Unlock idle pensions sector billions to fund greening of city economies

Thursday December 20 2018

Mauel Moses

Mauel Moses, International Finance Corporation country manager. PHOTO | NJIRAINI MUCHIRA | NMG 

NJIRAINI MUCHIRA
By NJIRAINI MUCHIRA
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The International Finance Corporation country manager Mauel Moses spoke to Njiraini Muchira on investing in projects with a large impact.

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The IFC has released a Climate Cities Report that looks into potential climate investments in key cities, among them Nairobi. How crucial are green cities?

The idea behind this report is to demonstrate the opportunities awaiting us. The number of city residents is growing due to rural-urban migration.

In Nairobi for instance, the population ranges from three to four million. Here is an opportunity to target these cities as they grow.

A city can grow in dirt using dirty fuels or we can use this opportunity to actually grow in a smart way.

In most cities the pollution is increasing, so we need to think of greening them up in terms of electric cars, tram railways and greenhouses.

The impacts of climate change are real and we need to embrace green growth.

An estimated $8.5 billion is needed within a decade to transform Nairobi into a green city. Where will the funds come from?

Raising this money is a challenge. However, it has to come either from taxation or from the private sector.

The IFC has been urging governments to consider unlocking funds held by the private sector.

Indeed, a lot of money is held by pension funds that could be invested. Projects can be undertaken on a public-private partnership basis.

This means the government does not necessarily need to borrow and will use less money compared with having it funded 100 per cent from their pension funds.

Before a government borrows money, it is important to ask if the project can be undertaken using private sector money. If so, let the private sector be engaged under the PPP model.

Affordable housing is part of Kenya’s Big 4 Agenda. How can Kenya leverage on green houses in implementing this?

Affordable housing is a classic example of maximising finance for development.

The government and the World Bank are working to create the Kenya Mortgage Refinancing Company.

This will allow for long-term financing to be made available for banks to lend long term.

The company will lend to banks to borrow on easy terms so that they can lend onward to mortgage customers. This will meet the demand for credit.

However, with regard to determining the number of housing units to be constructed, we are working with the government's official policy on affordable housing, social housing and the missing middle.

We need to work with the government under a PPP model because the government alone cannot meet the demand for housing units.

The government can make infrastructure and land available, but allow the private sector to build the houses.

The IFC will fund developers in the hope as long there are people willing to take up mortgages.

The PPPs model has not really taken off in East Africa despite enactment of various enabling laws. What can be done to activate it?

It is important to appreciate that PPPs are difficult and you have to check all the impacts to make them sustainable.

If you rush it, you end up with some constituency being unhappy. I believe that every PPP should be done as fast as possible but without taking shortcuts, particularly during the procurement stage.

When done properly, you avoid the situation where some bidders complain of unfair processes and go to court, thereby delaying implementation of projects.

How is the IFC helping in the growth of private businesses in East Africa?

On average, the IFC has invested some $500 million across East Africa.

As the private sector investing arm of the World Bank, we are involved in the health and education sectors, financial inclusion, infrastructure, agribusiness, tourism, retail and property. We also support private equity funds.

We seek to help these businesses grow and expand, but must interrogate their viability and ability to repay us before we invest.

There is always a developmental goal in all the projects we finance. It is not all about profit, rather about impact.

All projects we finance are categorised based on impact because we want to ensure these businesses are sustainable and will not harm the environment and society.

Businesses tend to be jittery about bringing on board equity investors even though this is IFC's strategy. How has this worked out?

We invest in equity all the time. If the capital base a company needs is equity and it is able to list at the securities exchange or pay us out after some years, we are always willing to invest.

We are usually minority shareholders, helping companies improve governance. We are never on board to run the companies.

At some point, we have to exit because all that we seek is to recycle our money.

How important is it for governments is East Africa to prioritise privatisation of public entities?

Privatisation is a good thing because governments should not be in business.

Governments should be regulators and enablers of a conducive environment for business.

The only time a government can play a role should be in social initiatives like distributing pensions to the elderly.

Otherwise, it is important to privatise public entities and let them compete, especially those that are not making money even where there is a functioning market.

Are governments in East Africa doing enough to fight corruption?

Corruption is a leakage, it is wasteful and affects a country's potential.

It is crucial to rein in corruption because you can do more with those resources.

Governments and the private sector must minimise wastage, and that is why we invest in companies that avoid such inefficiencies.

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Bio

  • Experience: In policy, legal, financial, economic and technical issues pertaining to emerging markets, financial and real estate sector transactions, structured trade and commodity finance.

    2014-: Country manager for Kenya, Uganda, Tanzania, Burundi, Rwanda and South Sudan.

    2012-2014: Hub leader, Southern Africa for financial markets based in Johannesburg before he returned to Nairobi as the Country Manager for the East Africa hub.

    2005-2012: Portfolio officer in what was then the financial markets division of IFC’s sub-Saharan Africa department in Nairobi.

    He was instrumental in IFC’s scaling up of its financial markets portfolio in East Africa. Prior to 2005: Senior projects officer at PTA Bank.

  • Education: He is an Associate of the Chartered Institute of Management Accountants of the United Kingdom and holds a Masters in Business Administration from the University of Leicester UK and a Bachelor of Honours in Civil Engineering from University of Zimbabwe.