions that can be taken now to move things forward fast, Birol stressed that as the world expands energy access, it also needs a global transition to low-carbon energy.

World Bank Global Director for Energy and Extractives, Demetrios Papathanasiou, said the bank would continue to support countries that seek assistance to transition away from fossil fuels and scale up low-carbon, renewable energy, and energy efficiency investments.

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deVere Launches ‘Green’ Investment Products as ESG Demand Soars

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Nigel Green - Investors King

Growing interest in environmental, social and governance (ESG) investing has prompted one of the world’s largest independent financial advisory and fintech organisations to unveil a new product to help clients benefit from this decade’s “ultimate megatrend.”

deVere Group will now be able to offer its clients a fixed-yield note of which the proceeds are allocated to the financing of eligible projects with a clear and defined environmental benefit, such as the reduction of carbon emissions.

In June last year, deVere revealed that 26% of clients around the world are eyeing exposure to or already have exposure to ESG investments. This has now increased to 44% over the last 12 months.

Of this new financial solution, Nigel Green, deVere Group CEO and founder says: “An increasing number of clients want to achieve profits with a purpose by investing in companies that prioritise reducing carbon, protect employees’ and consumer rights, and promote board diversity, corporate transparency and stakeholder accountability.

“As such, we feel it is our responsibility to bring to market financial solutions that can help them do this.”

“At the beginning of 2020 we identified that ESG will be this decade’s ultimate investment megatrend. Therefore, we will continue to develop products with legitimate ESG credentials.

He continues: “The ESG trend is set to gain further momentum for several reasons.

“First, governments and regulators are becoming increasingly pro-ESG which boosts investor confidence.

“For example, in the U.S. – the world’s largest economy – the Biden Administration is taking a tougher approach to the use of fossil fuels and is promising swift action to tackle climate change.

“In addition, the new chairman of the Securities and Exchange Commission (SEC), the U.S. financial regulator, Gary Gensler, is a proponent and is likely to strengthen investment and disclosure rules to help the U.S. catch up with Europe.”

He goes on to add: “Second, as millennials, who are statistically more likely to seek responsible investment options, become the major beneficiaries of the largest intergenerational transfer of wealth – an estimated $30tn in the next few years – we can expect both retail and institutional investors to continue to pile into ESG.

“And third, the pandemic has focused minds on the fact that the health of our planet directly affects human health which, in turn, affects the way we all live and work.”

As sustainable investments move from a ‘quirk’ or ‘nice to have’ to a legitimate portfolio diversification tool that delivers profits with purpose, deVere earlier this year announced it is to offer free, independent advice to clients on socially responsible investing, with the aim of positioning $1bn in environmental, social and governance investments within five years.

Of the new financial solution, Mr Green concludes: “This note is the next step in our sustainability journey. We look forward to developing more to help our clients with theirs.”

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G7 Development Finance Institutions, Multilateral Partner to Invest Over $80 Billion in African Businesses

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Business Solution - Investors King

The G7 DFIs, the IFC, the private sector arm of the African Development Bank, EBRD and the European Investment Bank today announced that they were committed to investing $80 billion in the private sector over the next five years to support sustainable economic recovery and growth in Africa.

The Covid-19 pandemic has caused a severe global economic and health crisis. The announcement is a welcome boost to support the long-term development objectives of African economies that have been negatively impacted by the crisis. It is the first time the G7 DFIs have come together to make a collective partnership commitment to the African continent.

The IMF estimates that sub-Saharan Africa needs additional financing of around $425 billion between now and 2025 to help strengthen the pandemic response spending and reduce poverty in the region.

The UK Minister for Africa, James Duddridge, said: “The UK is proud to back this commitment by world leaders at the G7 Summit to invest more than $80 billion in Africa’s private sector over the next 5 years.

“This investment will create jobs, boost economic growth, help tackle climate change and fight poverty. It comes at a crucial time as the continent rebuilds its economies, severely impacted by Covid-19.”

Nick O’Donohoe, the CEO of CDC Group, said: “The patient, high quality capital that DFIs provide is urgently needed if African economies are to start to rebuild quickly from the impact of the pandemic. CDC is committed to building long term investment partnerships in Africa that fuel sustainable private sector growth in support of the UN’s Sustainable Development Goals.”

Werner Hoyer, President of the European Investment Bank, said: “The EIB welcomes G7 leadership to enhance support for high-impact investment across Africa during and after the pandemic. Last year the EU Bank’s engagement in Africa, as part of Team Europe, represented the largest ever support for climate action and investment in fragile states in 55 years of EIB operations on the continent. We stand ready to cooperate further with African and multilateral partners to tackle both COVID-19 and accelerate the green transition in Africa.”

Makhtar Diop, IFC’s Managing Director, said: “Ensuring an inclusive and sustainable recovery for people, businesses and economies across Africa in coordination with our development partners, is at the core of IFC’s development mandate today. We know that the private sector will play a major role in financing Africa’s future by creating millions of jobs that are essential to ensuring sustained economic growth and poverty reduction. We, therefore, welcome this important partnership and are proud to provide financing and to work with partners to help create the right conditions to bring more private investment to Africa.”

David Marchick, Chief Operating Officer of U.S. International Development Finance Corporation (DFC), said: “Under President Biden’s leadership, investing more in Africa is a top priority for DFC in fulfilling our development mandate. DFC is proud to be doubling down on our commitment to Africa alongside our G7 and multilateral partners and will continue to prioritize investments in vaccine manufacturing, COVID-19 response, climate mitigation and adaptation, and gender equity on the African continent.”

Dario Scannapieco, Chief Executive Officer of Cassa Depositi e Prestiti (CDP), said: “Closer collaboration among Development Finance Institutions and multilateral partners is an essential factor in fostering sustainable economic recovery and growth in Africa. CDP looks forward to contributing to this strategic partnership, supporting the African continent in developing its entrepreneurial and financial private sector, to unlock its vast, untapped potential.”

Solomon Quaynor, African Development Bank VP, Private Sector, Infrastructure & Industrialization said: “We welcome this global partnership and the opportunity to provide the African voice, as Africa builds back better and boldly.  The opportunity to create jobs particularly for youth and women, from a focus on industrializing Africa underpinned by the African Continental Free Trade Area, will be our priority. Given the gap between the IMF estimates and what this partnership is committing to, we will seek to crowd-in African development partners, as well as African savings from SWFs, pensions, and insurance pools, estimated to have US$1.8 trillion AUM.”

Heike Harmgart, EBRD Managing Director, Southern & Eastern Mediterranean, said: “Harnessing the potential of the private sector is essential to supporting prosperity in Africa and meeting the continent’s development needs. In the North African countries where we work – Egypt, Morocco and Tunisia – we have invested over €11.5 billion in only 9 years, focused on boosting the private sector, developing green sustainable infrastructure and promoting youth and women participation in the economy. We will pursue our efforts to expand private sector investment opportunities at scale in the region in close cooperation with other development actors.”

Monika Beck, member of the DEG-Management Board, said: „Many of our African partner countries have been hit hard by the pandemic. We quickly developed new services to support private sector SME and to help protecting jobs and livelihoods. In Africa, DEG has always been specifically committed to creating prospects for the young, growing population. In addition to the continuing massive impact of Covid-19 we expect a further acceleration of the challenges connected to developments such as digitization and climate change. Therefore DEG welcomes and is proud to be part of the G7 DFI Africa initiative”.

Each DFI has its own investment criteria which are aligned to an assessment of need to achieve development impact across a range of sectors. DFIs play an important role in helping to build markets, mitigate risk and pave the way for other investors to enter new markets.

The G7 DFI group consists of CDCProparco (France), JICA and JBIC (Japan), DFC (US), FinDev Canada (Canada), DEG (Germany) and CDP (Italy). This commitment is also supported by the IFC, the Africa Development Bank, the European Bank for Reconstruction and Development and the European Investment Bank

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