Africa seeks pathways into untapped carbon trade market

Dr Ayub Macharia, a director at National Environment Management Authority (Nema), urged investors eyeing the business to think up carbon-reducing projects and then seek financing from banks and other financiers like private equity firms.

The issue of access to financing has itself been blamed for the slow uptake of projects in Africa.

“There is a perception that green projects are very expensive. That is not true. Some need capital of $100,000 or less. These are sums commercial banks can loan and gain from, given the liquid nature of carbon trade,” Mr Tsuma Charo, the CEO of Carbon Asset, said.

Analysts said in addition to direct revenue, projects for carbon market are usually labour intensive, especially those that involve agriculture, therefore, help to create employment opportunities.

It remains to be seen whether local banks will open their doors to investors in green projects once more of them get official approval from Nema, the sector’s regulator.

Standard Bank of South Africa, with operations in 17 African countries is positioning itself in the business of saving the earth.

In October last year, the bank joined hands with UNEP to roll out Africa Carbon Asset Development (ACAD), a programme that will provide funds to push through at least 10 projects in Africa by the end of this year.

Geoff Sinclair, head of carbon sales and trading at Standard Bank, reckons the ACAD facility with UNEP is an example of how the bank is pioneering green financing in Africa through the deployment of local, market specific solutions and partnerships.

“We are committed to growing carbon literacy amongst bank managers and credit officers not only in our own organisation, but in other banks across the continent,” Said Mr Sinclair.

Given that carbon trade is an emerging opportunity, some African countries, including Kenya, are yet to craft comprehensive laws to regulate the new industry.

Dr Macharia reckons that there are no specific laws governing green projects, adding that fragments of regulations close to addressing the gap are found in various ministries, including the ministry of agriculture, forestry, and environment.

A parliamentary committee formed a few years back is yet to write up a law that will consolidate and harmonise regulation of the green business.

Stakeholders note that effective laws will help develop the sector.

Last year, a meeting on developing the green business in South Africa found that mitigating risks is key to boosting the trade.

The threats, among others, were identified as political and currency risks.