Private Sector Energy Efficiency Programme Phase 2 (PSEEP2)

The project ‘Private Sector Energy Efficiency Programme Phase 2 (PSEEP2)’ aims to catalyse a paradigm shift in the market for energy efficiency lending and in turn lower South Africa’s carbon-intensive energy demand, and emissions from private sector industries. The intended shift to the national emissions trajectory will be brought about by proving the commercial viability of small-scale standardised energy efficiency lending, targeting small to medium sized enterprises (SMEs). Energy efficiency uptake in South Africa has mainly been limited for large projects/blue-chip companies in sectors and technologies considered easily and commercially implementable. Demand for small projects, development of new energy efficiency products and stimulation of demand for small-sized EE projects is low due to high risk associated with such projects, low return-on-effort and poor collateral. Despite SMEs being the majority of businesses, creating a quarter of private sector jobs, financial support to SMEs has been especially limited. Regulatory demands and the risk appetite of banks has led to strict underwriting criteria for the extension of credit to SMEs, resulting in majority of the bank lending flowing to large and established businesses. The programme will bridge the gap and enable financial access provision to SMEs to implement EE programmes that will reduce their energy consumption and carbon footprint. The project is designed to include both technical and financial interventions needed to catalyse and sustain activity to stimulate demand and develop pipeline and capacity in SMEs and financiers to promote uptake of energy efficiency measures in the country. The proposed components include – (i) technical assistance, (ii) Credit Risk Guarantee (CRG) facility, and (iii) loan and equity investments to EE projects. This project will induce momentum in EE lending to private sector companies and as proven results grow, the market is expected to take over and sustain the lending practices independently.