Naledi Madala, an economist at Absa, has encouraged capital market players to consider green bonds to complement government’s renewable energy vision. Madala was speaking this week in a webinar discussing “Unlocking Botswana & Africa’s True Potential – Attracting Investment.”
Reducing electricity imports from South Africa is one of the key goals that government has set. Reflecting back at the State of the Nation Address last year, Madala said the government was very clear that its integrated resource plan entails a mix of 15 percent renewable energy by 2030 from the current 2 percent.
“That says to us that we can have two implications from that statement – one being that coal is going to remain a dominant player in the power mix,” he noted. “Botswana has significant untapped pool reserves, and these have been identified as national objectives under the coal roadmap.”
The second implication in her mind is that to get to that 15 percent from the 2 percent means “we are going to see increasing opportunities in the renewable energy space”, she said. “We have been seeing some developments that show that capacity is progressing. The renewable energy space pipeline is quite strengthening.
“It will also be really interesting to get the kind of support also from the capital markets and see the start of the issuance of sustainable financial products such as green bonds to really support renewable energy projects.”
Madala noted that although the COVID-19 pandemic has brought much disruption, it has also presented a lot of opportunities for capital market development. She pointed to the African Development Bank’s issuance of one of the largest sustainable financial market bonds that have helped finance COVID-19 response measures across the continent as an example. “When we look at other African countries, we continue to see that the sustainability initiative is actually gaining momentum,” she said, citing countries like Nigeria, Kenya and Egypt where sovereign green bonds have been issued.
As Botswana discusses getting to its 15 percent target by 2030, there is a need to look to capital markets. “I want to challenge all of us as market players,” Madala said.
At a recent ASEA conference in Kasane, participants heard that investing in green bonds is the new – and critical – frontier for Africa and Asia because the two continents will be the hardest hit by global warming. The West African region has witnessed more interest in green bonds since 2016. The Nigerian Stock Exchange had a US$30 million issuance in 2016 targeting renewable energy. Kenya has also set an example by raising 4.3 billion shillings ($41.45 million) to build environmentally-friendly student accommodation.