Few organisations working in nature based projects, know about debt to nature swaps.
A panel of discussion at the pre-Africa’s Green Economy Summit, chaired by Heather Matson, Managing Director of Bankers without Boundaries, discussed this method of finance at length.
Akim Daouda, Founder and CEO of Mwaana, from Gabon, said briefly explained, this method, entails swaping expensive debt for a cheaper loan for capital to fund other fundamentals around projects, such as health, community development and conservation initiatives.
“But political but-in, is key from the Minister of Finance. In Gabon, the transaction was also led by the office of the President.”
In Gabon, R500 million of Government debt was payed in 3 years, and survived a military coup.
The Government was able to use the money to reinvest on censors placed at ships and satellite monitoring, to curb illegal fishing.
Erik Wandrag, CEO of the Oceans Finance Company, said the transaction, uses the same principle as current renewable energy deals.
The Project managers partner with a power purchasing agreement, raise money, to also finance related activities, such as conservation, health and community, funded by host nation.
He said “the repayment is relatively cheaper not free.”
“Of paramount importance is aligning the project with national priorities? Then you have buy in. Also ask-what is your liability management strategy” said Wandrag.
Rowan Le Roux, said this method is “not the wrong instrument, but not always relevant, given organisational objectives.”
He encourages project managers to have a proper project schedule, prior to commencement, to get the money out the door, quicker.
With R1,3 trillion needed to solve Sustainable Development Goals in Africa, more financial institutions are stepping up, to fund projects on the continent.