While Africa has affirmed its commitment to play its part in the global mobilization against climate change, the question of financing this ambition continues to arise two years after the Paris Agreement on Climate Change. The subject was at the center of the 4th edition of the Green Finance conference or international conference on financing green growth in Africa held this June 19 in Abidjan.
How to finance economic growth that is respectful of the “green and inclusive” environment, with “local content pushed”? This is the challenge of the Abidjan meeting presented by Félix Bikpo, General Manager of the African Guarantee Fund (AGF) at the opening of the meeting. The idea is to “allow the African continent to take full advantage of market opportunities as well as to honor commitments” at the international level, added Arancha Gonzalez, Executive Director of the International Trade Center (ITC), co- organizer of the event.
At the heart of this problem is the question of mobilizing financing for sustainable investments on the continent. And with this in mind, the private sector and even more so SMEs, representing “98% of companies”, appear to be the most opportune way to build green growth in Africa.
“Today, to be able to play this role of engine of growth, these SMEs must invest in green technology in order to be able to operate in an environmentally sustainable environment for the sustainability of their activities and thus of our economies,” said Félix Bikpo .
SMEs help to ensure that funding will impact all sectors of society, even the most modest, argued Arancha Gonzalez. “We think we need to work at the level of SMEs. They are the backbone of our economies, generating over 60% of our jobs, especially for women and youth. And we know that an exporting SME is a more productive, competitive and better paying SME, “she added.
However, mobilizing funds to support the transition to greener growth remains problematic. There are institutions like BOAD (West African Development Bank), accredited by the three main funds – Climate Change Adaptation Fund, Green Climate Fund and Global Environment Facility. – who manages green lines of financing towards the WAEMU zone. There is also the NDF, the Nordic Development Fund (a common financial institution in Denmark, Finland, Iceland, Norway and Sweden, focused exclusively on climate change and development in developing countries). low income), which provides financing to intermediaries in Africa such as AGF, or AfDB, the African Development Bank, which also provides credit lines for green projects. But as one participant noted: “Money does not flow to SMEs”.
In fact, the main commercial banks benefiting from these green financing lines are accused of demanding too much interest and 5 years at best, a period deemed unsuitable for the important investment needs of SMEs. A deal that can be bypassed according to Yacoubou Bio SAWE, the director of the environment and climate finance of BOAD, by mobilizing concessional resources from international donors, but “these resources are increasingly rare” he acknowledged.
But, it is still necessary for SMEs to have bankable projects. “The majority of SMEs are not viable and do not have the capacity to absorb significant resources” via their projects, argued Yacoubou Bio SAWE, which also proposes an incentive to group these companies so that they have a size critical to interest investors.
“Where are these financings? “
These funders, however, argue that there are funds. “Lines of credit and guarantee mechanisms are not lacking, yet they remain underused,” noted Arancha González.
“Where are these financings? “Asked Patricia Zoundi, SME boss at the head of an organization grouping companies with an international label, but unfortunately have not yet obtained bank financing.
On the other hand, there are SMEs that have innovative solutions in the ecological field with significant development potential but which do not have a structuring or a profile of interest to the financial world. “We are in a field of green financing that banks do not necessarily control yet, while there are initiatives, small businesses that have viable solutions for the future, especially in energy saving. But there is no bank to help them start their takeoff, “said Edi Boraud, president of AIER, the Ivorian association of renewable energies.
“We are SMEs, we know we are not profitable at the moment, but we are in growth sectors and we need to be mentored and have funds to improve our performance.
Call for State commitment
In this context, where external financing is used, it is forgotten that resources can be raised in local economies, notably through incentives. “The funding could come from domestic markets,” suggested a participant at the meeting. “Public procurement can be geared towards green projects to create momentum within the states that should get the financial sector to focus on it,” she said.
Three avenues of solutions to explore
In his speech, Arancha González spoke of three avenues that can be explored to give a valuable boost to SMEs. First, it suggests adapting financial engineering to the risk analysis of SMEs. Standardized risk assessment processes suitable for large companies tend to overestimate the risk of default presented by SMEs, which often results in the denial of funding, or a high and discouraging cost of capital, she notes. .
In addition, states could work towards “creating an ecosystem supporting SME competitiveness” through a “pro-SME” mechanism for reforms, capacity building and adequate support. And finally, the deepening of regional and continental economic and trade integration is a way that will open up opportunities for expansion to these companies.
