ZAMBIA’S PROPOSAL FOR MOBILISING FINANCE FROM DOMESTIC FINANCIAL MARKET FOR CLIMATE

RESILIENT PROGRAMMES TO SUPPORT VULNERABLE COMMUNITIES

ByLloyd Chingambo

Revolutionalising Finance for Agri-Value Chains

Nairobi, KenyaJuly 14-18, 2014

Overview

Since independence in 1964, Zambia is still exporting unprocessed copper

Rampant unemployment Serious imbalance in wealth distribution Rampant rural poverty with only urban pockets

of development while the rest of the rest of Zambia has been left behind.

Government is seeking to remedy this situation

CONSEQUENCES OF RURAL POVERTY

POVERTY RELATED SITUATIONS

HOW DO WE TRANSFORM PEOPLE TO THESE?

Livestock induced siltation

Shifting cultivation

POVERTY RELATED SITUATIONS HOW DO WE GET PEOPLE TO CHANGE TOTHESE?

Biofuels/Essential Oils Programmes expected to minimize deforestation and would engender economic empowerment among the rural poor.

POVERTY RELATED SITUATION ALTERNATIVE ECONOMIC ENGAGEMENTS

7

Economically empowered Rural poor will conserve Wildlife

POVERTY RELATED SITUATION ALTERNATIVE ECONOMIC ENGAGEMENTS

VISION AND TRANSFORMATION PROGRAMMES

• Set up a National Catalytic Fund. • Building a Catalytic Private Sector Financing

Mechanism through and use it to: Unlock the domestic financial market and

private sector Proactively “grow” the private sector to spur

growth and development in the country Financing as a vehicle for rural economic

empowerment of citizens Essential Oils Value Chain Programme Biofuels Value Chain Programme.

BIOFUELS AND ESSENTIAL OILS PRODUCTION VALUE CHAIN

10

IMPORTANCE OF BIOFUELS AND ESSENTIAL OILS TO ZAMBIA’S RURAL DEVELOPMENT

• It is an “All-Included” Economic Empowerment Industry capable of creating jobs and wealth for All in the long run

• Improves Climate Resilience and Security, • Promote Rural Development, • Promote Agriculture Development and enhance food

security, • Create jobs and alleviate poverty, • Economic Empowerment among citizens,• Enhance Environmental Conservation and mitigate climate

change,• Foster technological development, etc.

GROUND-BREAKING FEEDSTOCK PRODUCTION

AGRO-ECOLOGICAL MAP AND CROPS SUITABILITY

FROM: Agriculture Sector Profile 2011

Sweet sorghum4 – 4.3 months

All Zones

Cassava10 - 12 monthsMainly Zone III

MolassesAvailable

Moringa24 - 36 months

All Zones

Soybeans4.5 - 5 months

Mainly Zones IIa & III

EXAMPLE 1 – BIOETHANOL FEEDSTOCKS

EXAMPLE 2 - BIODIESEL FEEDSTOCKS

13

Jatropha24 - 36 months

All Zones

PROVINCIAL COOPERATIVE UNIONS

FEEDSTOCK SUPPLY NETWORK

POPUs

PGPGPG PG

FF F F

GBNLPCU

DISTRICT COOPERATIVE UNIONS

Inte

grat

ed a

nd C

ertif

ied

Mar

ket

Str

uctu

re

anch

ored

into

: P

PC

R,

ZA

BS

, N

TB

C,

NIS

IR a

nd

Her

bariu

m N

DO

Cata

lyzi

ng C

ottag

e In

dust

ries

(Dev

elop

men

t of V

alue

Add

ition

In

fras

truc

ture

)

PROPOSED FINANCING FRAMEWORKFOR BIOFULES AND ESSENTIAL OILS PROGRAMMES

PILLARS OF THE PROPOSED FINANCING STRATEGY

The Proposed Financial and Investment Framework isanchored into five (5) interlinking Strategies, namely:

• Based on an “Off-Balance Sheet” Funding Strategy”• Incorporates a robust Risk Mitigating Framework• Creation of a Liquid Fund as the vehicle through

which projects are processed• Deployment of the Liquid Fund to leverage

domestic financial sources• Adopted the Pooling and Blending Strategy.

Investors | Lenders

MoneyBonds,Instruments, etc.

CATALYTIC AND RISK MITIGATING FINANCING FRAMEWORK

GovernmentFunding

Grant Financing Sources

Concessional,Commercial, etc.

CATALYTIC Fund Programmes

&Projects

Treasury Management

Specialized Service Providers

FEATURES OF THE FUND

• Innovative domestic funds mobilisation framework• Structured to pool and blend different sources of funds• Permanent Liquid Fund capable of mobilizing finance from

both “donors” and domestic financial sources, at any scale • Capable of facilitating or supporting investment

opportunities with different risk profiles • Embodies venture capital characteristics• Capable of supporting:

oProjectsoProgrammesoCompaniesoLocal AuthoritiesoCentral Government (Sovereign Fund).

Africa Carbon Credit Exchange Telephone: +260-1-238473/2 www.africACCE.com

KEY FEATURES OF THE FUND, Cont/…

• Flexible and “continuously growing” pool of funds• The Fund is capable of:

Lending Borrowing Creating its own money through treasury

management of the pooled funds Extending grants:-

Productive Social programmes and projects Smallholder projects and programmes.

• Risk mitigation vehicle capable of: Extending credit enhancement Extending credit guarantees.

Africa Carbon Credit Exchange Telephone: +260-1-238473/2 www.africACCE.com

PRODUCTS AND SERVICES

• Agricultural Value Chain Financing• Credit Enhancements• Credit Guarantee• Loans• Share Acquisition• Bridge Financing• Trade and Supply Chain Finance• Leasing of Equipment • Blended Finance• Structured Finance• Underwriting Business Support• Infrastructure Financing• Etc.

RISK MITIGATING FEATURES OF THE FUND

• Government Programmes (PPP)• Guaranteed Market

Government Off-take Agreement • Product is Measurable• Specified Standards

Meets Specific Standards• Supported by a Liquid Fund • Inputs are specified and quantified• Supported by necessary specialized service providers• Etc.

MANAGED PERFORMANCE AND RISKS INSTITUTIONALCOLLABORATION

Specialized /Professional Services1. Operational 2. Technical3. Financial Planning4. Management5. Strategy support6. Risk management7. Marketing8.Out-grower Systems9. Infrastructure 10. Governance11. Standards12.Asset Management7. Etc.

CONTACT DETAILS

Africa Carbon Credit Exchange

4th Floor, Godfrey House. Kabelenga Road.P.O. Box 390035Lusaka. Zambia

lchingambo@africacce.com

Website: www.africACCE.com

Telephone: +260-211-238473/2