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Conservation Financing in AfricaApproaches and Challenges Wildlife Conservation Society Conservation Finance Program ABCG meeting November 2002
Fund Types Endowment Fund: Funds that invest their capital and use only income generated from those investments to finance activities. Sinking Fund: Sinking fundsdisburse their entire principal and investment income over a fixed period of time (usually 6-15 years). Sinking funds will also invest their funds to generate revenue, but the earned income is programmed along with the original allocation for expenditure during the fixed time period. Revolving Fund:Revolving funds are used to transfer funds to communities, organizations, businesses and individuals on condition of repayment. Land Trust: Land trusts purchase land to conserve biodiversity on private land and increase the size of protected areas. They acquire land through donation and/or purchase, by working with landowners who wish to donate or sell conservation easements (permanent deed restrictions that prevent harmful land uses).
Issues and Challenges for Africa-Based Conservation Funding Organizations
Legal Eastern and Southern Africa law facilitates the formation of trusts and endowments. Straightforward legal process. Gaining in-country tax-free status is a challenge in most countries West African law does not easily support the formation of environmental funds (law of associations) In Cote D’Ivoire PCGAP project with GEF and other donor funding leading the way to modify legislation to address issue – may be a model for other countries.
Most endowments are small – leading to greater risk and high management cost. Many of the funds have little to no access to effective local financial advice and receive little direction from their asset managers. The stock market downturn has created loss of value and anxiety in established funds – losses exacerbated because of the two above points. General popular lack of investment understanding can create tension. Endowments (and increasing market valuation in the 90’s) militated against active fundraising. Investment Issues
Investment Issues Resource Extraction/Mitigation payments - The Foundation for Environment and Development in Cameroon received U.S. $3.5 million from COTCO (Cameroon Oil Transportation Company S.A.) The capital sum and the interest earned will be expended gradually over a 28-year period.
Technical Issues Difficult to find board members with requisite skills and commitment to manage organizations. The breadth of technical skills required to run the organization often beyond the scope of staff. Balance between staffing requirements and overhead costs – how to deliver quality within means of the organization.
Historically donors avoid contributions to endowments – GEF the major exception and leader in this area. New entrants – Frankfurt Zoo, German Government. Funds have been slow to develop effective fundraising strategies – a glaring oversight with recent stock market declines. Funds identify need for greater technical assistance and strategic planning advice. Diversification of funding sources essential – ecotourism is not a panacea. Programmatic Issues
Policy Issues • Donors moving to support Poverty Reduction Strategies – linkage to biodiversity conservation has been weak – what are the possibilities to link biodiversity to livelihood improvements? • How to get Ministries of Finance and Planning to give adequate consideration to biodiversity conservation as a source of long-term revenue and value generation.
Land Trusts offer opportunities for biodiversity protection on private land - need to identify these trusts can leverage the value of the land to generate revenue. IFC and IUCN launching Kijani Fund – A green venture capital fund providing individually structured investment packages for biodiversity businesses backed by in-kind technical assistance – not yet capitalized. Development of loan financing (village banking), revolving funds, business enterprises that can generate revenue. Tanzania considering feasibility of water use fees for forest protection Opportunities/Approaches
Green banking products Green Trust South Africa in partnership with Nedbank has raised over $4 million since 1990 and funded 125 projects in South Africa, Namibia, Mozambique and Malawi
Planned Future Directions Funds in West Africa have requested a technical workshop for early 2003 to further enhance their skills and understanding of financial instruments. Organizations in the Albertine Rift are interested in strategic planning around conservation financing. WPC will include a session on conservation financing. New funds will be coming into operation in 2003 and 2004 and will face challenges similar to their predecessors.