World Bank agency guarantees are supporting green energy transition in Africa

21st February 2024 By: Rebecca Campbell - Creamer Media Senior Deputy Editor

The Multilateral Investment Guarantee Agency (MIGA) of the World Bank had so far supported 16 renewable energy projects in South Africa, with a total generating capacity of 1.4 GW, reported MIGA VP operations Junaid Ahmad on Wednesday. He was speaking to the 2024 Africa Green Economy Summit, being held in Cape Town, via a live video link from Washington DC in the US (where it was 03:00, when he delivered his address).

He pointed out that the opportunity for the green energy transition in South Africa was huge. However, the country would have to build 1 000 km of transmission lines a year to properly tap this opportunity.

He also cited an example from Egypt. That country had what was probably the biggest solar energy park in Africa. The electricity supply contract between that park and the Egyptian public-sector electricity distributor had been underwritten by MIGA. This had greatly increased the credit rating of the project, so significantly reducing its financing costs. That, in turn, had reduced the cost of solar energy in Egypt.

Speaking more generally, he affirmed that countries which subsidised fossil fuels should switch money away from such subsidies and into green energy. He highlighted that MIGA had supported an average of $1.2-billion a year of private investment into the production of green energy, around the world, over the past ten years.

He explained the role of MIGA. It was focused on de-risking (from political, policy and other non-financial or non-commercial risks) and guaranteeing private investment into ‘development’ projects. He pointed out that, originally, development finance and corporate finance had been seen as different things, but that today it was recognized that they were just different aspects, with different risk profiles, of the same thing.

The success of MIGA was shown by the figures. Every $1 guaranteed by the agency brought in $16 in investments. It also reinsured $0.64 of every dollar that it guaranteed. It had so far leveraged its guarantees into total investments of $75-billion.