Thirteen Southern African Development Community (SADC) Member States have called for the establishment of an international blended investment facility to unlock innovative finance solutions for long-term water security and climate resilience.
The Member States - Angola, Botswana, Eswatini, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, United Republic of Tanzania, Zambia, and Zimbabwe - are developing a coordinated regional approach to climate-resilient water investment as part of the SADC Regional Climate Resilient Water Investment Programme (SADC -AIP): Climate Resilient Hydrological Cycle Observation System, which is funded by the Green Climate Fund (GCF).
The initiative seeks to bolster the region’s climate resilience by improving water management systems and is expected to benefit approximately 140 million people across the SADC region. The Project Preparation Facility (PPF) of the GCF will help develop the investment program aimed at leveraging at least USD 117 million.
The SADC Secretariat, the Development Bank of Southern Africa (DBSA) and the Global Water Partnership Southern Africa (GWPSA) are working together with the thirteen SADC Member States to drive the success of this transformational initiative.
SADC Member States representatives attending the Programme’s 3-day inception and training workshop in South Africa in Pretoria, recognized the region's over-reliance on external funding sources, including grants and official development assistance, to finance hydro-climatic information and hydrological monitoring systems. This dependency highlights the urgent need for more sustainable and innovative financing solutions. The delegates agreed that private sector involvement in climate-resilient water investments remains limited due to the perceived risks, long payback periods, and challenges in predicting returns.
“We need to create sustainable financing solutions, starting with water bonds that enable us to raise funds without relying solely on external grants. Each member state can contribute to the repayment of these bonds, ensuring the project’s long-term success. Water bonds are essential for ensuring long-term investments in water sustainability and infrastructure, which are vital for public health, economic growth, and environmental protection ” said Dr Patrice Kabeya, Senior Programme Officer for Water at the SADC Secretariat.
Mr Billy Katontoka, GCF’s National Designated Authority in Zambia’s Ministry of Green Economy and Environment explained the need to look at various options of blended financing instruments including Climate Resilience and Water Security Funds, Water Impact Bonds, Green Bonds for Water Infrastructure, Blended Water Financing Platforms and Resilience Bonds among others.
“We need to look at the development of blended finance models, which combine public and private funding with concessional finance to de-risk investments for the private sector. Such an approach could attract institutional investors and mobilize domestic resources. A national climate resilience fund for instance could focus on upgrading water infrastructure in urban areas to improve water management in the face of climate change. At the regional level, a SADC-wide water security fund could support transboundary water management projects. Countries can also consider green bonds can be particularly effective in attracting institutional investors interested in Environmental, Social, and Governance criteria,” said Mr Katontoka.
The meeting also discussed various other options including Blended Water Financing Platforms which aggregate resources from multiple public and private sources to finance a portfolio of water projects; and Water Credit Enhancement Mechanisms which act as guarantees and insurance to reduce the risk for private investors in water projects. By providing guarantees, multilateral development banks or donor agencies can encourage private sector investment in projects that might otherwise be seen as too risky.
The United Nations Capital Development Fund (UNCDF) announced its availability to leverage its Flagship Catalytic Blended Financing platform of the UN, to crowd-in finance for the scaling of development impact where the needs are greatest, and support country efforts for establishment of a blended investment facility. The UNCDF has previously engaged in innovative financing for transboundary water management projects, such as the Tanga Water Authority’s bond for financing infrastructure.
“The innovative financing mechanism would not only ensure the sustainability of water investments but also lay the foundation for a broader investment strategy that could be expanded to other sectors in the future. The facility will serve as an incubator to support bankable projects, transforming the region’s investment landscape,” explained Ms. Surekha Ramesseur, Senior Programme Officer -Meteorology at SADC Climate Service Centre.
The DBSA’s SADC Water Fund encouraged member states to adopt collaborative efforts, including co-contributions—whether financial or in-kind—to not only ensure the sustainability of the SADC Hydrological Cycle Observing System (HYCOS) program but also demonstrate the power of regional partnerships in overcoming climate challenges.
“We have already seen remarkable progress in Zambia and between Mozambique and Eswatini through shared commitment and co-financing. Projects like Kazungula, which taps into the Zambezi River, exemplify climate resilience in action,” said Eng Chenge Chikara. Project Manager of DBSA’s SADC Water Fund.
Alex Simalabwi, CEO of the AU’s AIP High Level Panel Secretariat and Executive Secretary of GWPSA-Africa, noted that that an innovative blended finance mechanism would support efforts to reduce dependence on aid. ‘Diversifying funding sources and leveraging of Official Development Assistance (ODA) and grant finance to de-risk priority water investments using a variety of innovative financial instruments and sources, in part of the approach for the AIP, he said.
The SADC-AIP initiative is part of the Continental Africa Water Investment Programme (AIP), adopted by the African Union Heads of States Summit in 2021. The programme's goal is to bridge the water investment gap, enhance climate resilience, and promote sustainable sanitation for a prosperous and peaceful SADC region.
