August 29th, 2010 by Tom Minney
South Africa’s Standard Bank (www.standardbank.com) will provide $100 million as credit to up to 750,000 farmers in 4 African countries in the next 3 years, according to an interview given by Clive Tasker, CEO for Africa, to Reuters newsagency. The bank is to offer the credit in Uganda, Ghana, Mozambique and Tanzania to help boost agricultural production and economic growth. It is a pilot scheme agreed with some institutions and aims to boost export crops.
Reuters quotes Tasker as saying: “This scheme will disburse loans to small-holders of up to $100 million over the next 3 years and will potentially benefit up to 750,000 small-scale farmers.” He said the bank was also planning a broader financing scheme for other farmers in Africa and would consider projects that aimed at raising production of cash crops: “We are committed to financing agriculture across the full scope of the industry.”
Priority will go to growing crops such as cocoa in Ghana and cashew nuts in Mozambique. “We will help farmers with the right seeds, fertilisers, and ask them to have crop insurance to mitigate our risks,” Tasker said. He added the bank would finance farmers’ co-operatives and agro-businesses to boost trade. Increased production of crops would help African economies to grow and lift millions of people out of poverty.
Reuters reports that Africa has vast water resources and arable land but also food shortages, and says analysts partly blame this on mismanagement of funds, poor government policies and lack of support infrastructure for farmers.
Standard Bank said there was increasing global demand for African produced cocoa, coffee, tea and horticultural crops. Reuters says there is also increased investment, including equity funds seeking land deals and South African and other farmers who are investing in other African countries to grow cash crops.
August 12th, 2010 by Tom Minney
The African Development Bank (www.afdb.org) is aiming to commit up to $10 billion a year to infrastructure in Africa, according to a story on Reuters. Alex Rugamba, the bank’s Director for Regional Integration and Trade, told the newsagency on 26 July that the bank hopes to nearly double infrastructure funding over the coming 5 years.
“There’s a big interest in projects that can transform economies… for instance there’s big talk about railways. We want to revamp our railways. So if the trends continue as they are now, I would say within five years’ time we’ll be committing up to $10 billion per year on infrastructure.”
Rugamba said the AfDB was particularly interested in cross-border infrastructure ventures to drive economic growth by promoting trade within and between African countries. Other possible investments include regional power grids, cross-border highways and submarine telecommunications cables. For instance in January, the bank lent Ethiopia $125.6 million to finance the construction of the Mombasa-Nairobi-Addis Ababa Road corridor project phase II.
He reportedly added that countries, including Egypt, Morocco, South Africa and Tunisia, were absorbing large amounts: “South Africa last year took a loan of over $2 billion, which is almost about half our annual infrastructure budget and Egypt now takes in $400 million worth of credit for its energy sector per year.” Africa has always been able to absorb large amounts of infrastructure finance, but the AfDB had too little capital to meet demand.
June 16th, 2010 by Tom Minney
Finance compatible with Islamic investment principles is taking further root in Kenya. There has been take up of sukuk portions of infrastructure bonds launched by the Government, the Central Bank of Kenya (CBK – www.centralbank.go.ke) has announced that it is working on plans to launch sharia-compliant treasury bills in the money market and it is reported in local media that a sharia-compliant unit trust is applying for registration.
According to the bank, including sukuk bonds and bills (structured in compliance with sharia law), is likely to increase the amount of cash flowing into Kenya from the Gulf region. CBK Governor Prof Njuguna Ndungu said the 2 sharia-compliant banks in Kenya – First Community Bank (www.firstcommunitybank.co.ke) and Gulf African Bank (GAB www.gulfafricanbank.com) – have contributed to the development agenda by participating in the sukuk component of infrastructure bonds issued by the central bank on behalf of the Kenyan government. GAB invested KSh500 million (US$6.2 million) in the sukuk portion of a government infrastructure bond issue last year and received a 13.5% rate of return, according to CBK figures.
In Ndungu’s reported speech during the opening ceremony of the Second Gulf African Bank Annual East and Central Africa Islamic conference in Nairobi, the entry of Islamic banking institutions in the country meant CBK was developing new regulations: “Islamic banking prohibits interests and allows profit sharing; however, our prudential returns and disclosure report formats were tailored for institutions which have an element of interest in their financials. We have therefore tailored our returns and disclosure formats to cater for the new market niche,” Ndungu said.
He said the CBK grants exemptions to Islamic banking institutions upon request in transactions that involve wholesale trading and holding land and buildings, since the Banking Act prohibits these activities. He also commended the 2 full sharia-compliant banks in Kenya, both founded within the last 2 years, for enabling formerly unbanked Kenyans, specifically those in the Muslim community and rural areas, to access financial services. The 2 banks have 1,570 loan accounts and 58,548 deposit accounts and control 0.8% of the banking sector’s net assets, according to the report. Islamic banks still require research and innovation to grow and be competitive.
“We are still waiting for ’structured sukuk’ to cover the bonds and T-bills market,” Ndungu said.
According to a report in Business Daily (www.businessdailyafrica.com), ApexAfrica Capital Ltd, recently rebranded from Apex Africa Investment Bank Ltd (the website, www.apexafrica.com does not reflect this) is the issuer and is undergoing approval as required by the Capital Markets Authority. The product is a collective investment vehicle in the form of a unit trust that will require a minimum of KSh25,000 ($311) to start.
Bank Managing Director Kassim Bharadia (listed as Chief Executive on the website) reportedly said the product is in response to investor demand.
According to Islamic finance principles it would avoid interest and gain profits from capital gains and dividends paid by companies whose shares that the unit trust has invested in. It would also target companies that companies that fit within the interpretation of Shariah. Thus it should avoid companies that deal in, for example, alcohol but shares such as plantations will be compliant.
The report says Hamilton, Harrison and Mathews is guiding the issuer in the legal process of issuing the unit trust.
Unit trusts are popular in Kenya, despite a few frauds in the past, according to the news report.
January 6th, 2010 by Tom Minney
South Africa’s Nedbank (www.nedbank.co.za) has announced an agreement with international non-governmental organisation Wildlife Works Incorporated (www.wildlifeworks.com) to launch an African carbon credit scheme.
Nedbank is to acquire carbon credits which stem from Wildlife Works’ efforts sustainably to prevent the deforestation of the Kasigau Corridor. The project will monetize the biodiversity assets of a 200,000 hectares dryland forest and savannah grassland strip called Kasigau Wildlife Corridor until 2026. It was awarded gold-level approval under the Climate Community and Biodiversity Alliance’s forestry protection standard and is apparently Africa’s first approved large project under the international Reduced Emissions from Deforestation and Degradation (REDD) scheme, which pays for projects which prevent further deforestation sustainably and measurably in areas which has seen previous deforestation. It is seeking registration with the Voluntary Carbon Standard registry. Business and people in developed countries can “off-set” carbon emissions through buying carbon credits from developing countries, which are preventing deforestation and conserving their natural resources and helping the world climate.
Over 2.5 million tonnes of carbon is expected to be released into the global carbon trading market through the Kenyan REDD carbon project partnership. The Kasigau project applies market-based solutions to conservation of biodiversity and should benefit local communities through education, job creation, environmental protection and direct financial rewards.
The investment banking division Nedbank Capital will make the Kagisau credits available. Head of carbon, Kevin Whitfield, reportedly says: “The carbon market provides a mechanism for linking Africa to the global green economy, while simultaneously conserving its rich natural heritage and safeguarding the livelihoods of its people. We hope this partnership will prove Africa can fight climate change, uplifting both rural communities and protecting wildlife by connecting them to the global carbon market.”
Saliem Fakir, Head of the WWF in South Africa reportedly confirms: “Rukinga and the associated Kasigau Wildlife Corridor project are world-class examples of projects that are making a tangible difference to both communities and the environment. It is innovative finance solutions, like carbon financing, which makes them possible.”
Wildlife Works applies innovative market-based techniques to conserving biodiversity and forest habitat. It sees the emerging Global Carbon Marketplace as a logical and exciting extension and its website gives a useful rundown of the theory (How It Works). According to WW, the Rukinga community was being forced to destroy their magnificent wilderness in order to survive. In the last ten years WW has restored a huge piece of land to a healthy vibrant ecosystem with elephants, lions, and 50 other species of large mammal. At the same time, the community has received 18 new classrooms for their children, and the employees and their families have received full health care benefits in a community with incredibly high HIV incidence. Wildlife Works also provides jobs, including through founding an organic greenhouse to promote healthier farming practices, providing local farmers with cash-generating citrus trees and free agroforestry trees to use for building and fuel wood. WW is exploring the extensive and expensive preparation for a new REDD project to save the Ngoyla-Mintom Rainforest (2 million acres) in Cameroon from being logged.
Wildlife Works Carbon is a new joint venture between Wildlife Works and Colin Wiel Investments LLC formed to pursue the emerging Reduced Emissions From Deforestation and Degradation (REDD) marketplace for Carbon Offsets as a sustainable and scaleable funding mechanism for biodiverse forest protection.
Nedbank, a subsidiary of the Old Mutual Group, is one of South Africa’s oldest banks and listed on the JSE Ltd. since 1969. The project further boosts the bank’s “green” credentials after the bank announced in October that it had won the National Business Initiative (NBi) 2009 South Africa Carbon Disclosure Project (CDP) Report Leadership Index. Other leading corporates included Bidvest Group, Woolworths Holdings, BHP Billiton, Goldfields and Sappi. It is also reportedly the only African bank included in the Dow Jones Sustainability Index.
The Global CDP is the largest source of transparent information on carbon emissions in the world. Nedbank is moving towards becoming carbon neutral and is cutting its “carbon footprint” through a robust entrenched carbon management programme including awareness, energy efficiency targets, paper and waste reduction initiatives, travel reduction, and various other methods of internal carbon reduction. Tom Boardman, Chief Executive, Nedbank Group, says: “Our position as a truly environmentally aware organisation is not the result of ad hoc environmental interventions. Rather, the external realization of our green credentials is the natural consequence of a deeply ingrained commitment to a culture of sustainability – one that runs throughout our operations and is embraced as a value by our staff members, business partners, suppliers and other stakeholders.
“Nedbank is serious about influencing others to follow our lead, by linking environmental considerations to all our financing activities, an aggressive green procurement policy that encourages suppliers to operate in an environmentally friendly manner, and a Green Affinity that raises awareness among our clients of the need to be environmentally aware and affords them the opportunity to contribute towards conservation projects simply by utilising affinity-linked Nedbank products.”