37 Financing and budgeting readiness Green growth financing readiness is measured by assessing the availability of adequate financing to implement green growth strategies, and countries’ ability to mobilise and channel finance from local and international sources through various means, including national climate and sustainabilityoriented funds. Achieving financing readiness also entails the development of policies and systems to boost the required private sector participation for local innovation, job creation, and scale-up of the transition. The green growth transition requires substantial investment, as clearly indicated in most African NDCs. A study by the African Development Bank suggests that the implementation of 44 African NDCs will cost approximately $2.35 trillion (AfDB, 2018b). Many countries have made their NDC commitments contingent upon substantial financial, technological, and capacity building support from international sources. For instance, Kenya estimated it would need $40 billion in international support by 2030 to implement its climate change and green growth action plan. A lack of access to finance is a major barrier to scaling up climate action across the continent. Most countries have underdeveloped financial sectors, which results in high transaction costs, high-risk premiums and high collateral requirements for the private sector (KfW, 2019). IFC has indicated that there are at least 44 million formal MSMEs in Sub-Saharan Africa, of which 51% struggle to access the financing they need to grow (IFC, 2018). At the consumer level, a large majority of rural populations and informal workers lack bank accounts, which makes it difficult for firms to assess their customers’ creditworthiness. Mobile money and other financial technology solutions are contributing to closing this gap. In addition, governments experience capacity limits that hamper their access to international climate finance. For example, government representatives have indicated that they have struggled to complete the rigorous accreditation process required for national entities that wish to receive funding from the Green Climate Fund (GCF; Green, 2018), a process that can take more than 500 days, according to recent analysis by the GCF itself (GCF, 2020). Positive efforts are emerging throughout the region to overcome this access to finance challenge, including in Kenya, Rwanda, and Mozambique. Kenya and Rwanda have established dedicated climate change/green growth funds to mobilise domestic and international financing and channel it into public and private projects. The government of Rwanda has recently formalised that country’s green fund and capitalised it with over $160 million. The governments of Kenya and Rwanda contribute to these funds from their national budgets. The effectiveness of these mechanisms varies. Kenya’s fund is yet to be fully developed, while Rwanda’s green fund (FONERWA) is operational and has mobilised and disbursed more than $100 million to various climate projects, supporting local entrepreneurship and job creation in the process. While such dedicated national financial mechanisms have proven useful, other effective strategies for accessing international climate funding exist. For example, Morocco does not have a dedicated national climate fund. However, two national entities, the Agency for Agricultural Development (ADA) and CDG Capital SA, are accredited to the GCF, the world’s largest climate fund. By 2016, Morocco had received $960 million for 29 projects, in the form of loans and loan/grant combinations from various multilateral and bilateral sources. The Moroccan government also invested $2.45 billion of public money in emerging areas such as renewable energy. Similarly, Senegal has not yet established a national green/climate fund, but its Centre for Ecological Monitoring (CSE), accredited to the GCF and the Adaptation Fund (AF), is working on green growth/ adaptation projects at national and sub-national level in the country and other countries in the region as well. Tunisia has also made arrangements to financially support climate action and green growth projects. For example, its Energy Transition Fund, Pollution Reduction Fund, Competitiveness Development Fund, and National Upgrade Programme are all financial mechanisms that support green growth projects in specific sectors or addressing specific issues. There are other examples of mechanisms to mobilise climate finance from domestic and international sources, including market-based instruments such as taxes, green bonds, investment funds, and guarantee instruments. Morocco has initiated the creation of a domestic carbon market. Under an initiative named SUNREF East Africa, implemented in Kenya, Uganda, and Tanzania, the French Development Agency (AFD) seeks to increase the availability of renewable energy and energy efficiency project financing and green credit under favourable conditions (low interest rates, long tenor, grace period) in collaboration with local banks. In Tunisia, international banks play a prominent role in the financing of large renewable energy projects. A green bond market is also emerging in Africa, primarily in South Africa, Morocco, Nigeria, and Kenya. South Africa, Morocco, and Nigeria have advanced programmes with national networks and bold initiatives. These bonds target sectors important to green economy, such as buildings, transport and energy, and waste. Nigeria has launched a climate-certified sovereign green bond. South Africa was the first among emerging nations to issue green bonds and has issued several municipal bonds (SSFC, 2020). Climate change —core to the African Development Bank’s strategy
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