Botswana is urged to follow relevant pathways if it is to mobilize private sector to finance green growth – energy entrepreneur Obuile Morewane has said.
“It starts with creating standards and initiatives that will interest private entities to participate in green projects. The old policy that is still making government and her parastatals the sole service providers in this area has to be reviewed to allow private sector to participate and finance these projects because they will be guaranteed of revenue,” said Morewane, owner of Bio Watt (Pty) LTD.
Botswana, in a bid to liberalize energy supply in the country amended the Electricity Supply Act in 2007 to allow for Independent Power Producers (IPPs) partaking in energy supply. It further came up with a regulatory body, the Botswana Energy Regulatory Authority (BERA) which is a parastatal under the Ministry of Mineral Resources, Green Technology and Energy Security, what Morewane labels as ‘old policy’.
His words are in resonance with those of the African Development Bank (AfDB)’s recent report which highlighted that, roadmaps for investment in climate action (implementing projects aimed at promoting mitigation or adaptation to climate change) should be integrated to provide the clarity needed by private investors on financing and other resource needed for implementation. The regulations should be comparable across all green growth sectors to ease meaningful private sector investments in climate action.
A glimpse into the Botswana Energy Policy shows that for research, service is provided by research institutions like Botswana Institute for Technology Research and Innovation (BITRI) Botswana Innovation Hub (BIH) and academic institutions like the University of Botswana (UB) the Botswana University of Agriculture and Natural Resources (BUAN) and the Botswana International University of Science and Technology(BIUST).
For the supply of energy top of the list is Botswana Power Corporation (BPC-a government parastatal) and Botswana Oil Limited (another parastatal) then followed by private sector and multinational companies and donor companies.
The report, titled; “Country by country report on Africa’s green growth financing need”, further underpins that to manage exit risk, the ongoing reforms strengthening governance mechanisms based on accountability and transparency should be accelerated, so that the rights and responsibilities of the different stakeholders in green growth are known.
“Botswana’s public investment in climate change is relatively low.
Blending public and private sector finance is useful to reduce transaction costs and de-risk investments in private sector capital, through for example, first-loss investments or performance guarantees. These will serve to bring down the higher capital upfront investment costs usually associated with green technologies.”
It added that for local adaptation actions, the use of decentralized financial models such as small grant programs or revolving funds should be prioritized to empower stakeholders at the local level and ensure locally relevant adaptation.
Morewane lamented the fact that high costs involved in mitigating and adaptation investments are barriers in the uptake of green projects by the private sector.
He said, “We need to acknowledge that these systems are very expensive and still new to us, they require high capital to start up and for countries like Botswana where markets are restricted by population it becomes very discouraging for big companies to inject money looking at long payback period.”
The AfDB report recommends that Botswana should deepen domestic financial markets to mobilize finance for green growth. That a developed financial and capital market will provide a sustainable financing source for both the Government and the private sector.
“Commercial banks, such as the Standard Bank Group and ABSA, are supporting renewable energy projects in the region.” Furthermore, the report emphasized that supportive regulations should be developed simultaneously with capital markets development to incentivize these long-term funds into green companies listed on the Stock Exchange and that engagement should be made with multilateral green finance institutions.
