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African Guarantee Fund Unveils US$5 Billion Mission 300 Local Currency Guarantee Facility to Boost Energy Access in Africa

A Landmark Initiative for Africa’s Energy Future

The African Guarantee Fund (AGF) has announced the launch of its Mission 300 Local Currency Guarantee Facility, an ambitious initiative aimed at mobilizing US$5 billion to finance small and medium-sized enterprises (SMEs) in Africa’s Distributed Renewable Energy (DRE) sector. This facility marks a significant milestone in addressing Africa’s longstanding energy access deficit, with the overarching goal of providing electricity to 300 million Africans by 2030.

Africa’s energy challenge remains a critical issue, with approximately 600 million people still lacking access to electricity as of 2023. Despite Africa being home to abundant renewable energy resources—ranging from solar and wind to hydro and geothermal power—the continent continues to face significant barriers to financing and implementing clean energy projects.

With an estimated US$25 billion in annual investment required to achieve universal energy access by 2030, the Mission 300 Local Currency Guarantee Facility aims to play a transformative role by facilitating investments, de-risking SME lending, and promoting sustainable energy solutions across the continent.

Bridging the Energy Financing Gap

Why Local Currency Financing Matters

One of the major challenges in Africa’s renewable energy sector is the heavy reliance on foreign-denominated financing. Most energy projects are funded in US dollars or euros, exposing businesses and governments to currency fluctuations that can significantly impact repayment costs.

The Mission 300 Local Currency Guarantee Facility seeks to overcome this challenge by encouraging local banks to provide loans in local currencies, reducing risks related to foreign exchange volatility and making financing more accessible to SMEs.

According to Wale Shonibare, Director for Energy Financial Solutions, Policy, and Regulations at the African Development Bank (AfDB), the facility will:

  • Encourage collaboration with African governments.
  • Leverage concessional financing from institutions like the African Development Bank, the World Bank Group, and other development partners.
  • Enable local banks to finance Distributed Renewable Energy (DRE) solutions, fostering financial inclusion for SMEs in the energy sector.

Shonibare, who also serves as a non-Executive Director at AGF, emphasized that this approach aligns with the AfDB’s New Deal on Energy for Africa, which aims to achieve universal energy access by 2030 while driving economic growth through sustainable power solutions.

The Role of AGF in Driving Energy Transition

The African Guarantee Fund (AGF) has been instrumental in bridging the financing gap for green SMEs by implementing innovative solutions such as the Green Guarantee Facility. This initiative, supported by the Nordic Development Fund and the Investment Fund for Developing Countries, has:

  • Mobilized financing for renewable energy projects.
  • Reduced risks associated with loan defaults for financial institutions.
  • Accelerated electrification efforts, particularly in rural and peri-urban areas, where energy access remains limited.

By mitigating systemic barriers, including high collateral requirements and lack of long-term financing, AGF has enabled private sector participation in Africa’s energy transition.

According to Jules Ngankam, Group CEO of AGF, the organization’s leadership in driving financial innovation for SMEs aligns perfectly with the goals of Mission 300.

“By addressing financing gaps and fostering public-private partnerships, AGF plays a crucial role in driving inclusive energy solutions, accelerating the energy transition, and reducing carbon emissions across the continent.”

Unlocking Africa’s Renewable Energy Potential

Current State of Energy Access in Africa

Africa remains one of the most energy-deficient regions in the world. Despite hosting some of the richest renewable energy resources, a significant portion of the continent still depends on traditional biomass, kerosene, and diesel generators for lighting and cooking.

  • As of 2023, more than 600 million people in Africa lack access to electricity.
  • Sub-Saharan Africa accounts for 75% of the global population without electricity.
  • Rural areas suffer the most, with electrification rates below 20% in some countries.

The lack of access to reliable electricity hinders economic development, limits opportunities for education, and affects the delivery of essential services such as healthcare.

However, with the right investments and financing mechanisms, renewable energy solutions such as solar mini-grids, wind farms, and battery storage systems could rapidly close this gap.

How Distributed Renewable Energy (DRE) Solutions Can Change the Game

Distributed Renewable Energy (DRE) solutions—such as solar home systems, mini-grids, and off-grid renewable projects—are widely recognized as the fastest and most cost-effective way to expand energy access in Africa.

The Mission 300 Local Currency Guarantee Facility will provide crucial financing to SMEs specializing in these solutions, helping to:

  • Deploy solar mini-grids and off-grid power solutions to electrify underserved communities.
  • Reduce reliance on expensive and polluting diesel generators, which are still widely used in Africa.
  • Promote clean energy entrepreneurship, creating thousands of green jobs in the process.

A case study that highlights the effectiveness of this approach is AGF’s involvement in a 40 MW solar power project in Madagascar. This project:

  • Provided electricity access to 285,000 people.
  • Displaced thermal power, reducing emissions by 34,000 tonnes of CO₂ annually.
  • Showcased the viability of local currency financing for renewable energy projects.

This success story underscores the potential for similar projects to be replicated across the continent with the support of the Mission 300 Local Currency Guarantee Facility.

Scaling Up Renewable Energy Investments

The Role of Public-Private Partnerships

One of the key success factors of the Mission 300 Local Currency Guarantee Facility is its ability to foster collaboration between governments, financial institutions, and private investors.

By leveraging funds from the African Development Bank, the World Bank Group, and other international partners, AGF can:

  • De-risk private sector investments, making it easier for local banks to fund renewable energy projects.
  • Enhance policy frameworks to support the growth of SMEs in the energy sector.
  • Drive climate resilience and sustainability by financing clean energy projects that align with the African Union’s Vision 2063 and the global Sustainable Development Goals (SDGs).

According to AGF’s leadership, the facility will not only help Africa meet its energy access goals but also contribute to:

  • SDG 7 (Affordable and Clean Energy)
  • SDG 13 (Climate Action)

The Road Ahead

With a target of mobilizing US$5 billion in energy financing, the Mission 300 Local Currency Guarantee Facility is poised to transform Africa’s energy landscape. However, the success of this initiative will depend on:

  • Strong implementation strategies by governments and development institutions.
  • Efficient disbursement of funds to ensure SMEs receive adequate support.
  • Continued public and private sector collaboration to scale up investments in renewable energy.

As Africa moves towards achieving universal energy access by 2030, initiatives like Mission 300 serve as a blueprint for accelerating progress and driving sustainable economic growth.

Conclusion

The launch of the Mission 300 Local Currency Guarantee Facility marks a major step forward in addressing Africa’s energy financing gap. By empowering SMEs, reducing investment risks, and fostering local currency financing, this initiative has the potential to revolutionize Africa’s renewable energy sector.

With 600 million Africans still without electricity, this facility represents a crucial opportunity to unlock Africa’s energy potential and drive inclusive development.

The coming years will determine how effectively governments, financial institutions, and private sector players collaborate to make this ambitious vision a reality.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

29th January, 2025

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