AfDB suggests SPV for South Africa to raise $41b climate financing – Report

A Bloomberg news report says the African Development Bank (AfDB) has made suggestions to South Africa to create a Special Purpose Vehicle (SPV) bank and use it to raise $41 billion in climate financing.

According to the report, the President of the AfDB, Dr Akinwumi Adesina suggested to South Africa that it would help the country to use the $8.5 billion in climate financing pledged by some of the world’s richest nations to raise even more funds.

The SPV, which can seek a credit rating, can sell zero-coupon bonds to raise as much as $41 billion, Adesina told Bloomberg last week in New York.

The report indicates that the US, UK, Germany, France and European Union plan to provide $8.5 billion to South Africa to help the country cut its use of coal, which is used to generate more than 80 per cent of its electricity.

South Africa, which is the world’s 13th-biggest producer of greenhouse gases will need to spend $250 billion over the next 30 years to fund the closing down of coal-fired power plants, develop green energy sources and an expanded electricity grid, according to a study released in May.

The country is working on a plan to access the funds, which will be a combination of grants, concessional financing and potentially guarantees. The structure of the funding arrangements, which may be on a project-by-project basis, could make it impossible to use an SPV structure, the report said.

It also points out that the AfDB’s proposal has received little support from South Africa or the funding partners, citing people with knowledge of the matter.