EEP Africa Draft Project Document Incl Annexes
EEP Africa Draft Project Document Incl Annexes
EEP Africa Draft Project Document Incl Annexes
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Content
1. Introduction ................................................................................................................................................... 3
2. Context, strategic considerations, rationale and justification ...................................................................... 3
2.1. Justification and strategic considerations for the support ..................................................................... 3
2.2. Rationale for supporting green start-ups and scale-ups ........................................................................ 4
2.3. Institutional context and lessons learned .............................................................................................. 5
3. Fund objectives and components.................................................................................................................. 6
4. Theory of change and key assumptions ........................................................................................................ 6
5. Summary of the results framework ............................................................................................................... 7
6. Budget............................................................................................................................................................ 8
7. Institutional and management arrangement ................................................................................................ 9
8. Financial management, planning and reporting ......................................................................................... 10
9. Risk management ........................................................................................................................................ 11
10. Sustainability and closure .......................................................................................................................... 12
Annex 1: Process Action Plan (PAP) for EEP Africa project preparation ......................................................... 13
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1. Introduction
The present draft project document outlines the background, rationale, objectives and management
arrangements for the planned Danish contribution of DKK 50,0 million to the Energy and Environment
Partnership Africa Trust Fund (EEP Africa) hosted and managed by the Nordic Development Fund (NDF). The
project document is an annex to the legal bilateral agreement with the implementing partner and constitutes
an integral part hereof together with the documentation specified below.
Around 11 million young Africans are expected to join the labour market every year for the next decade.
Therefore, it is critical to support a sustainable and inclusive growth that can create millions of new decent
jobs. The environmental and off-grid green energy sectors provide a unique opportunity for Sub-Saharan
Africa to boost economic inclusive growth. However, lack of capital for seed and early-stage investments is a
major barrier for many African entrepreneurs and start-ups within the field of pro-poor climate technology
and innovative green business models. Further, there is limited access to incubator funds, technical
assistance and angel investors, and particular female entrepreneurs and domestically owned companies face
challenges of accessing capital and technical support to grow their companies.
The Energy and Environment Partnership Africa Trust Fund (EEP Africa) is multi-donor fund hosted and
managed by the Nordic Development Fund. It provides early-stage grant and catalytic financing to innovative
clean energy projects, technologies and business models in 15 countries across southern and eastern Africa.
Since 2010, EEP Africa has committed more than EUR 70 million and supported nearly 250 projects leveraging
clean energy technologies and sustainable energy access business models to transform lives and livelihoods.
The overall objective EEP Africa is to enhance clean energy access, development and investment, with a focus
on benefiting poor and underserved groups. This is achieved by providing early-stage grant and catalytic
financing to innovative clean energy technologies and business models in 15 countries across Southern and
East Africa. Project financing is supplemented by technical support, investment facilitation and knowledge
sharing.
The Danish contribution will support the work of EEP Africa and support a consolidation of EEP Africa as a key
Nordic early stage and catalytic financing facility targeting to support clean energy and climate-relevant
technology and business models in Sub-Saharan Africa. The Danish support will furthermore strengthen the
close Nordic collaboration and effort to close the energy gap in Sub-Saharan Africa. EEP Africa will be a new
partner for Danish development assistance but operating under the umbrella of the Nordic Development
Fund where the Danish Ministry of Foreign Affairs (MFA) already plays an active role in the Board.
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This is also allowing new opportunities to introduce new technological opportunities that fits the needs and
affordability of the markets in Sub-Saharan Africa.
Energy is also critical for local populations to adapt to climate change. Products such as off-grid solar powered
irrigation can reduce local exposure to more frequent droughts and changing rain patterns. Solar cooling
storage for fresh fish and vegetables can open more resilient business models or green charcoal based on
agricultural waste can reduce deforestation in semi-arid regions highly vulnerable to climate change
desertification. These are just some examples of local businesses that can contribute with prosperity for both
people and the planet in Sub-Saharan Africa. Renewable energy is in other words an enabler for achieving
the SDG’s, adapt to climate change and allow Sub-Saharan African communities to leapfrog to low-carbon
technologies. Yet, the business environment in most Sub-Saharan countries for green and climate-related
start-up companies are still facing many barriers for scaling up their business solutions and technologies.
The Danish contribution to EEP Africa is in this context well-aligned with the Danish Strategy for Development
Cooperation “The World We Share”. The strategy priorities to provide access to clean and renewable energy
for underserved people in Africa which can contribute to both social and economic development as well as
local job creation. Further, the strategy emphasises that the Danish development assistance should promote
integration of renewable energy with initiatives for climate change adaptation such as the appliance of solar
water pumps for irrigation purposes which could reduce vulnerability to climate change. Further, it also
stresses a need to contribute to a sustainable and socially just economic recovery after the COVID-19 crisis,
which should allow creation of new green jobs and mobilize private investment that can decarbonize growth.
Finally, EEP Africa has a strong gender focus and contributes to a leave-no-one-behind approach by
supporting business models targeting energy poor households which is also a key priority for Danish
development assistance.
Africa has the highest entrepreneurship rate in the world according to the African Development Bank (AfDB)
which include many young and female entrepreneurs. This means that Micro, Small and Medium Enterprises
(MSME) are now the biggest formal employers in Sub-Saharan Africa. However, while these numbers appear
promising, Sub-Saharan Africa also has the highest small business discontinuance rate of 8.4% and only 20
percent of African entrepreneurs are introducing new products and services. Africa has, in other words, a lot
of so-called petty-cash and survival entrepreneurs who were pushed into entrepreneurship by
unemployment1 and adding limited value to the local socio-economic development.
Early-stage entrepreneurs in Sub-Saharan Africa have many women and it is estimated that around 27
percent of the female adult population is engaged in early-stage entrepreneurial activity. This means African
women are twice as likely to start a business as women elsewhere in the world. But, particular African female
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Why Africa Has the World's Highest Entrepreneurship and Discontinuance Rates | The African Exponent.
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entrepreneurs struggle to find investment capital. EEP Africa demonstrates that female entrepreneurs obtain
3.6 times less investments than their male peers which provides a strong rationale of focusing support on
female entrepreneurs. Furthermore, an IFC study finds that over 90% of MSMEs across sub-Saharan Africa
are suffering harsh economic impacts due to the COVID-19 pandemic. Women-led MSMEs are in particular
hard hit.
Finally, start-ups and scale-ups in Sub-Saharan Africa have demonstrated an ability to develop new business
models and distribution of new technology that increase access to new and affordable low-carbon and
climate resilient technologies in the region. Particular off-grid energy solutions have proven to be an enabler
for sustainable development growth in areas without sufficient access to energy. For examples, EEP Africa
has supported ‘Celfre Energy’ to provide farmers in Zimbabwe a solar-powered surface water pump that
enables them to irrigate crops and access water for household purposes throughout the year or ‘Agsol’ that
is developing a network of solar mills for food processing in rural off-grid areas of East Africa .
An impact evaluation of the fund conducted in 2020 confirmed that EEP Africa’s value added is its’ willingness
to take risks and invest in early-stage and unproven technologies and business models. In recent years, this
has included an increased focus on supporting local and women-led companies as well supporting local
entrepreneurs bridging the gap to commercial capital. Based on this evaluation, the Fund is expected to up-
date its strategic focus and engagement based on recommendations from the Steering Committee where
Denmark would have a seat (some of lessons learned is summarized in the study generating success).
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EEP Africa organises and hosts different knowledge, networking and investor events. However, as the recent
performance evaluation emphasized, EEP Africa is still a small stakeholder with limited convening power.
Therefore, the Danish MFA will support that EEP Africa builds stronger partnerships with specialised
organisations such as IRENA, GOGLA and AMDA. Denmark can also facilitate dialogue with other partners
such as ESMAP, IFC, IFU, SEFA and UNEP CCC as well as relevant embassies. Finally, the Danish contribution
will also allow to consolidate and complement the existing close Nordic collaboration in the Beyond the Grid
Fund for Africa, Nordic Development Fund and in SEFA.
This objective is achieved by providing early-stage grant and catalytic financing to innovative clean energy
projects, technologies and business models in 10-20 countries across Southern and East Africa (maybe
broader geographic scope in the future). Project financing is supplemented by technical support, investment
facilitation and knowledge sharing
The Fund focuses its operations on three linked and interrelated activities: (i) Clean Energy Financing
supporting early-stage energy access projects; (ii) Investment Facilitation and Business Development Support
(BDS), and; (iii) Knowledge, Policy and Partnerships.
(i) The Clean Energy Financing component has two primary financing windows to support start-ups
and scale-ups with direct capital. The main window is titled the EEP Innovation Window and is
targeting early-stage energy access projects in active development through an open challenge
fund and Call-for-Proposal (CfP) format closely following the model established under the EEP-
SEA Programme, and allocating financing in the form of grants and repayable grants to successful
project developers. The other window, the EEP Catalyst window, is currently piloting follow-on
loans to selected projects stemming from the EEP innovation window. The future of the Catalyst
will be decided based on the lessons from the two ongoing pilots.
(ii) Investment Facilitation and Business Development Support component is providing technical
advisory and investor outreach, recognizing that access to specialised business advisory expertise
and, even more crucially, access to finance “beyond EEP” remain critical constraints to growth
for emerging businesses EEP Africa has a clear niche for being a pipeline engine, providing,
essentially, a service to the growing community of downstream clean energy investors including
development finance institutions (DFIs), impact funds, banks and local financial institutions and
institutional investors.
(iii) The Knowledge, Policy and Partnerships component will leverage the applied learnings taking
place inside EEP Africa’s diverse portfolio to develop a wide range of knowledge products, events
and partnerships that advance best practices in the clean energy sector.
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1); Gender Equality (SDG 5); Affordable and Clean Energy (SDG 7); Decent Work and Economic Growth (SDG
8); and Climate Action (SDG 13).
EEP Africa’s outcome is to enhance clean energy access, development and investment in South and East
Africa. The Fund also aims to be aligned with relevant regional and national policies, development plans,
and Nationally Determined Contributions (NDCs) to the Paris Agreement. EEP Africa’s Theory of Change is
also reflected in its results framework. Below is a summary of the Theory of Change which is further
elaborated in Annex 3.
The aim of the Results Framework establish core targets and indicators which is a frame for monitoring,
supervision and reporting at the level of every project in the portfolio. The Results Framework has been
harmonised with the metrics being required of Project Developers across financing institutions. Project
reporting is then aggregated for key metrics across the portfolio to provide results-based data to donors at
Fund level. Core outcome indicators are identified and outlined in the below matrix (see full results
framework in Annex 3).
The high-level indicators are expected to be continued in the next financing phase. However, more
emphasis will also be paid to other types of Key Performance Indicators requested by financial institutions
that could provide scale-up financing. Furthermore, a more adaptive approach will also be allow in the
future reflecting the more dynamic nature of small enterprices and start-ups. Lessons learned
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demonstrates a need for flexibility on agreed indicators at project level to adapt to changes in the markets
and adjust the business case. For example, the off-grid energy company D.Light intended to use grant
funding to scale-up solar lantern sales in Kenya but found that there was a greater demand from end-users
for higher level power systems. In response, D.Light launched a pay-as-you-go Solar Home Systems (SHS)
line in 2015 and managed to sell 275,000 SHS by the end of the project period.
6. Budget
The Danish funding to EEP Africa is planned to run from 2022-2025 and will be based on annual calls for
proposals. A number of donors have already committed new funding to EEP Africa where commitments of
EUR 4 million from Finland and EUR 8.6 from Switzerland are confirmed. In addition, it is expected that NDF
will make a new financial commitment and Iceland is also likely to become a donor to EEP Africa. The total
budget for the next four years is expected to be approx. DKK 190.0 million.
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The below budget summarizes the overall budget for the Danish contribution and the estimated total budget
for EEP Africa in the period for 2022-2025. More detailed budget can found in Annex 5.
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The Green Diplomacy and Climate from Ministry of Foreign Affairs will represent Denmark in the SvB, which
is comprised of representatives from the group of donors and convenes for at least 1 physical meeting
annually to review the Annual Fund Report. The SvB serves as the highest decision making authority for EEP
Africa providing strategic guidance, reviewing and approving the audited Annual Fund Report as well as
annual work plans and budgets, approving changes to the Fund Rules, Operational Guidelines or Results
Framework and handling any other business as defined in the Fund
The day-to-day fund manager is NDF with the overall responsibility for management, administration and
performance of the Fund throughout its life, managing Fund resources in compliance with its existing policies
and procedures, and ensuring appropriate internal controls and separation of key functions. A new third
party service provider is planned to be selected in June 2022 based competitive selection process where eight
pre-identified companies. The service provider will support NDF fund manager in the technical and field
implementation of the project, including preparing the tenders, rating incoming proposals and providing
technical assistance.
In addition, an Investment Committee has also been established with the responsibility for selection and
approval of projects for financing. Donor partners may opt to nominate a representative to the committee.
NDF will nominate additional external technical experts, as relevant. The EEP Innovation Investment
Committee will meet once at the conclusion of each round of Call for Proposals to review final proposals and
make selections. Preparation and signing of financing agreements will follow normal NDF policies and
procedures, including legal and integrity review.
The Danish MFA will require that an independent mid-term review will be conducted to ensure progress and
learning during the implementation.
Any repayments, reflow or income accruing from investment operations of the Fund will be added to the
general resources of the Fund for further deployment and will not be credited to the contributions of any
donor. Any placement of Fund resources will follow NDF’s liquidity policy.
The Department of Green Diplomacy and Climate (GDK) in the Ministry of Foreign Affairs of Denmark shall
have the right to carry out any technical or financial supervision mission that is considered necessary to
monitor the implementation of the project/programme. Further, after the termination of the
project/programme support, the Danish MFA reserves the right to carry out evaluations in accordance with
this article.
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Procedures and minimum requirements pertaining to disbursements, partner procedures pertaining to
financial management, procurement and financial control procedures, work planning will be defined when
an implementing agency has been selected for technical support and financial management of grants to start
to national businesses.
Narrative progress reports and financial reports should be delivered as agreed upon in the Steering
committee but no later than six months after the closure of the financial year. All financial report should be
subject to financial audit. Both parties will strive for full alignment of the Danish support to the implementing
partner rules and procedures, while respecting sound international principles for financial management and
reporting.
The Danish MFA has a zero tolerance for anti-corruption and inaction approach to tackling sexual
exploitation, abuse and harassment (SEAH) as well for child labour and any associated link to support
terrorism. Any violation will be ground for immediate termination of the Agreement. Denmark requires
maximum openness and transparency is essential when fighting corruption, and information concerning the
public sector is generally accessible to the general public in accordance with the Danish Public Administration
Act and the Danish Act on Access to Public Administration Files. Therefore, any reports on corruption will be
made publicly available by the MFA. In this connection, NDF/EEP Africa will report any corruption cases to
the Ministry according to the Danish Anti-corruption Policy (https://amg.um.dk/en/policies-and-
strategies/anti-corruption-policy/).
9. Risk management
Below provides selected risk divided on a risk analysis and risk response for contextual, programmatic and
institutional risk factors. A detailed risk matrix can be found in Annex 4 but the risk matrix will also be subject
to an up-date to reflect new risks.
Contextual risks
Risk Factor Likelihood Impact Risk response
Weak enabling policy and Likely Minor Ex-ante risk review and mitigation planning at
regulatory framework in proposal stage; Data collection, M&E during
target countries impacts implementation and knowledge management
project implementation. and dissemination to policy
makers and key regional influencers and leaders
Natural disasters and extreme Likely Major The livelihood improvement aspect of the Fund
weather events impact project will help build resilience to impacts of climatic
implementation. change. Diverse and local renewable energy
resource use and energy efficiency measures
will also help support a climate-compatible
energy system.
Programmatic Risk
Risk Factor Likelihood Impact Risk response
Resource mobilisation for the Unlikely Major Effective reporting and publication of Fund
Fund is not successful. results in line with donor priorities, specifically
the SDGs; Resource mobilisation and fund
raising efforts take place on rolling basis,
allowing for entry of new donors at any point;
Demonstrate that EEP has a good track record
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for delivering results among the plethora of
other challenge funds.
Fund sustainability impaired Unlikely Minor Selective application and use of repayable grant
due to significant non option, recognizing that this instrument is not
repayment of repayable suitable for all projects
grants as anticipated.
Institutional risk
Risk Factor Likelihood Impact Risk response
Fund targets not realized due Unlikely Significant Rigorous ex ante political risk evaluation and
to government policies and due diligence for particular on-grid projects and
strategies that affect private mini-grids, possibly including non-selection of
sector promotion of projects with significant uncertainty related to
renewable energy access signature of power purchase agreements; EEP
solutions. National Focal Points and Project Developers are
encouraged to engage on issues of the national
enabling environment.
Supported projects fail to Unlikely Significant Rigorous ex-ante review of project impact and
reach disadvantaged groups as intended engagement with disadvantaged
anticipated. groups, including women, youth and/or
vulnerable communities.
Close monitoring of project implementation and
user surveys.
The Danish MFA will require that EEP Africa delivers a final narrative and financial report no longer than six
months after the close of the project financing which summarises the annual narrative and financial reporting
of the fund. This should be complemented with a final closure of accounts: final audit, return of unspent
funds and accrued interest and administrative closure by reversing remaining provision. However, since EEP
Africa is an open-ended fund, the report will produced for Danish purposes mainly and should be kept concise
on overall lessons-learned and results.
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Annex 1: Process Action Plan (PAP) for EEP Africa project preparation
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Approval of the 1. October
programme by the
minister
Prepare and submit 15. October
“aktstykke”
Meeting in the Finance 1. November
Committee
Signing of agreement 15. November
First disbursement 15. November
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