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Interview with Maximilian Jönsson, Senior Advisor and Programme Manager, Swedish International Development Cooperation Agency (Sida)
PFAN has been generously funded by:
Interview with Maximilian Jönsson
Senior Advisor and Programme Manager, Swedish International Development Cooperation Agency (Sida)
1. What are the main features and priorities of SIDA’s work in fostering private sector development in emerging economies?
The private sector is crucial in global development and poverty reduction. It is key in accelerating and scaling the implementation of the Sustainable Development Goals (SDG’s).
SIDA works, often through partners, with companies and private sector organisations that contribute to economic, social and environmental sustainable development.
When working with the private sector, there are in addition to overriding priorities of poverty reduction, dignity for all and sustainability a few principles that are of specific importance. For example:
- Our involvement should generate multiplier effects and catalyse additional resources such as knowledge, innovation capacity and investment from private sector partners to reach development objectives.
- Private sector collaboration (PSC) must integrate and further Environmental, Social and Governance responsibility.
- Sound risk- and cost-sharing is key for ensuring a catalytic effect and sustainable results beyond the intervention.
- We ultimately target systemic impact and to contribute to market reforms by enabling well-functioning, inclusive and sustainable markets, value chains or business models.
- SIDA uses a number of instruments for PSC, including Guarantees, Challenge funds, Results-Based Financing, Project Preparation Facilities, Public Private Development Partnerships, Policy Dialogue, and Investor Networks.
2. In your opinion, what are the main challenges faced by the private sector in contributing to the clean energy transition in emerging economies?
A key challenge is developing enough projects and businesses in terms of numbers and scale which have a risk- and return profile which can be financed by the market. For example,
- Project- and business development is a long, risky and costly process. This phase therefore tends to attract insufficient financing.
- Some concrete challenges with which we currently grapple include utility solvency for larger projects, productive-use load and income generation for off-grid, and perhaps user behaviour and business models for clean cooking, just to name a few.
- There are often solutions for risk-sharing for debt once a project approaches bankability, but the risk faced by the developer- and equity investors is challenging.
Lastly, the ever present challenges of developer capacity and political- and regulatory risk.
3. Can you tell us more about SIDA’s support for PFAN, and how this support contributes to SIDA’s overall strategy and priorities?
SIDA has supported PFAN initially since 2016, with a step-up in recent years. Currently support to PFAN is provided under SIDA Regional Africa- and Global Strategies. PFAN contributes to strategy objectives of increased production and access to renewable energy, improved conditions for decent and productive jobs and to some extent, resilience. PFAN is considered to be a good example of a catalytic approach which helps mobilise private sector resources to generate development.
PFAN is an important complement to SIDA contributions and instruments which, in general, sits in between challenge funds and guarantees and support via funds.
4. What are your suggestions for PFAN’s future direction in light of SIDA’s priorities for its development co-operations?
This is of course something discussed with donors and PFAN in the Steering Committee, but some food for thought:
- Business plan preparation and investor pitches are clearly key. We also encourage your reflection on if- and how to further increase support to project development and structuring.
- We also follow with interest the PFAN work around partnerships for making available micro-mezzanine financing – clearly a gap in the market.
- PFAN is well placed to increasingly capture, analyse and communicate learning on markets, challenges, opportunities and solutions – potentially huge value add.
- A challenge for all is to ensure that the clean energy transition maximizes development impacts such as decent and productive jobs, income generation, resilience and gender equality.