When trade finance powers renewable energy, the lights stay on

News24

5 days ago

By Niron Rampersad, Divisional Executive Trade, and Yusuf Chothia, Senior Client Coverage Banker Power and Infrastructure, at Nedbank Corporate and Investment Banking (CIB)
Renewable energy ambitions are growing across the African continent: projects are being conceptualised, investment secured, and policy frameworks established. But what continues to slow progress isn't ambition – it's delivery. And what underpins delivery – trade?
This is why trade and supply chain finance must shift from an operational necessity to a strategic imperative. It's more than just financial instruments – it's the backbone of execution. Letters of credit (LCs) secure payments to suppliers, bid and performance guarantees enable market entry, working capital solutions sustain momentum, and foreign exchange (FX) cover mitigates volatility. These elements aren't just supportive – they determine whether projects move forward or stall.
Consider our work with WBHO, an experienced infrastructure contractor operating across borders, often in challenging environments. Their success is not only built on technical expertise but also enabled by trade and supply chain finance. Whether it's submitting a bid with a guarantee or accessing flexible working capital to keep progress moving on-site, trade finance plays a pivotal role.
Trade finance is not theoretical – these tools are real, specific, and responsive to project realities. For example, a solar project delayed at port due to customs clearance is often less a logistics issue than a financial one. Currency volatility, if unmanaged, can throw off entire procurement schedules. And if a contractor lacks liquidity or coverage, execution risk intensifies.
This is precisely why trade and coverage must operate in lockstep. When a client prepares to execute, we can't afford to be reactive. We anticipate. That means clearing internal hurdles – legal, compliance, treasury, risk – before they emerge. In one case, approval from the South African Reserve Bank was secured the same day, a direct result of proactive groundwork.
It's this kind of foresight that keeps projects moving. Financial enablement underpins execution, not just at the start but through every procurement milestone. That's why solutions need to be agile. A timely LC, supplier guarantee, or currency hedge can make the difference between delay and delivery.
To reinforce this momentum, we've also invested heavily in digitisation. Our digitised guarantees and LCs, partnerships with fintechs, and streamlined customs documentation have cut turnaround times dramatically. Still, we're clear-eyed: no amount of tech can solve the continent's deeper structural issues as non-tariff barriers, inconsistent border protocols, and regulatory disparities continue to undermine intra-African movement.
Policy frameworks such as the African Continental Free Trade Area (AfCFTA) are critical here. With 48 countries ratified, AfCFTA has the potential to boost intra-African trade significantly. But patchy implementation limits its impact. That's why we argue that trade finance is infrastructure. Just like roads, ports, and grids, it enables movement. Governments and developers alike must treat it as such.
Understandably, expectations around renewable energy are high. But they're being pursued in messy contexts, volatile currencies, fragmented supply chains, and long lead times. In sub-Saharan Africa, the cost of capital for renewables is 2 to 3 times higher than in developed markets. Meanwhile, the continent receives just 2 to 3 percent of global renewable investment, despite housing nearly 17 percent of the world's population.
To shift that reality, we must treat trade and supply chain finance as central to bankability. That means development finance institutions, commercial banks, and governments must collaborate. We need harmonised documentation, regional liquidity pools, and early-stage trade solutions baked into project design.
Success stories reinforce this point. Projects with integrated, responsive trade structures progress more smoothly. Our work with WBHO shows what's possible. As one WBHO executive puts it: 'When you're racing against time and operating across borders, you need a banking partner who sees the road ahead, not just the spreadsheet in front of them. Nedbank CIB's trade finance team doesn't wait to be asked. They move with us. It's made a tangible difference on the ground.'
This isn't just about supporting one contractor. It's about building an execution ecosystem. Everyone from the developer to the equipment supplier benefits when trade finance enables momentum.
Heading into the Africa Energy Forum, let's widen the conversation. It's not just about megawatts or investment figures. It's about delivery mechanics. It's about whether procurement timelines are bankable, and whether trade flows can move with speed and certainty.
Africa's energy transition can't be driven by vision alone – it must be delivered through turbines turning, panels installed, and communities electrified. That requires understanding finance not just as capital, but as movement.
And that's what we bring to the table: not just the promise of infrastructure, but its delivery. Trade finance belongs at the centre of Africa's energy story.