TCX & GuarantCo Hosted Boardroom: Financing Your Power Sector In Local Currency

TCX & GuarantCo Hosted Boardroom: Financing Your Power Sector In Local Currency image
“It’s time to really rethink local currency versus foreign currency,” is the rallying cry from Janice Kotut-Sang, Regional Director for East and Southern Africa at GuarantCo.
Financial infrastructure across the continent is evolving in a way where long-term, safe and sustainable energy projects can now potentially be met with equally sustainable and stable local currency-driven financing models.

“The only logical, rational, sensible, sustainable, smart thing to do is finance energy in local currency,” affirmed Per van Swaay, Senior Vice President of Structuring and Sales at TCX.

He added that the issue that largely remains is the gap between supply and demand. While the former is accounted for, demand still primarily revolves around dollars, pounds and euros. The reason is simple – that’s how the infrastructure and ecosystem is currently set up.

Additional pitfalls to this transition include offtakers opting for the lowest tariffs and lowest base rates, even if they may increase beyond local currency rates over time. Transferability and convertibility risks then compound a situation where most are willing to operate in local currency, but don’t feel they have a conducive setup to walk into.

There are trailblazers changing this landscape with successful projects in Cameroon and strong intention in Botswana looking to mirror South African progression. But more refined and established policy needs to showcase countries as viable from this perspective. This would allow more thorough planning and preparation to offset the likelihood of reverting back to ‘safer’ international currency models once unforeseen challenges arise.