Investors update: January 25 2023

GreenCo gets $54m EU guarantee to support Africa expansion

Highlights

• The European Fund for Sustainable Development plus (EFSD+) has approved a $54 million guarantee to support GreenCo’s expansion within Southern Africa; in Zambia, Namibia, Zimbabwe, and South Africa.
• The guarantee provides a backstop to long-term market risk on the Southern African Power Pool and will cover outstanding debt lent to IPPs in GreenCo’s portfolio in the event that GreenCo becomes unable to fully service the PPA.
• GreenCo’s proposal was developed with and submitted by the Danish Investment Fund for Developing Countries (IFU), one of its investors.

Source: ABC

Our Takeaway

Investments in green power projects, mostly solar, in Africa are typically considered high-risk. That sentiment has largely contributed to African solar operators struggling to access the financing they need to scale, inhibiting their potential. Although the trend has changed over the last few years, with cleantech startups in Africa increasingly pulling massive amounts of VC money, efforts like the EU-backed guarantee for GreenCo give investors interested in the space some confidence, thereby increasing the capital pool available to African energy startups. 

---

Nigeria central bank hikes monetary rate to 17.5% despite inflation dip

Highlights

• Nigeria’s central bank on Tuesday raised its benchmark lending rate by 100 basis points (bps) to 17.5%.
• The central bank’s decision came after inflation dipped for the first time in 11 months in December to 21.34%, compared with 21.47% in November.
• But CBN Governor Godwin Emefiele said members of the monetary policy committee did not think the decline was big enough to justify either holding or cutting the rate.

Source: CNBC

Our Takeaway

The CBN’s decision is meant to rein in inflation without choking off lending to the private sector. Although most expectations were that the bank would hold rates steady after it raised them by 500 basis points last year to combat inflation, which is at its highest in nearly two decades. We think the latest hawkish stance could dampen investors’ demand for equities, which have started the year bullish, encouraging them to navigate toward the fixed-income market. 

---

Mama Money, AFC partner for money transfers to Zimbabwe

Highlights

• Mama Money, a South African fintech that offers cross-border money transfer and banking services, has partnered with AFC Commercial Bank, to allow its customers to easily send money to AFC branches in Zimbabwe for cash collection.  
• Mama Money facilitates money transfers to over 50 countries across Africa, Asia, and Europe, and has played a major role in reducing the cost of money transfers from South Africa to other countries.
• The goal of the partnership is to improve access to financial services in underserved communities in both countries.

Source: ABC

Our Takeaway

An estimated $30 to $60 million in monthly remittance flows from South Africa to Zimbabwe through both formal and informal channels, and account for over 10% of the latter’s GDP according to the World Bank. But the average cost of sending money to Zimbabwe—estimated at 7% from South Africa—can significantly reduce the impact that remittances have as these funds are predominantly used for critical needs such as school fees, healthcare, and housing.