Month: December 2023

Dubai, United Arab Emirates: On the dedicated Finance Day of COP28, the Right Honourable Andrew Mitchell MP, Minister of State of the United Kingdom for Development and Africa, joined Kenyan government and stakeholder representatives in the UK Pavilion to celebrate progress on the newly incorporated Dhamana Guarantee Company Limited (Dhamana). The new guarantee company has been created to unlock local capital for sustainable infrastructure and projects that will advance climate change mitigation and adaptation efforts across East Africa.

Dhamana was established in Nairobi, Kenya, by InfraCo Africa, part of the Private Infrastructure Development Group (PIDG), and Cardano Development with support from FSD Africa. The company draws on the success of other PIDG-supported credit enhancement facilities, InfraCredit Nigeria and InfraZamin Pakistan, and recently received significant funding commitments from the African Development Bank (AfDB) and CPF Financial Services (CPF), who were represented alongside PIDG at the meeting with Mr Mitchell today in Dubai.

Mr Mitchell said, “As our recent white paper set out, the UK is committed to supporting countries that want to draw on their own resources to tackle climate change. This investment will provide the guarantees needed to enable Kenyan pension funds to fund climate resilient infrastructure in Kenya. It is fantastic to see that PIDG, Cardano Development and FSD Africa are collaborating with the Africa Development Bank and a Kenyan pension fund to deliver this new approach and demonstrate how African resources can be used to fund African development.”

Dhamana’s initial focus of operations will be in Kenya, a country which holds significant wealth in pension,[i] life insurance and private wealth funds. However, in Kenya, as for much of East Africa, cash-flow based investments and infrastructure projects are largely reliant on US dollar denominated bank loans. Such loans seldom have sufficient tenor length to ensure project success, and can expose borrowers to currency exchange risk, challenges which Dhamana’s local currency guarantees will serve to mitigate.

Dhamana CEO, Christopher Olobo, said, “The focus of COP28 is around the need to unite, act and deliver for climate action. Dhamana epitomises this ethos by bringing partners together to facilitate a step-change in how we finance East Africa’s development, accelerate access to climate-resilient infrastructure and achieve the UN SDGs. With the backing of our shareholders, Dhamana will strengthen local capital markets, connecting bankable projects with untapped pools of domestic institutional capital and ensuring that investors have the comfort they need to use their funds for positive change.”

InfraCo Africa’s CEO, Gilles Vaes, said, “We are extremely proud of the work undertaken by all parties to establish Dhamana, and to attract significant funding commitments which will enable it to deliver on its vision.”

Emphasising the significance of Dhamana for climate action, PIDG CEO, Philippe Valahu, said, “As part of the wider PIDG suite of credit enhancement facilities, Dhamana’s local currency guarantees will support the growth of local capital markets, unlocking domestic capital to underpin a thriving ecosystem for climate-resilient infrastructure and project development across East Africa.”

Joost Zuidberg, CEO Cardano Development enthusiastically stated, “The power of Dhamana lies in its ability to catalyse substantial investments from East Africa’s institutional capital, fortifying the bedrock for the sustained financing of the region’s burgeoning economic landscape. At the heart of Cardano Development lies our incubation and management of guarantee solutions for emerging and frontier markets, we are delighted to work alongside AfDB, County Pension Fund, InfraCo Africa, PIDG and FSDA on this innovation and together empower Dhamana with the essential support and capital required to realise this pivotal mission.”

Mark Napier, CEO FSD Africa said, “FSD Africa is committed to supporting local currency bond markets in Africa as well as local currency credit enhancement facilities as they play an important de-risking role. This role is pivotal in the mobilisation of climate finance from both local and international owners of capital to African economies that require different sources of capital to fund their green growth.  FSD Africa is particularly pleased to provide seed funding for Dhamana Guarantee Company Limited’s Technical Assistance Facility which will provide project preparation and transaction support to potential issuers of innovative climate financing debt instruments, thereby increasing the pool of bankable climate-resilient projects in East Africa.”

Following the recent announcement of the African Development Bank’s Board approval for a US$10m equity investment into Dhamana, AfDB Vice President for Private Sector, Solomon Quaynor, said, “Dhamana’s credit enhancement offering aligns well with several of AfDB’s strategic objectives, including our commitment to stimulating local currency debt markets as a route to unlocking  new sources of green and sustainable finance for the real sector and infrastructure development across East Africa.”

Dr. Hosea Kili, CEO of CPF concluded, saying, “CPF Financial Services is excited to be part of the investors in Dhamana, a new guarantee company to serve the East African region. Dhamana is envisioned to unlock local currency debt from untapped pools of capital in Kenya and the Easy Africa region, providing guarantees for local currency bonds invested in by East African pension funds, insurers, and other financial institutions.  This guarantee fund will enable infrastructure and other sectors to raise more money locally in KES, without the borrowers suffering from KES-to-USD devaluation.”

[i] https://www.oecd.org/pensions/Pension-Funds-in-Figures-2020.pdf

AGRI3 has provided a 50% pari passu guarantee to Old Mutual Investment Group Limited  in Malawi, in order to support a Malawi Kwacha 19.5bln  (USD 12mln), 10 year loan for Gala Agriculture Co Ltd (GalaMacs). The loan will be used to support the company’s operations and expansion, supporting sustainable agricultural production, improved livelihoods and forest conservation on the farm. This represents the first transaction the fund has closed in Africa.

AGRI3 Fund and Old Mutual Investment Group Limited, a leading asset management business in Malawi with Asset Under Management of just under a billion dollars, this week closed a USD12mln deal to fund GalaMAcs, an export focused macadamia business in Malawi. The deal demonstrates that funding towards the agriculture sector can accelerate commercialisation at a large scale in Malawi and the right partnerships can adequately de-risk large scale sustainable farm expansion. 

Malawi, located in the Southern African region, is heavily dependent on agriculture and is particularly vulnerable to climate related shocks. The agricultural sector employs 60% of the population and accounts for 30% of the GDP. The predominance of agriculture means the country is particularly vulnerable to commodity prices and agri-market volatility. Recent decline in tobacco sales and low cotton prices have seen a reduction in foreign exchange leading to shortages of other good such as oil and gas and imported foodstuffs. The country is also prone to droughts and other natural disasters (such as cyclones), which can affect crops and harvests.

The macadamia industry is relatively young in Malawi and developing at a rapid pace on the back of a growing global market, as well as being the preferred crop in migrating from tobacco production. It is primarily an export crop, which has growing global demand due to a number of lifestyle trends. The agriculture sector in Malawi is characterised by subsistence farming and therefore low productivity and limited cases of commercial scale and sustainable agriculture. Supporting sustainable agricultural production at a large commercial scale, with an export focus, will impact the economy through much needed foreign currency generation, the agriculture sector in advancing commercialised farming and the community with a web of activities that benefit surrounding communities, uplifting livelihoods. The impact demonstrates how the proposed investment amplifies activities at Gala beyond regular farming practices in Malawi. 

GalaMacs is on course to become one of the leading farming operations in the region with 2,050ha of planted macadamia trees, offering significant economic and environmental benefits for the population. The loan from Old Mutual Investment Group (Malawi), supported by AGRI3, will be utilised to continue to support the expansion and ongoing operations of the existing farm. This includes restoring degraded land, which was previously used for tobacco, and supporting the scale up of sustainable production operations on the 2,050 ha of farm area using precision irrigation (1,400ha) and application of liquid fertilizers. The company is also trialling a range of innovative Integrated pest management and yield enhancement practices. The company will meet Global Gap certification for export and will also explore different sustainable certification schemes. The company further aims to restore and maintain a significant area, up to 3,000ha, of the land under native vegetation, with the potential to generate significant biodiversity and carbon mitigation benefits. 

Critically for the country, the farm is expected to generate significant positive impact on rural livelihoods by providing employment and training support to workers on the farm. In addition, GalaMacs is in the process of developing a smallholder scheme, to provide farming opportunities for local communities, adding additional benefits for livelihoods and incomes. 

“AGRI3 is very excited by the potential impact of this project. GalaMacs’ strong commitment to sustainability aligns well with AGRI3’s impact objectives and strategy. The transaction will not only allow AGRI3 to make its first investment in Africa, but also support a professional farm, which is not only aiming to improve productivity and create local jobs, but also implement a range of sustainability and livelihoods measures which will improve soil health, sequester carbon and benefit the local community.”  Casper Havinga, AGRI3 investment Director

“GalaMacs, partnering with AGRI3 and Old Mutual Investment Group, has successfully concluded a long-term financing facility, that will have far reaching achievements for its operations, both now and in the future. This will contribute to the national economy by earning valuable foreign exchange and at the same time creating a high standard workplace for employees, whilst impacting the surrounding communities through responsible social governance.

GalaMacs through its vision, implemented strategies and practices in macadamia production, using modern agronomic techniques, by farming in a sustainable manner, protecting its fauna, flora and water resources through standards of environmental governance, has probably achieved the status of being the largest single macadamia operation in Africa. AGRI3 has played a pivotal role in assisting GalaMacs formulate its international profile. “ Chris Skordis, Chief Financial Officer GalaMacs

“This deal demonstrates how we can allocate capital towards projects that have a significant impact on key economic drivers such as agriculture, while speeding up the journey to commercialised farming. This project at Gala showcases that with the right partners we can diversify our export base while delivering solid returns to our customers and positively impacting the communities we operate in. As a responsible business, partnering with AGRI3 Fund has facilitated not only de-risking of the project but support towards sustainable farming, aligning with our responsible investment philosophy which is at the heart of how we operate” Mark Mikwamba, Managing Director Old Mutual Investment Group Malawi

About AGRI3 Fund 

The AGRI3 Fund was created by the United Nations Environment Programme (UNEP) and Rabobank, together with partners IDH and FMO, the Dutch Entrepreneurial Development Bank, to support the transition to sustainable agriculture. The Ministry of Foreign Affairs of the Netherlands is a donor to AGRI3 Fund. FOUNT and Cardano Development are the Investment Advisors for the Fund. AGRI3 Fund aims to mobilise additional public and private capital globally and at scale. The Fund works with commercial banks, development finance institutions (DFIs), impact investors and institutional investors and provides credit enhancement tools and technical assistance to projects which actively prevent deforestation, stimulate reforestation, contribute to efficient sustainable agricultural production and value chains and reduce carbon emissions and improve rural livelihoods.

About Gala Agricultural Company Ltd

Gala is an agricultural entity focused on the production of macadamia nuts on 12 estates in the Namitete area, Lilongwe, Malawi. With over 2,050ha of planted orchards, Gala is on track to become the largest single macadamia company in Africa.  The company has made considerable progress towards building a state-of-the-art, export-driven macadamia operation which is already delivering significant social, environmental and community benefits and contributing to the national economy through its foreign currency earnings. In 2021, Gala attracted equity funding from the Old Mutual Ulimi Trust Fund (Ulimi) to support Gala’s development path as a sustainable and responsible agribusiness. Ulimi is an agri-fund launched and managed by Old Mutual Investment Group and SIGNATURE Agri Investments which is dedicated to the development of sustainable agri and food value chains in Malawi. 

About Old Mutual Investment Group Ltd Malawi

Old Mutual Investment Group (OMIG) is the leading fund manager in Malawi with assets under management sitting over USD1 billion as at October 2023. OMIG offers a wide range of investment solutions for both institutions as well as individuals. OMIG manages a comprehensive spread of investments across listed equity, interest bearing assets, property and alternative investments. It’s investment capabilities are managed by specialists in each field, who focus purely on delivering on their client mandates. OMIG is committed to growing customers  wealth by delivering consistent strong returns. Investing responsibly for the long term, delivering strong returns while also contributing to the greater good is at the heart of OMIG’s strategy.

Today at COP28 the U.S. government, including USAID and the U.S. Presidential initiative Prosper Africa, announced its investment in a public-private partnership to create the Green Guarantee Company (GGC), the first ever privately run guarantee company devoted to catalyzing green bonds and loans in partner countries, focusing on Africa, Asia, and Latin America. 

Subject to final documentation, the United States – through USAID, the State Department, and Prosper Africa – alongside the UK’s Foreign Commonwealth and Development Office, the Green Climate Fund, Norfund, and the Nigerian Sovereign Investment Authority, intend to contribute to GGC’s initial balance sheet of $100 million. With that $100 million balance sheet, the Green Guarantee Company will unlock an estimated $1 billion in new mainstream private capital for climate finance by 2024.

The United States provided $5 million in technical assistance through USAID’s EDGE Fund, $3 million in seed funding from Prosper Africa, and $2 million from the State Department, to help establish the world’s first credit guarantor dedicated to climate solutions in developing countries. The GGC will assume the financial risk associated with green bonds and loans to systematically de-risk and effectively catalyze scale-level private investments in climate solutions. By taking a blended finance approach – combining donor funding and private capital – the U.S. government is delivering innovative approaches to mobilizing and localizing greater private investments to fund climate projects.

You are on Cardano Development’s website. Learn more about our work here.

Source: www.usaid.gov

As discussions at the United Nations Climate Conference (COP28) turn to finance, MOBILIST is proud to be featured among investors and programmes using innovative new vehicles to drive the much-needed mobilisation of commercial capital to address climate change, including adaptation and mitigation efforts.

Public markets and the institutional capital they attract must form part of the discourse, suggested reforms, and innovative solutions needed to close the climate finance gap in developing countries. 

The recent UK White Paper on International Development highlights the need for new financing vehicles that meet the requirements of institutional investors in tackling climate change. The White Paper highlighted how MOBILIST’s investments are already enabling institutional investors worldwide (including pension funds) to finance sustainable development and critical infrastructure needs in developing countries. 

As discussions at the United Nations Climate Conference (COP28) turn to finance, MOBILIST is proud to be featured among investors and programmes using innovative new vehicles to drive the much-needed mobilisation of commercial capital to address climate change, including adaptation and mitigation efforts. 

Andrew Mitchell, UK Minister of State in the Foreign, Commonwealth & Development Office (FCDO), highlighted the potential role of public markets in mobilising climate finance in his remarks at a roundtable on unlocking commercial investment in adaptation and resilience at COP28. “We are also collectively recognising the need to catalyse innovative public markets approaches. With support from the UK’s flagship public market mobilisation programme, ‘MOBILIST,’ we are backing the world’s first global hard currency climate guarantor to unlock $1 billion from global capital and credit markets for mitigation and adaptation in developing countries.”

Read more about UK climate aid announced at COP28 here. 

The Green Guarantee Company (GGC) will be the world’s first global guarantor that focuses exclusively on developing market climate adaptation and mitigation projects. Subject to final documentation, five investors – the UK’s Foreign Commonwealth & Development Office, the Green Climate Fund, the Nigeria Sovereign Investment Authority, USAID & Prosper Africa, and Norfund – together intend to invest $100 million to establish GGC. GGC is managed by the Development Guarantee Group (DDG).  

Ross Ferguson, FCDO MOBILIST Programme Lead, says that guarantees issued by GGC will enable businesses at the forefront of the climate transition to access global capital markets. “Like the markets GGC will operate in, the Company is set up to be a commercial operation that will grow rapidly, enabling borrowers to tap into the large pools of institutional capital in global markets at a lower cost, and creating a large and diversified green bond market for global investors, helping more commercial capital flow to emerging market and developing economies (EMDEs) than would have been possible otherwise.” 

GGC is the first global guarantor focused on providing hard currency guarantees for more sophisticated borrowers in emerging markets who will have the ability to mitigate currency risk but are restrained by the sovereign rating of their home country from accessing global capital markets on an affordable basis. GGC also offers technical assistance to borrowers to improve their credit ratings to investment grade. 

“GCF supports platforms, critical market services, and infrastructure to create a more competitive ecosystem for longer-term private finance mobilisation for climate action. One example is GGC, which will be able to leverage its initial capital base by a factor of 10x, unlocking far more capital from global credit markets than would be possible through traditional development finance,” says Henry Gonzalez, Deputy Executive Director of the Green Climate Fund (GCF). GCF and MOBILIST were the first investors to commit to supporting GGC. 

British A. Robinson, Coordinator of Prosper Africa, says the U.S. government’s  Prosper Africa and USAID are thrilled to join the UK government and other partners in launching GGC as a de-risking product that will help African nations achieve their climate goals. “Green Guarantee  Company  is an example of multiple donors collaborating to drive climate finance at greater scale by crowding in large pools of mainstream private capital — that have until now — remained on the sidelines in developing countries.” 

Through MOBILIST, FCDO’s support for GGC also delivers on the UK’s commitment made at COP26 to support a new kind of guarantee offer for developing countries, enabling businesses driving the climate transition to access new capital through international capital markets. With support from MOBILIST and partner investors, that commitment is now being realised. 

Source: www.mobilistglobal.com