Herbert Smith Freehills ESG Tracker (SADC Edition)

There are so many ESG-related publications and developments that it is hard to keep abreast of them all. For this reason, HSF publishes a monthly tracker of ESG-related publications and developments, with a primary focus on developments that may be of most interest to or impact our clients in the Southern African Development Community, be they corporates, asset managers or asset owners.

If you have any ESG-related questions, please get in touch with your usual contact at HSF who will be able to direct you as appropriate.

This issue covers the period from 1 to 31 May 2023.

LESOTHO

16 May 2023

The World Bank Group Board of Executive Directors endorsed a new Country Partnership Framework (CPF) for Lesotho, laying out the World Bank Group's strategy in the country for FY2024–2028.

The five-year CPF is centred around three high-level, long-term outcomes: (i) increased employment in the private sector through improving the enabling environment for Micro, Small, and Medium Enterprises' growth to crowd in private investment for enhanced job creation, (ii) improved human capital outcomes through the strengthening of the quality of education, health, and social protection; and (iii) strengthened climate resilience through improving the management of natural resources and access to climate resilient infrastructure. The CPF, which builds on the lessons of the previous CPF FY2016-2020 and the findings of the Systematic Country Diagnostic (SCD) Update, is well aligned with the country's second National Strategic Development Plan.

MALAWI

10 May 2023

A validation meeting on the successor National Industrial Policy was held in collaboration with the United Nations Economic Commission for Africa Sub-regional Office for Southern Africa (UNECA SRO-SA) in Lilongwe. In this event, Ms Mauva, a director of Administration, Ministry of Trade and Industry (MoTI) stated that "it is envisaged that industrialisation will transform Malawi from a predominantly consuming and importing country to a predominantly producing and exporting country, thereby reducing the overriding trade deficit" and lauded UNECA SRO-SA for supporting the comprehensive analysis and review of the newly drafted National Industrial Policy so that it is aligned to the regional industrial policies as well as aligning the Industrial Policy to the Malawi 2063 Agenda. UNECA SRO-SA supported the development of the new NIP that is aligned to the SADC and the Common Market for Eastern and Southern Africa Industrialization Strategies and the Malawi 2063 agenda and its first implementation plan, the National Export Strategy II and other relevant polices and strategies of the Government of Malawi.

10 May 2023

Climate change-related disasters continue to hamper growth in Malawi, but private sector participation through green financing could help mitigate these challenges. Speaking at the recent opening ceremony of the 8th edition of the Green Finance Conference in Lilongwe, it has been reported that Malawi's Minister of Energy Ibrahim Matola said climate change is a development issue that needs to be dealt with "holistically". "Climate change affects the budget negatively in the sense that the Ministry of Finance has to come in with budgetary resources to implement mitigation and response mechanisms designed to minimise negative effects of climate change. Apart from budgetary allocation, climate change affects growth prospects either through drought-induced shocks or flooding as has been the case with Cyclone Idai, Gombe, Ana and recently Freddy." The African Guarantee Fund, in partnership with the Nordic Development Fund, kicked off the conference. Key players in the Malawi finance and energy sectors, regulatory-policy stakeholders and green small and medium-sized enterprises highlighted the contribution of the country's private sector in terms of the 2015 Paris Climate Agreement.

MOZAMBIQUE

18 May 2023

It has been reported that Mozambique's parliament has definitively approved by consensus the new Private Investment Act, which the government says is needed in order to make the country "more attractive" to domestic and foreign private investment.

Among the new measures is a set of stimuli announced in August 2022, and which included the abolition of Mozambican entry visas for 29 countries.

As for the new law, the Ministry of Trade and Industry highlights several innovations, ranging from the enunciation of the social responsibility of investors to the establishment of investment regimes (mere registration or simplified regime and authorization regime).

NAMIBIA

11 May 2023

It has been reported that a two-day stakeholder workshop was held in Windhoek, targeting feedback on the drafted National Upstream Petroleum Local Content Policy. Notably, the Minister of Mines and Energy drew a clear distinction between local content and local ownership policies, and called for the inclusion of Namibians in the country's nascent oil and gas sector.

Minister Alweendo, the Minister of Mines and Energy of Namibia, also underscored the importance of a shared understanding of local content policies among stakeholders, and for rigorous input on the draft legislation.

SOUTH AFRICA

12 May 2023

The Department of Employment and Labour published the Draft Employment Equity Regulations 2023 (draft Regulations) for public comment. The draft Regulations include the proposed 5 year sector targets for various economic sectors in terms of population groups and gender for the four upper occupational levels and for employees with disabilities.

The public has until 12 June 2023 to comment on the draft Regulations.

30 May 2023

On 30 May 2023, the Supreme Court of Appeal (SCA) confirmed in Ezulwini Mining Company (Pty) Ltd v Minister of Mineral Resources and Energy and others [2023] ZASCA 80 (30 May 2023) that miners remain responsible for the pumping and treatment of extraneous water until the Minister of Mineral Resources and Energy has issued a closure certificate in terms of section 43 of the Mineral and Petroleum Resources Development, Act, 2002 (MPRDA).

The key issue for consideration in this case was whether a mine operator has a continuing obligation to pump extraneous water from an underground mining area even after the cessation of underground mining activities and whether this obligation extends to the closure of the mine under section 43 of the MPRDA. The High Court decided in the affirmative. The High Court's decision was upheld by the SCA.

AFRICA

2 May 2023

The Southern African Development Community (SADC) Fisheries Monitoring Control and Surveillance Coordination Centre (MCSCC) has been established in the Ministry of Sea, Inland Waters and Fisheries building in Maputo, Mozambique, following the entry into force of the Charter establishing the MCSCC on 8 April 2023. The establishment of the MCSCC paves the way for coordinated measures to improve fisheries monitoring, control and surveillance (MCS) to combat illegal, unreported and unregulated fishing in the SADC region. In a symbolic gesture, the Minister of Sea, Inland Waters and Fisheries of Mozambique, Dr Lídia Cardoso on 20 April 2023, handed over keys to the offices of the SADC MCSCC to Mr Domingos Gove, director of Food, Agriculture and Natural Resources of SADC. The MCSCC will coordinate regional fisheries MCS data and information sharing services, including a regional fishing vessel register and monitoring system; provision of regional fisheries surveillance, observer coordination and port state measures support services; provision of fisheries law enforcement and legal support services; and help to support improvements in the capacity of national MCS systems.

5 May 2023

Green or sustainable finance aims to promote the real economy and long-term projects. This type of financing favours financial operations that take into account extra-financial criteria, commonly known as ESG criteria. These criteria include carbon emissions, biodiversity protection, waste management and societal impacts. It is towards this ecological model of finance that the member countries of the Central African Economic and Monetary Community (CEMAC) are oriented, through an international forum on the theme Trajectories towards sustainable finance. Held on 8 and 9 May 2023 in Douala, Cameroon, this initiative of the Bank of Central African States (BEAC) was organised in partnership with the International Finance Corporation of the World Bank Group and the Sustainable Banking and Finance Network. The objective of this meeting was to develop a common vision of sustainable finance for the countries of the CEMAC zone, says the BEAC.

5 May 2023

The average annual GDP growth in Africa was 3.4% between 2010 and 2021, according to African Development Bank (AfDB) data. This is well below the targeted yearly average growth of 7%. Combined with population growth, GDP per inhabitant has barely changed. At the same time, average purchasing power in Africa has deteriorated due to inflation, which has accelerated over the last 10 years. As well as the challenges of governance, the reality of African economies means that periods of optimism have often been disrupted by external shocks such as COVID-19, and the Russian war in Ukraine, resulting in lower GDP growth rates over the last few years. The issue has raised questions in the region. The African Union Commission, the AfDB and the African Union Development Agency – New Partnership for Africa's Development jointly conducted a study to identify the key actions needed to put every African country on the path to steady growth from 7% to 10% over the next 40 years. The preliminary report of the study will be discussed at the Annual Meetings of the AfDB Group from 22 to 26 May 2023 in Sharm el-Sheikh, Egypt.

7 May 2023

Recently, the International Maritime Organization and the umbrella body of African maritime regulators, the Association of African Maritime Administrations (AAMA), held deliberations aimed at accelerating shipping decarbonisation in Africa. While green shipping is a complex matter globally, developing nations face a bigger challenge due to limited fiscal space to support maritime decarbonisation. Additionally, some African countries are yet to include the maritime industry in their national development action plans. This is a huge barrier in investing in projects such as green ports and national single window systems, which are key in cutting carbon emissions for the shipping sector. In fact, the AAMA Secretariat contended that lack of defined maritime policies is locking out some African ports from accessing climate resilience financing from multilateral lenders. Government ministries specifically involved with the blue economy could be an important front to cure policy inconsistencies, which are derailing development of shipping in Africa.

8 May 2023

The Government of Nigeria has set a goal to achieve universal energy access by 2030 and is implementing various policies and initiatives to increase access to clean and affordable energy for its citizens. However, the energy sector faces several challenges, including insufficient power generation, inadequate infrastructure, and a high level of energy poverty. Recently in Abuja, the World Economic Forum together with the Renewable Energy & Energy Efficiency Associations conducted a Mobilizing Investment for Clean Energy Emerging Economies Initiative deep dive roundtable that brought together over 40 stakeholders from Nigeria's energy and finance sectors to develop energy and power priority areas, and showcase viable solutions to address the financing challenges faced by each priority area. The working group carried out a country context risk analysis that shows Nigeria's biggest risks in scaling the sector is complications with currency convertibility, financing structures and the availability of technology supply and technical know-how in operating the equipment.

10 May 2023

It has been reported that Africa will need more than USD700-billion in finance over the next decade to develop renewable power and mines to extract the metals required for the green energy transition. The continent's financial institutions will not be able to provide even half of that and most of the money will need to come from investors from elsewhere" African governments are under pressure to extend power supply to the 600-million people – about half of the continent's population – who currently do not have access to electricity. At the same time, copper and cobalt deposits in the Democratic Republic of the Congo and Zambia, lithium reserves in Zimbabwe and platinum and manganese seams in South Africa are seen as key to providing the materials needed for everything from solar panels to electric vehicle batteries.

10 May 2023

In a time of energy transition and rising demand for metals and minerals, resource-rich governments in sub-Saharan Africa have an opportunity to better leverage their resources to finance their public programmes, diversify their economy, and expand energy access. Africa's Resource Future, a World Bank report launched on Wednesday 10 May 2023, finds that on average countries capture only about 40% of the revenue they could potentially collect from natural resources. In other words, at a time when countries are burdened by slow growth and high debt, governments could more than double revenues from natural resources such as minerals, oil, and gas by adopting a better set of policies, implementing reforms, and investing in better fiscal administration and promoting good governance. Full taxation of natural resources is also important to charge the full cost of environmental and social impacts not always fully covered by producers, including petroleum resources. Failing to do so can act as an implicit production subsidy and raise carbon emissions.

15 May 2023

The African Development Bank is set to roll out the first green finance facilities in two public financial institutions in Benin and Côte d'Ivoire as part of its ground-breaking African Green Bank initiative. The host institutions are La Caisse des Dépôts et Consignations du Bénin and the Ivorian National Investment Bank.

16 May 2023

It has been reported that the African Development Bank has committed to helping to de-risk and remove business barriers to increase private investors' contribution to climate finance on the continent.

During its upcoming Annual Meetings from 22 to 26 May in Sharm el Sheikh, the Bank will host a session to explore how to mobilize more private sector financing to tackle climate change in Africa, including domestic natural capital. This flagship event will bring together entrepreneurs, pension and private equity fund managers, financiers and government representatives to discuss different instruments and how to deploy them on a large scale on the continent.

16 May 2023

It has been reported that the Invest in African Energy Forum in Paris is set to boost Africa's renewable energy sector by mobilizing European investments and fostering greater European participation in projects.

As demand for energy in Africa grows and the need to transition to a clean energy future becomes increasingly important, investing in Africa's renewable energy sector will ensure dual goals of electrification and decarbonization are met. As such, the Invest in African Energy Forum in Paris, hosted by the African Energy Chamber on June 1, presents a unique opportunity for French and European investors to advance investment in African renewable energy.

The Invest in African Energy Forum in Paris connects French and European investors with African policymakers, enabling new deals to be signed across the burgeoning African renewable energy sector.

18 May 2023

It has been reported that Germany and Kenya have agreed to strengthen bilateral ties across the green energy sector. German Chancellor Olaf Scholz confirmed the report and said their country will technically and financially support Kenya's renewables projects and climate action initiatives.

The funding provided by Germany will contribute to the deployment of green energy systems in Kenya, which will help reduce reliance on fossil fuels while improving climate support and resilience.

This support aligns with Kenya's goal of maximizing its abundant renewable energy resources, including solar, wind, and geothermal power, to drive energy access and economic growth. Kenya aims to increase the share of renewables in its energy mix and intends to achieve 100% renewable electricity production by 2030.

23 May 2023

It has been reported that renewable energy projects dominate Africa's energy sector in number, with a total of 153 projects between 2020 and 2023. Overall, ongoing infrastructure projects totalling USD353-billion in investments spanning 165 projects have been committed to. But weak legislative frameworks and the perception of a lack of projects are hampering more investment in Africa.

Despite the challenges Africa is well placed to service the European markets due to the decarbonisation drive there. Green hydrogen is expected to play a significant role in the global energy transition.

23 May 2023

The Africa Investment Forum presented four renewable energy and sustainability projects worth nearly USD1.5-billion to investors on the sidelines of the AfDB Group's 2023 Annual Meetings. The curated projects, which are drawn from all of Africa's regions, are sourced from the Africa Investment Forum's pipeline. They reflect gathering urgency in Africa, the world's most vulnerable region to climate change, to accelerate climate action, including closing financing gaps by securing an ever-increasing share of global capital for the continent. The AfDB's 2023 Annual Meetings are being held under the theme, Mobilizing Private Sector Financing for Climate and Green Growth in Africa. The investment roundtable, held in Sharm El-Sheikh, attracted a range of private investors, including venture capital and private equity firms. The event also included an update on the Africa Investment Forum's current pipeline, comprising 90 deals valued at USD62.9-billion and classified as either in the capital raise phase or the bankability phase.

23 May 2023

A staff team from the International Monetary Fund (IMF), led by Haimanot Teferra, visited Nairobi from 9-22 May 2023, for the fifth reviews of Kenya's economic programme supported by the IMF's Extended Fund Facility (EFF) and Extended Credit Facility (ECF). The arrangements were approved by the IMF Executive Board on 2 April 2021. Including augmentation at the time of the fourth reviews, these arrangements provide access to a total amount of SDR1.818-billion (about USD2.43-billion at current exchange rate). The mission also considered Kenya's request for access under the IMF's Resilience and Sustainability Facility (RSF) and further augmentation under the EFF/ECF. At the conclusion of the mission, Ms Teferra issued the following statement, in part: "The IMF team and the Kenyan authorities have reached staff-level agreement on the fifth reviews of Kenya's economic programme under the EFF and ECF arrangements; an augmentation of access under the EFF/ECF totaling 75% of quota (SDR407.1-million, about USD544.3-million) given challenging global financing conditions; an extension of the duration of the EFF/ECF arrangements by 10 months to April 2025 to allow sufficient time for meeting the programme objectives; and a new 20-month RSF arrangement with access also of 75% of quota that will run in parallel with the EFF/ECF arrangements until April 2025."

23 May 2023

It has been reported that the Renewable Energy Association of Nigeria (REAN) has signed an agreement with a private entity to work together to make solar equipment procurement "more efficient and cost-effective" for solar companies operating in Nigeria. They will make USD100-million of equipment finance available to REAN members. This will mean "favourable terms", including only requiring a small down payment for equipment. Solar companies will also be given a 60-day window period in which to pay the balance once equipment has arrived in Nigeria for select equipment. As one of the fastest-growing economies in Africa, Nigeria has a significant demand for renewable energy solutions. Many solar companies face significant challenges when it comes to sourcing equipment and materials, including long lead times, high costs and lack of access to quality products. By 2040, the Nigerian government aims to achieve 100% rural electrification with 5% through stand-alone solar solutions.

23 May 2023

It has been reported that Nigeria wants to locally produce at least a third of all electric vehicles in its market in the next decade. The West African nation recently ratified its National Automotive Industry Development Plan (NAIDP) in a bid to boost its technology and manufacturing capacity in the automotive industry. The plan was recently presented to the government's Federal Executive Council by the Minister of Industry, Trade and Investment, Otunba Niyi Adebayo. The National Automotive Design and Development Council (NADDC), which had put the plan together, said it is "aimed at enabling the exponential increase in the local production numbers of vehicles." "The NADDC has developed the new plan to aggressively build on the successes that have been achieved so far in the Nigerian Automotive industry. "The new NAIDP would strategically provide outstandingly competitive fiscal and non-fiscal incentives needed by automotive industry manufacturers/ producers, investors, developers and all relevant stakeholders," said the council.

24 May 2023

The Executive Board of the IMF has completed the first reviews of Rwanda's Policy Coordination Instrument (PCI) and programme under the Resilience and Sustainability Facility (RSF). The board's decision allows for an immediate disbursement of SDR73.95-million (about USD98.6-million) under the RSF. The PCI and RSF arrangement were approved on 12 December 2022, the latter with a total amount of SDR240.3-million (about USD319-million or 150% of quota). Rwanda's economy continued with fast-paced post-pandemic growth in 2022, but macroeconomic imbalances have emerged. Rising food prices and strong domestic demand fuelled by high credit growth contributed to a persistent inflation which stood at 17.8% in April. Robust import demand coupled with high commodity prices and tightening global financing conditions have weakened Rwanda's external position. The uncertain external environment and the reduced prospects for external concessional financing are compounding the challenges from the legacy of the recent global crises.

25 May 2023

Africa is set to be the second-fastest growing region in the world after Asia in 2023-24, demonstrating the resilience of its economy despite dealing with multiple global shocks. But the projected growth will depend on global conditions and the continent's ability to bolster its economic resilience, the AfDB's African Economic Outlook 2023 report has found. The report, launched recently, forecasts that Africa will consolidate its post-COVID-19 pandemic recovery to 4.3% GDP growth in 2024 from 3.8% in 2022. Some 22 countries will record growth rates above 5%, it says. It recommends robust policy actions, including incentivising green industries and providing guarantees at scale to de-risk private sector investments in managing natural capital across the continent. The launch, attended by African leaders, experts and development partners, was one of the highlights of the AfDB's Annual Meetings in Sharm El-Sheikh, Egypt. The AfDB's chief economist and vice president for Economic Governance and Knowledge Management, Professor Kevin Urama, presented the report's findings, outlining several potential policy actions for stimulating more private sector financing for climate and green growth in Africa.

30 May 2023

It has been reported that Uganda's president has signed the world's harshest anti-LGBTQ bill into law, adding the death penalty as punishment for some gay sex and a 20 year jail sentence for the "promotion" of homosexuality.

Activists in Uganda and across Africa are protesting the measures which have been met by international outrage amid concern for the safety of LGBTQ people across the region.

It has been reported that the United Nations has urged Uganda to rethink its new Anti-Homosexuality Act. The UN secretary-general suggested the measure conflicts with key international treaties and violates the rights of Ugandan citizens.

Global

2 May 2023

The United Nations Conference on Trade and Development (UNCTAD) will host the third UN Trade Forum on 8 and 9 May 2023 to identify trade policies that can help countries grow their economies while tackling pressing global challenges and accelerating progress towards achieving the UN's Sustainable Development Goals (SDGs). The forum will give particular attention to developing countries, which have been hit hardest by multiple global crises including the COVID-19 pandemic, the war in Ukraine and the climate emergency. "A cascade of global crises has disrupted international trade, including for essential foods, and revealed the trading system's vulnerabilities and imbalances," UNCTAD deputy secretary general Pedro Manuel Moreno said ahead of the forum. "But trade remains a very powerful engine for sustainable and inclusive growth," Mr Moreno said. More than 100 trade experts, policymakers, senior officials from international organisations, business leaders, and civil society representatives will meet in Geneva and online to discuss policies and initiatives that can make trading systems more inclusive, environmentally friendly and resilient.

11 May 2023

The World Bank approved $460 million in credits and grants from the International Development Association (IDA) to improve and harmonize data systems in eight countries in Western Africa and three regional organizations.

The Harmonizing and Improving Statistics in West and Central Africa Project, Phase 1, is aimed at building statistical capacity to improve the quality of data production, regional harmonization, data access and use, as well as modernize statistical systems in Benin, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, and The Gambia. It will also support the statistical divisions of the Economic Community of West African States (ECOWAS), the West African Economic and Monetary Union, and the African Union to better coordinate and improve the harmonization of statistics across the region.

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