Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, has called for financial actors to actively take steps to lower the cost of borrowing for investment in the continent’s development, climate resilience and clean energy transition initiatives.
“Africa is the most mineral rich of all continents yet is the most energy deprived, underdeveloped and the poorest of all the regions,” Ramokgopa said on Tuesday.
Addressing the Africa Energy Indaba in Cape Town, the Minister said the biggest challenge confronting the continent is the ability to finance the investments that are required to realise the potential of the continent.
“The issues of the financing gap should be issues that are front and centre of the conversation. We are calling for a number of steps to be taken, including but not limited to the need to reconfigure the cost of capital.
“Our view is that developing nations face exorbitant borrowing costs due to the perceived risks that do not reflect economic fundamentals but rather outdated and what I refer to as buyers credit rating,” he said.
The Minister emphasised that it is important that issues of risk allocation should be assigned to countries that have the best capabilities of resolving the risk, among others.
“We do accept that the debt burdens that are placed on the African countries are crippling and undermine the ability to invest in development, climate resilience and clean energy transition.
“This is what sovereign nations need to do to so that we can use the countries balance sheet to enable the investments that are required in this space,” Ramokgopa said.
He advocated for greater coordination between the financial actors as he noted some degree of asymmetry and fragmentation.
“The multilateral development banks are on the one side and the developing financing institutions on the other and issues around vertical climate funds.
“What this does because there is some degree of misalignment, it undermines the possibility of us achieving greater efficiencies and this is going to hinder impact of the pocket of fund that these players are bringing to the fore to help to anchor this kinds of transition and the issues of sustainable development, the ability of the continent to extract and beneficiate closer to the source and thereby broadening the industrial flow of their respective jurisdictions,” he said.
He called for the strengthening of the role of the national development bank.
“I think there is a need for recapitalisation, especially here in South Africa. The Development Bank of Southern Africa (DBSA) can play a much bigger role if it is recapitalised, it competes with some of the commercial banks and therefore they are unable to provide the kind of concessionality that is associated with development banks.
“It stunts or undermine the prospects of them anchoring the kind of industries that we want to see because they must compete with the commercial banks on the same rates,” the Minister said.
Ramokgopa said there is a need to work very hard to attract private sector investors.
“This requires that the political actors, the elected representatives on the continent should work very hard to ensure that there is a degree of stability at a political level but create the necessary conditions, introduce reforms that are necessary to spare on private sector investments. Those are some of the interventions that we are proposing for us to be able to realise the potential of the continent,” the Minister said.
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