{"id":8063,"date":"2020-02-13T09:45:03","date_gmt":"2020-02-13T06:45:03","guid":{"rendered":"https:\/\/africasustainabilitymatters.com\/?p=8063"},"modified":"2026-01-11T05:30:51","modified_gmt":"2026-01-11T05:30:51","slug":"why-france-is-investing-billions-in-east-africas-green-projects","status":"publish","type":"post","link":"https:\/\/rayscohosting.best\/ASM\/2020\/02\/13\/why-france-is-investing-billions-in-east-africas-green-projects\/","title":{"rendered":"Why France Is Investing Billions In East Africa\u2019s Green Projects"},"content":{"rendered":"\n

The French Development Agency (AFD<\/a>) has been promoting sustainable development in the region through green projects financing, including geothermal and hydropower power plants alongside high-voltage transmission lines.<\/p>\n\n\n\n

Kenya represents the single biggest AFD investment portfolio in energy with \u20ac1 billion (Sh116 billion) funnelled in Kenya\u2019s power projects, over the past 20 years.<\/p>\n\n\n\n

The Africa Sustainability Matters (ASM) <\/em>caught\nup with the AFD regional director Eastern Africa Christian Yoka in his Nairobi\noffice to shed more light on the agency\u2019s mission.<\/p>\n\n\n\n

Here are the excerpts:<\/p>\n\n\n\n

What’s the role of AFD in sustainable investment in eastern Africa? <\/strong><\/p>\n\n\n\n

The French Development\nAgency has been quite active in the region for the past 30 years, largely in three\nstrategic sectors \u2013 energy, water and private sector support.<\/p>\n\n\n\n

We believe these three pillars hold the key to socio-economic transformation by supporting growth and development alike.<\/p>\n\n\n\n

Our total portfolio\nwithin eastern Africa is around \u20ac4.5 billion (Sh522 billion) invested in\nenergy, water, urban development and private sector support.<\/p>\n\n\n\n

Our footprint covers 11\ncountries throughout eastern Africa. This includes EAC (East African Community)\ncountries and Horn of Africa countries \u2013 Ethiopia, Djibouti, Somalia and\nEritrea.<\/p>\n\n\n\n

People and planet\ngoals, more than anything else, drive our investments in the region. <\/p>\n\n\n\n

The region\u2019s electricity\nsector has particularly received special attention from the French agency. Why?<\/strong><\/p>\n\n\n\n

Electricity is a powerful tool to deploy in boosting society\u2019s socioeconomic fortunes. Improving access to electricity has already been one of the key pillars in poverty reduction strategies among countries in the region.<\/p>\n\n\n\n

That\u2019s why it\u2019s also\none of our top priorities in development financing throughout the world. Note\nthat electricity represents 20 percent of AFD development financing.<\/p>\n\n\n\n

To this end, our role\nis to help countries to build modern, efficient renewable energy infrastructure\nto boost growth and anchor socioeconomic development. That\u2019s precisely why\nwe\u2019ve made electricity one of our focus areas. And thanks to recent and ongoing\nprojects, Kenya\u2019s electrification rate has jumped from slightly a third of the\npopulation six years ago to 75 percent, an impressive run.<\/p>\n\n\n\n

The AFD has mainly focused on\ngreen energy financing. But some countries in the region, including Kenya, plan\nto build coal and nuclear power plants in coming years. Will these plans\nreceive the same level of support from AFD?<\/strong><\/p>\n\n\n\n

When it comes power generation, we have some sectors that we can support, and those that we won\u2019t.<\/p>\n\n\n\n

Our focus on renewable energy sector is important in light of ongoing global efforts to fight climate change. It has become quite imperative to look at investment decisions from all points of view, not only in terms of tariffs and the diversity of the country\u2019s energy mix, but also environmental impact.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Remember not so long\nago in 2015 we had the Paris conference on climate change. And France took some\ncommitments. Those binding commitments, therefore, guide AFD actions. To this\nend, the French Development Agency has strong commitments that all the projects\nwe support have to be 100 percent in line with Paris agreement.<\/p>\n\n\n\n

In that respect, for\ninstance, financing coal power plants won\u2019t be something we\u2019ll do. We equally won\u2019t\nfinance nuclear plants; this is something we simply cannot do.<\/p>\n\n\n\n

Is Kenya, therefore, better\noff without coal and nuclear in its power mix?<\/strong><\/p>\n\n\n\n

If we look at Kenya,\nfor instance, we see a lot of unexploited potential in terms of renewable\nenergy available to it \u2013 solar, geothermal and wind. We, therefore, don\u2019t feel\ngoing into fossil fuel power plants is necessary. This applies to other\nregional economies too.<\/p>\n\n\n\n

I definitely think\nthat Kenya has huge potential worth exhausting before going to other areas.<\/p>\n\n\n\n

Is this the global trend,\nshunning coal?<\/strong><\/p>\n\n\n\n

Oh yes, this is now a\nglobal commitment. You cannot choose electricity source mix without considering\nthe resultant impact on environment.<\/p>\n\n\n\n

Another consideration\nto take is that when a country makes an investment, it\u2019s going to have an\nimpact on the end tariffs. And from an investment point of view, geothermal has\nhad a huge impact on reducing power tariffs, with Kenya being a good case\nstudy.<\/p>\n\n\n\n

That\u2019s why we don\u2019t\nfeel there is need to go for coal, and yet there\u2019s enough room for other\nrenewable energy sources. Remember studies indicate that Kenya\u2019s Rift has a\npotential of 10,000 MW waiting to be exploited. That\u2019s five times more than\nKenya\u2019s current total power capacity.<\/p>\n\n\n\n

But government officials\nreckon that wind and solar are intermittent sources and cannot be relied upon.\nAnd with geothermal, there\u2019s no guarantee future wells exploration will yield\nenough steam to develop electricity. Plus geothermal plants sit along the\nvolcanic belt in Rift Valley and there\u2019s need for diversity in power mix as a\ncontingency measure.<\/strong><\/p>\n\n\n\n

I\u2019m not in the\ndriver\u2019s seat when it comes to final decisions. If the government says we\u2019re\ngoing for coal, fair enough. But the question is will the AFD finance them? No.<\/p>\n\n\n\n

Because of green\nenergy commitments we have, this is something we won\u2019t be involved in.<\/p>\n\n\n\n

Taking stock, what are the major\nsuccesses of the AFD campaign in the region\u2019s electricity sector?<\/strong><\/p>\n\n\n\n

Indeed, there are several\nsuccesses to talk about in financing energy projects in the region. In Kenya,\nfor instance, geothermal is clearly a real success. <\/p>\n\n\n\n

Because of investment\nin geothermal (additional 280MW in Olkaria, Naivasha in second half of 2014),\ntariffs have significantly dropped for end users. This is a double-win since tariffs\nare down while the energy source is clean.<\/p>\n\n\n\n

The second aspect is\nthat by financing geothermal, we have enabled skills transfer and human\nresource development locally.  People\nhave been trained and employed in the energy sub-sector.<\/p>\n\n\n\n

And today, throughout Africa\nand indeed throughout the world, Kenya is recognised as major player in\ngeothermal. That is a reason for us to be proud, as the financiers.<\/p>\n\n\n\n

How about the successes in\nother countries in the region?<\/strong><\/p>\n\n\n\n

Let\u2019s now take a look\nat Ethiopia. In Ethiopia, we financed the country\u2019s first wind farm, the 120MW Ashegoda\nwind farm in 2013. Note that it was the first of its kind, the largest even, in\nsub-Saharan Africa. That\u2019s something we take pride in.<\/p>\n\n\n\n

In Uganda, the AFD\nfinanced the Bujagali hydropower project with a capacity of 250MW. Before that\nproject, there was no cheap energy. The plant is now producing half the\nproduction capacity of the country.<\/p>\n\n\n\n

What are the challenges?<\/strong><\/p>\n\n\n\n

Well, some challenges still remain, i.e rural electricity provision <\/p>\n\n\n\n

What new projects is the AFD\nlooking to finance in future?<\/strong><\/p>\n\n\n\n

I won\u2019t go into too much\ndetail in terms of figures; but I\u2019ll talk about different segments, not only in\nKenya but in other countries in the region as well.<\/p>\n\n\n\n

I earlier mentioned\nthe challenge of rural development through electricity access.  To this end, mini grids are becoming very\npivotal. This is an area that we will work heavily in countries like Uganda,\nfor instance.<\/p>\n\n\n\n

In Kenya and Tanzania,\nwe\u2019ll focus on transportation of electricity from points of generation. Here,\nwe\u2019re talking of transmission and distribution lines. This will be given\npriority. <\/p>\n\n\n\n

Besides, when it comes\nto off-grid energy solutions in Kenya, our subsidiary Proparco, which has specialised\nin financing private sector, will be heavily involved.<\/p>\n\n\n\n

In Djibouti, we\u2019re\nworking in geothermal alongside the World Bank and African Development Bank\nwhile in Ethiopia we\u2019re already involved in geothermal in Tendaho area.\nProparco, our subsidiary, is also looking at other private geothermal projects\nin Ethiopia.<\/p>\n\n\n\n

The AFD equally runs a\nprogramme in which the agency offers lines of credit through commercial banks to\ngreen projects owned by private entrepreneurs under the <\/strong>Sustainable\nUse of Natural Resources and Energy Finance (SUNREF). Tell us a little bit\nmore.<\/strong><\/strong><\/p>\n\n\n\n

This programme is\nquite innovative in the sense that we\u2019ve channeled a line of credit directly to\nlocal commercial banks for onward lending to strategic green energy projects.<\/p>\n\n\n\n

It\u2019s a powerful tool. Before\nSUNREF, our funding was limited to public sector projects. We then quickly\nrealised private sector players could equally be key players in the energy\nspace, hence rollout of the scheme.<\/p>\n\n\n\n

Under SUNREF, which local banks are you working with and how much funds have been issued? <\/strong><\/p>\n\n\n\n

So far, we have 30 SME (small and medium-sized) projects financed to the tune of $75 million (Sh7.5 billion) in Uganda, Tanzania and Kenya. When it comes to local banks, we\u2019re working with Co-operative Bank, CBA, Bank of Africa and DTB bank, especially in Uganda.<\/p>\n\n\n\n

What are the lending terms to\nprivate investors and what\u2019s the eligibility criteria?<\/strong><\/p>\n\n\n\n

We have two components to our financing. First,we have long-term financing. We understand most of these projects have long gestation period, turnaround takes some time before revenues start trickling in. To this end, we\u2019re bringing in long term financing to local banks.<\/p>\n\n\n\n

The second component\nis that our lending is on concessional terms, lower than market rates.<\/p>\n\n\n\n

On the second\nquestion, to be eligible obviously the project must be green. <\/p>\n\n\n\n

But over and above\nthat, the project in question must demonstrate measures taken to ensure energy\nefficiency. This is crucial, not only because of the resultant impact on the environment\nbut also as a factor of cost of production and end retail prices.<\/p>\n\n\n\n

What have been the successes of\nSUNREF loans to private projects through local commercial banks? <\/strong><\/p>\n\n\n\n

I would say the\nsuccess has been two-fold; we\u2019re not only bringing financing. We also have another\ncomponent attached to the financing aspect and that\u2019s technical support. <\/p>\n\n\n\n

The programme has\nfacilitated local banks to develop their technical capacity in financing analysis\nof green energy projects. Beneficiaries have equally benefited from technical\nand financial expertise through training.<\/p>\n\n\n\n

This two-pronged\napproach is quite powerful in bringing about long-lasting impact on the\nsociety.<\/p>\n\n\n\n

The AFD is the implementing\nagency in the financing of the green mini-grids project in off-grid remote\nvillages in the region. What\u2019s the overriding objective of this drive?<\/strong><\/p>\n\n\n\n

The main one is toimprove electricity access rate in\nrural areas. Our role is to go and support that objective. But it should be\nnoted from the outset that tariffs on mini grids are expensive compared to those\non the national grid. When it comes to pricing, the variation becomes a social injustice\nto rural customers on mini grids. And not only that. It\u2019s also an economic\nquestion. For instance, we should ask, can rural homes afford to pay for the\nexpensive power made available to them through mini grids?<\/p>\n\n\n\n

To this end, we\nfinance mini grids through grants to private developers, not loans, because we\nrealise these projects need subsidies in order to reduce consumer tariffs.<\/p>\n\n\n\n

In the region, we run\nthe green mini-grid project in two phases. The first phase is financed by DFID\nof UK and the other by the European Union, but they\u2019re being implemented\nconcurrently by the AFD. We come in as the implementing agency. <\/p>\n\n\n\n

As you earlier indicated,\nhouseholds on mini grids currently pay a lot more for electricity than those on\nthe national grid, disfavouring village folks. How can this be harmonised?<\/strong><\/p>\n\n\n\n

Indeed that\u2019s true.\nWe\u2019re having talks with the government on how to smooth out the disparity. We\nfeel village folks shouldn\u2019t be discriminated against through higher pricing\nand yet it\u2019s a group that needs heavy subsidies due to their low incomes and\nsubsequent low purchasing power.<\/p>\n\n\n\n

The AFD is helping to\ndesign a solution to ensure tariffs come down on mini grids.<\/p>\n\n\n\n

Amid all these projects, how\ndo you ensure there\u2019s skills transfer among local sector players?<\/strong><\/p>\n\n\n\n

Technical assistance is\nat the heart of our operations. Remember I mentioned earlier that in geothermal\ndevelopment in Olkaria which we funded, there was skills transfer. Same thing\nwith the wind farm in Ethiopia, it was the first one. Now, thanks to technical\nlessons learnt from the Ashegoda wind plant, Ethiopia is using it as a spring\nboard to finance and develop more projects. <\/p>\n\n\n\n

The thing is, in every\nproject we\u2019re financing, we make sure to include technical assistance. Notice\nthat the ownership of the projects we finance belongs to the beneficiary, not\nus. And hence the benefitting parties need the technical know-how to operate\nit. <\/p>\n\n\n\n

We\u2019re not an\nimplementing agency, but a financing agency. So we have to make sure our\nbeneficiaries have the needed skills to implement these projects. And when we\nnotice the beneficiaries have inadequate skills we do provide technical skills\nthat comes along with our financing. That\u2019s very important to us. <\/p>\n\n\n\n

Still on the issue of\nskills transfer, remember I mentioned that we have our private sector financing\nsubsidiary Proparco. To be complete, soon the AFD will have another subsidiary,\nExpertise France, which will be completely dedicated to provision of technical assistance.\nThis means we\u2019ll have a holistic group which can bring different solutions to\nthe table. That is financing of private side, public side and also bringing in expertise\nthrough Expertise France.<\/p>\n\n\n\n

The AFD has equally financed\nregional transmission lines. Why this focus?<\/strong><\/p>\n\n\n\n

We noticed there\u2019s a disconnect\nbetween the surplus power capacity that several nations in the region have and\nwhat is transported to consumers. Customers in far-flung areas simply don\u2019t\nhave access, partly due to lack of transportation lines.<\/p>\n\n\n\n

But even more\nimportant is that we\u2019re financing and look to finance more interconnection\nlines among countries in the region. Why?<\/p>\n\n\n\n

In the region, we\u2019ve\nobserved, many economies rely on hydros, and this poses a challenge whenever\nrains fail. During such dry periods for a country that relies on hydropower,\nthe only choice is to turn to expensive thermal plants to bridge the deficit\ncaused by the dip in hydros or to resort to load shedding.<\/p>\n\n\n\n

To this end, interconnections\nwill give such countries more options to better manage their power resources,\neven during adverse conditions. That way, tariffs will remain low and power\nsupply steady and reliable. Interconnector lines will also facilitate regional\nintegration through creation of a power pool and trade.<\/p>\n\n\n\n

You have hardly mentioned\ninvestment in biogas and waste-to-energy projects. Is this an area you\u2019d wish\nto venture into?<\/strong><\/p>\n\n\n\n

We\u2019re actually open to that and it\u2019s something we\u2019re seriously considering.<\/p>\n\n\n\n

The French Development Agency (AFD) has been promoting sustainable development in the region through green projects financing, including geothermal and hydropower power plants alongside high-voltage transmission lines. Kenya represents the…<\/p>\n","protected":false},"author":3,"featured_media":8064,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","pagelayer_contact_templates":[],"_pagelayer_content":"","_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[111],"tags":[142,491,596,898,1007,1310,1394,1462],"class_list":["post-8063","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-social-responsibility","tag-afd","tag-djibouti","tag-ethiopia","tag-kenya","tag-mini-grids","tag-sustainability-development","tag-tanzania","tag-uganda"],"_links":{"self":[{"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/posts\/8063","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/comments?post=8063"}],"version-history":[{"count":0,"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/posts\/8063\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/media\/8064"}],"wp:attachment":[{"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/media?parent=8063"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/categories?post=8063"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rayscohosting.best\/ASM\/wp-json\/wp\/v2\/tags?post=8063"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

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