DBSA: “Pipeline development is very important; connecting with projects that are bankable or on their way to bankability”

Exclusive interview with Kanyisa Mzilikazi, Principal Investment Officer, Climate Finance: Green Fund at the Development Bank of Southern Africa (DBSA). The DBSA is a distinguished development finance institution with extensive experience in mobilising funding for climate initiatives. The bank was a platinum sponsor at the recent Africa’s Green Economy Summit (AGES) in Cape Town and hosted a roundtable on scaling climate investments in Southern Africa.

Thank you for joining us. Let’s start with some background on you and your role at the Development Bank of Southern Africa (DBSA).
My name is Kanyisa Mzilikazi. I’m a principal investment officer within the Green Fund of the DBSA. The Green Fund is part of the Climate and Environmental Finance Unit of the DBSA. we help finance projects and programmes in South Africa that are helping drive the decarbonisation agenda in South Africa. It’s part of what the South African government is doing in terms of meeting its nationally determined contributions. This DBS initiative is a fund that was set up by the South African government to finance projects andcatalyse the green economy in South Africa.

My role entails identifying projects and helping those projects get the necessary financing

How is the DBSA effectively mobilising funding for climate initiatives from both local and global sources, and who are your partners?
The DBSA is involved in quite a few initiatives in terms of mobilising climate finance funds into projects, not just in South Africa, but the rest of Sub-Saharan Africa. So I’ll speak with regards to three initiatives currently at the DBSA that are perhaps of relevance to this conversation. The DBSA has partnered up with both local and global financing mechanisms to fund climate projects in South Africa, one of those being the Green Climate Fund (GCF), which finances programmes for climate mitigation and adaptation through blended financing mechanisms.

There are different subprogrammes within the GCF that the DBSA has implemented, for example, the Climate Finance Facility, which looks at finding adaptation programmes in South Africa. We also have the Embedded Generation Programme, which looks at embedded renewable energy.

We also are an accredited entity to the Global Environmental Fund, the GEF, which is mainly targeted at environmental projects mainly through grants projects. And most specifically, the fund that I am a focal point for, which is the Green Fund Facility, was catalysed initially by the South African government in terms of initial capital that was received and the mandate of the fund is to finance green projects in South Africa. So those are some of the global and local partnerships that the DBSA has in terms of financing mechanisms that are available for financing climate activities.

What in your view are the challenges in this kind of financing, and what are the opportunities?
Some of the challenges that we do encounter in this space is really what we are seeing in practice, and I think this is a very common thing, and that people who are practitioners in this space will also allude to a lot. First, there is a lack of bankable and scalable projects, especially for the adaptation side. So, we’re seeing a lot of the capital currently flowing towards mitigation projects and specifically renewable energy projects. So, there is a serious lack of bankable projects on the adaptation side. These are some of the challenges we are seeing. And adaptation is very important in the conversation around climate and how we finance interventions around that. Because if we are financing just the adaptation side, I think especially developing countries are the most affected when it comes to a lack of preparedness when it comes to adaptation, and therefore, they’re the worst impacted. So capital is limited for projects like that, because those tend to have to be done on a social impact basis and not really on a commercial basis. So that’s some of the challenges we are seeing in that space.

And then second, attracting private capital, especially towards adaptation projects. There are opportunities, such as interesting financing mechanisms, that are now being looked at in terms of financing of adaptation projects. For example, impact bonds are coming up to finance, for example, biodiversity, and creating very creative and unique ways to bring together both philanthropists, who typically play in the adaptation space, together with the investment side to create pools of capital that are able to finance on a sustainable commercial basis projects in the adaptation space. So, I think those are the opportunities that do exist in that environment. And it’s quite exciting for us as well, because we are doing quite a few things there.

Which DBSA climate initiatives in particular are you most excited about? And why?
I would say the work that DBSA is currently doing around biodiversity is the most exciting for me. I previously mentioned the lack of capital that flows into adaptation projects. So, part of what we’re doing is we’re looking at ways to finance nature. So, the DBSA is currently involved in a partnership with a local bank to design a biodiversity bond that’s going to look at ecosystem conservation initiatives in South Africa. We’re looking at innovative ways of financing ridding areas of alien invasive species to preserve our water bodies. We’re looking at ways to preserve, for example, lion populations in South Africa.

So these are some of the interesting things that we are doing and I’m most excited about, because as we all know, we are all connected to nature, and nature is connected to us. And as long as we do not take active steps proactively to preserve our ecosystems, everybody is affected. It takes all the brains gathered in a room to creatively finance nature activities in a way that is sustainable. So that is the work that currently excites me, and it’s a space that globally has also received a lot of attention recently. So, we look forward to also just look at what the rest of the world has done and hopefully replicating those solutions in the rest of the African continent as well.

How important is the role of the private sector in Africa’s fight against climate change?
The private sector is a very important player in terms of the fight against climate change in Africa. The most important reason being that it is clear that DFIs or public institutions cannot fund the gap alone. The gap is massive, and we do need partners in order to fund projects in the climate space on a sustainable basis.

The private sector has an important role in increasing the pool of capital that’s available to finance projects on the African continent. And I think importantly also are the competencies that the private sector brings that may not necessarily be available in the public sector. For instance, the private sector has developed competencies in developing infrastructure projects on a commercial basis. So, there’s opportunity then to partner and to finance climate resilient infrastructure, for example, renewable energy, green buildings and immobility to reduce Africa’s vulnerability to climate-related disasters, which are on the increase.

There are also opportunities for the private sector to fund climate tech. The private sector has already developed competencies, for instance, in driving the investment in innovation and technology. Therefore, the private sector could then drive that very same competencies that they’ve developed in investing in specifically green technologies and climate tech. I mean, there are opportunities, for example, for climate-smart agriculture on the African continent. There are opportunities to look at ways to finance tech that speak to those, because those are issues that are particularly relevant on the African continent.

But also in co-designing financing mechanisms that are relevant for the African environment, for example, impact bonds and green bonds that speak and respond to African problems and work to address problems from an African context. So I think there are opportunities in that sense.

At the recent AGES, you hosted a DBSA roundtable on “Scaling climate investments in Southern Africa: Innovative financing and de-risking of green projects.” Tell us more about the outcomes.
So we’re quite excited about our recent roundtable that the Green Fund and the entire DBSA Climate Finance Unit were a part of. I think the first important thing about the platform is that it has helped us to connect to a broader network of financiers who are doing similar work to us and wish to collaborate with us. We had quite a few people approach us that, for example, are in the climate tech space and who are already, for example, also doing impact bonds, which is part of the work that the DBSA is already doing. So, the important thing that really came up from that is to be connected to important role players on the continent that are doing similar work and exploring ways in terms of how we can collaborate.

In addition, the important thing for the DBSA obviously is pipeline development: Connecting with projects that are bankable or are on their way to bankability on the continent to see how those projects can benefit from the DBSA’s current financing mechanisms. So, the outcomes of the roundtable for us have been twofold in terms of connecting with similar minded role players from a co-financing point of view, but also connecting directly with project sponsors that are already undertaking projects that could be funded by the DBSA.

How important is an event such as AGES for the continent?
An event like AGES is very important. First, to bring key role players in Africa to collaborate on financing climate initiatives on the continent. In the recent developments that we are seeing globally, developed countries are tapering back funds to emerging economies in terms of supporting them to fund climate initiatives. So, it is clear that Africa has to look within in terms of financing solutions and collaborating in projects in order to create the scale that is required to finance projects in Africa. So I think an event like AGES was very instrumental in doing that because it connects role players in Africa: the different development finance institutions that were at the platform, VC capital investors as well as project sponsors that are engaged in projects in Africa.

So, the AGES conference is very relevant to that, but it also allows these role players at a single platform to find African solutions. And I think that’s the powerful thing about what a platform like this can achieve and why it is important.

Anything you would like to add?
What I would like to add is that first, if we look forward to AGES 2026, I think that’s going to be a game changer. What we would like to see, especially for AGES 2026, is an integration of SMMEs and the role that they can play in the climate finance space. And I think there’s a very unique role that SMMEs can potentially play in the green economy. And that conversation is not always put to the fore in terms of the opportunities that are available. Especially given the young startups on the African continent; there’s huge potential for these businesses to be at the centre of Africa’s decarbonisation and greening agenda. I look forward to AGES 2026 that also has a very strong focus on that.