Models of financing renewable energy for sustainable development: an African perspective

Thesis (Ph.D.)--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Law, 2016.Africa is challenged by the lack of stable modern electricity which is essential for economic and social development. Many African communities, especially in rural and sub-urban areas, are not connected to the national grid and thus constrained from developing and their continued use of traditional sources of exhaustible energy cause environmental pollution. Distributed renewable energy technologies can help to address the problem of modern energy provision in many of Africa‘s communities. Finance plays a critical role in the development of renewable energy within countries. It bridges the gap in the development of renewable energy projects (REPs). Governments‘ efforts towards developing REPs for scaled-up renewable energy to impact the energy access challenge measurably have been inadequate. Thus, this dissertation focuses on increasing the financial contribution of the private sector in developing REPs, especially within rural communities. Models of financing REPs within selected African countries are analysed, with focus on financiers‘ perspectives and governments‘ ultimate goal in financing REP development. A key objective is to bridge the gap between private sector financiers and policymakers in government in this REP financing effort. The study uses the mixed methodology approach to develop a framework through which REP development is related to the perspectives of financiers and policymakers as to enable reliable and useful research findings. Broadly, the results show that while REP financiers are mainly focused on the profitability of their investments, policymakers are mainly focused on the prospects for sustainable economic development. This divergence presents a key obstacle to the development of renewable energy within African countries. Further, results show that traditional financing methods have been largely ineffective in promoting development of REPs in African countries, hence the need for innovative financing channels to increase REP development in Africa. Also, financiers of REPs in Africa consider renewable energy to be highly risky even when supported by government policies. The fledgling capital markets in many African countries need to be further developed to provide appropriate hedging mechanisms while financing small and medium scale REPs. This study also proposes financing models that amalgamate financiers into a small ―financing consortiums‖ using project finance to fund localised renewable energy service companies (ESCOs) with expertise in finance and REP development; kind of models that spread risk among a number of investors, thereby reducing the potential risks of investments while delivering on the objective of sustainable economic development

Financing Renewable Energy Projects for Sustainable Economic Development in Africa

AbstractAccess to clean and stable energy is a major challenge for many developing African countries. This research aims to investigate ways in which financing renewable energy projects (REPs) can help to address this problem. We find that a mix of traditional and innovative methods is used by financiers, as they see fit, in specific financing situations. In addition, we find that for investment firms, the perception of financial risks associated with financing REPs in semi-urban and rural areas is higher than that for REPs in urban areas. Furthermore, we find that for larger firms financing REPs, safety of the environment or impact on local economic development are not prioritized goals. However, for smaller localised firms, contributing to a sustainable economic development is an important consideration when financing REPs and improving the capacity of renewable energy technologies (RETs). We propose the promotion of the two-hand renewable energy service company (ESCO) model as an efficient financial vehicle for increasing sustainable economic development through the production of reliable and stable electricity in semi-urban and rural communities

The Contribution of SMEs to Economic Growth in Africa

MBA - WBSIn recent times, governments of countries and various internationally recognised institutions have come to the utter realisation of the somewhat overwhelming difference in the form of economic liberialisation and sustainable accelerated growth in development, which can be achieved through engaging the Small and Medium Enterprises (SMEs) in numerous sectors of the economy in different business operations. Targeting development through SME establishment has proved to be an important hydra-headed strategy to achieve an appreciable upgrade of the economic status of Western and Asian countries where SMEs account for about 20% of the Gross Domestic Product (GDP) and 40 – 60% of employment, through the complimentary ripple effects like poverty alleviation, job creation, market industralisation, crime reduction etc which all point toward an increased standard of living for citizens of the country. This however has not been the case for Africa. This study looks into the contributions of SMEs to economic growth in Africa as measured by selected economic variables i.e. entrepreneurial index of a country, per capita income of SMEs, trade statistics of SMEs, attraction of FDI for SMEs and capital investment in SMEs, all as contributors to the GDP of countries. GDP in this research is a measure of the economic position of a country. Five econometric models were developed for four African regions totaling 16 countries, using multiple regression analysis to investigate the relationship between GDP and the selected variables, in a bid to estimate the level of dependence of the GDP on these variables. The study finds evidence that GDP of selected African countries is not dependent on the economic indicators used as the yardstick for measurement. Hence, Africa shuts itself out of viable growth opportunities in deciding not to invest in the SME sector as a long-term strategy for economic resurgence and development. If the truly applaudable success achieved by foreign counterparts is to be realised on the African continent, in order to partake of the benefits of economic development, governments must invest capital and FDI in the form of education and management competencies within the SME sector and back this strategy up with favorable policies to foster sustainable economic growth and appreciable developmen