Of the $300 billion in annual climate finance Africa needs, Africa receives just $30 billion, with private finance accounting for only 18% of total financial flows, the lowest proportion of any region in the world.
Since 2021, nearly 90 de-risking measures have been introduced across the continent, mobilizing approximately $4.5 billion.
Nigeria’s InfraCredit offers a replicable model through local currency guarantees, pension fund mobilization, and zero defaults across 24 completed transactions.
According to the Global Alliance for Nationally Determined Contributions (NDC) Partnership, Africa needs to quadruple its annual climate finance flows by 2030 to deliver on existing national energy commitments, but currently only 23% of the continent’s NDC investment requirements are being met. The African Development Bank estimates Africa’s annual climate financing gap at $270 billion. The continent’s renewable energy financing toolkit is extensive, as blended financing instruments, concessional DFI capital, first-loss facilities and guarantee instruments are all widely available. However, industry leaders point to the bottleneck as a lack of bankable projects to absorb the allocated capital. The central challenge is no longer a lack of capital, but the ability to execute. Can Africa transform its promised billions of dollars into structured, investable clean energy pipelines at scale?
Mismatch between capital and project
Dheerosh Maharaj, Standard Bank’s executive head of energy, infrastructure and mining, addressed the issue directly in Cape Town this week. “The question is not where the money is available, but where the systems that absorb it are built.”
Teboho Makhabane, head of ESG and impact at Sanlam Investments, told Energy Capital & Power (ECP) that this mismatch is built into the way most fund managers design their products. “The final structure is in place, but it is very specific in terms of ticket size, due diligence and what is required,” she said. For early-stage or non-standard green economy projects, this rigidity prevents capital from reaching project level.
Private finance accounts for just 18% of total climate change in Africa, the lowest share of any region in the world, even though the continent has an estimated $2.4 trillion in largely untapped domestic banking, insurance and pension assets. “The money is in the private sector,” Mahabane said. “The whole problem was how to draw crowds for commercial purposes.”
Inadequacies of blended finance
South Africa’s Just Energy Transition Partnership (JETP) shows a large implementation gap. With a commitment of nearly $11.9 billion, JETP was one of the most ambitious applications of mixed climate finance on the continent.
Grove Steyn, managing director of Meridian Economics and developer of the original trading concept on which JETP was based, told ECP that no meaningful spending on power generation or grid infrastructure has materialized. “Things seem to have lost their way,” Stein said, attributing the failure to structural flaws. “Fiscal concessions should be tied to very clear and measurable outcomes in terms of accelerated decarbonization.[Currently]we don’t have that structure.”
Implementation issues also exist early in the project cycle. According to Karim Mirsi, senior investment director at Africa50, the main bottleneck lies in mitigating risks in the early stages of projects. Africa50 assembled an in-house team of engineers, financial modelers and environmental experts to prepare the project for funding. This is due to the recognition that without bankable transactions, even well-structured capital instruments are of little use.
A model that works
Nigeria presents a contrasting situation. The removal of fuel subsidies, rising grid charges, and persistent currency pressures have made solar power cheaper than grid electricity for many consumers, and demand for distributed renewable energy has soared. Mr. Ojulu Adeniji, Vice President, Creation and Structuring, InfraCredit Nigeria, said the demand for the agency’s decentralized renewable energy pipeline currently exceeds N100 billion.
InfraCredit’s model is centered around a $350 million balance sheet and local currency guarantees backed by AAA domestic credit ratings from Agust and GCR, enabling it to mobilize institutional investors (primarily pension funds) into an infrastructure asset class that has not been previously accessible to investors. The institution has completed 24 transactions with zero defaults, a track record that is the result of Adeniji’s years of sustained capacity building with pension fund managers and hands-on engagement with portfolio companies as they face financial stress.
“So far, none of our guarantees have been claimed,” she said. “It gives them great confidence to continue.” The model has since been replicated through Damana in Kenya, Infrazamin in Pakistan and Green Assurance Company in Cambodia.
The road ahead
Makhabane said closing the financing gap requires continued efforts to change the way private investors assess clean energy risks in Africa.
“More work needs to be done to make private investors feel safe, understand their role and be willing to take on risks,” he said.
Africa’s domestic institutional capital base represents the continent’s most directly untapped pool of capital. As InfraCredit’s experience shows, leveraging this at scale requires credit infrastructure, a track record of governance, and market-building foundations, which most African markets are still developing.
