The International Finance Corporation (IFC), the World Bank’s private-sector lending arm, is partnering with Sasfin Bank to develop a portfolio of energy efficiency and renewable-energy financial products for small, medium-sized and micro enterprises (SMMEs) in South Africa.

The partnership would see the formation of a new advisory services agreement, which would support a $10-million line of credit to expand lending to projects that would help smaller businesses become more energy efficient, sustainable and more competitive.

The programme would be cofunded by the Swiss State Secretariat for Economic Affairs (Seco) and follows an earlier engagement during which the US Agency for International Development funded and assisted Sasfin to develop its financing strategy in consultation with the IFC.

Sasfin Bank CEO Roland Sassoon said in Johannesburg on Thursday that the partnership would assist the company to finance its SMME clients in improving their energy spend. “This will not only improve their bottom line, but also play an important part in the reduction of carbon emissions in the country,” he noted.

The advisory services partnership aims to develop renewable energy and energy efficiency financial products for smaller manufacturing and services firms, while executing energy audits and training bank staff. The funding line would specifically enable clients to invest in energy efficient capital projects.

It would also examine the energy service company (Esco) marketplace in South Africa and enable Sasfin to develop energy measurement and verification protocols.

“We have launched this project as essentially a Sasfin project, but we, as a niche financing subsidiary of Sasfin are outsourcing the commercial solutions activities of the group, creating a start-to-finish energy solution,” explained David Edwards, the CEO of Sasfin group company Iquad.

With a footprint in Johannesburg, Cape Town, Port Elizabeth, Durban and East London, Edwards said the company would be able to provide services and partner with Escos countrywide.

“We see three different ways to serve the market; firstly, by approaching our clients with financing for energy efficiency, using the incentive grants from government as a catalyst to switch to energy efficient business. We will also look to identify reputable energy services companies that could give good service and solutions to clients, as well as identifying the best product suppliers,” he added.

Seco head Markus Schrader told Engineering News Online that by rendering SMMEs competitive, South Africa’s economy would grow exponentially. “There are about five-million SMMEs in the country. Imagine if each one of them employs one extra person - the New Growth Path would be met, but it is not that easy,” he said.

“However, through encouraging resource efficiency in the labour relations and the input side, and energy efficiency later playing a role and working around risk perceptions, financing for SMMEs would grow. In turn, they would reduce reliance on electricity, raise their profit margin, employ more people and there is something in it for the banks,” he added.