Enabling a power shift in the African energy landscape

Rand Merchant Bank (RMB)

Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand Group of which First National Bank is a member, is actively involved in the African power landscape across the continent.

From gas projects in Nigeria and Ghana, to large scale utility investment and supporting Independent Power Producers (IPPs) in Southern Africa, we have an excellent track record in the space. As a bank that has funded over R25 billion in power transactions to date, we are proud of the bespoke products we have created and the impact we’ve had on the market.

Across Africa, there is an ongoing shift in how power is procured. This is partly from necessity and partly from a strategic imperative. We are seeing the start of a boom in private power as many corporates seek to either generate their own power or contract with independent power producers (IPPs). From a fiscal perspective, many governments can no longer absorb the liabilities emanating from long-term PPAs signed up to by their national utilities, so larger, centrally procured deals in this space are going to wane.

African corporates want to green their operations and lessen the impact of climate change, but perhaps more importantly, they are concerned with securing supply and certainty of price. It’s difficult for a large-scale business to project the costs for a line item without any knowledge on the dependability of its supply.

Says Daniel Zinman, Head of Power and Renewables at RMB: “Thankfully, it has never been more accessible for the private sector to generate its own electricity. Current advancements in technology have opened up the options available to businesses. Costly and complex fossil fuel generation supplied by the national utility isn’t the only option anymore, with multiple financing solutions for smaller scale projects such as on balance sheet ESG funding and leasing models also becoming available.

However, while a deregulated power sector is an enormous opportunity for the continent, it also requires innovative funding solutions to get it off the ground so as to make this power accessible to the broader corporate market.”

RMB has been and is involved in structuring solutions to meet the power needs of a wide spectrum of corporate clients. The most important thing we’ve learned is that funding private power production is not a one-size-fits-all solution, but that the technical solution and optimal financing structure needs to be tailored based on the business’s needs and drivers.

Titus Nampala, Head of Africa Financial Institutions & Sovereigns at RMB concludes: “The African Development Bank aims to spur sustainable economic development and social progress to ease poverty. By investing in key energy projects across Africa, RMB aligns to the AFDB goals of ensuring access to reliable, modern energy and ensuring access to sustainable management of water and sanitation.

“The future of energy in Africa is evolving and will require new tools and approaches. With an ethos of innovation and awareness of sustainable impact, we can reimagine the provision of energy in a way that benefits all.”

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