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Experts Call for Alternative Financing for Africa’s Energy Projects Under Mission 300: Pension Funds, PPPs Top the List

With the rising debt distress in African countries, experts highlighted that relying on debt financing alone is not a sustainable model for achieving energy development goals.

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Experts in the financial and energy sectors have called for Africa to explore alternative financing models for energy projects, particularly as the continent aims to connect electricity to 300 million people within five years, as highlighted by Mission 300. This was the central topic of discussion on January 27, 2025, during the first day of the Africa Energy Summit at the Julius Nyerere Convention Centre in Dar es Salaam.

With the rising debt distress in African countries, experts highlighted that relying on debt financing alone is not a sustainable model for achieving energy development goals.

“For Africa to meet this target, the model of government borrowing cannot work alone—it has to involve joint partnerships with the private sector,” said John Mativo, Managing Director of the Kenya Electricity Transmission Company (KENTRACO).

Experts also noted the low-risk appetite and limited capacity of local financial institutions as significant barriers. “The financing market is not deep enough to provide the long-term funding and the scale required for these capital-intensive projects,” explained Rachel Moré-Oshodi, CEO of ARM-Harith Infrastructure Investment Limited, a Pan-African infrastructure fund manager based in South Africa.

While public-private partnerships (PPPs) were widely recognized as a promising solution, experts highlighted a major challenge: many investors are reluctant to fund early-stage project development, which requires significant upfront investment and is time-consuming.

“Project development is hard; it’s risky. Spending at the early stages, before securing contracts, is tough. That’s why many global investors and power companies are leaving Africa, they don’t want to risk as much money in project development,” said Alain Ebobisse, CEO of Africa50, an infrastructure development facility.

READ: Global Funders Bullish on Investment in Africa’s Energy Development, Call for Regulatory Predictability: ‘Africa is the Future’

To address this, some experts proposed leveraging the significant capital available in local markets, particularly from pension funds, to finance energy projects, especially during the early stages of development.

“Local investors, particularly pension funds, are key to bridging the gap in what we’re trying to close,” emphasized Rachel Moré-Oshodi. She explained that mitigating risks, such as the illiquid nature of long-term projects, is essential to attract pension funds. Her organization has developed a model where investment funds provide early returns to make such funding more attractive.

The use of local funding was also noted as critical due to its immunity to foreign exchange (FX) risks, which often plague foreign-funded projects. “Local currency is a game changer. Financing large infrastructure projects with foreign funding is possible, but the FX risk is too high,” explained Alain Ebobisse. He added that Africa50 has  mobilized African pension funds through initiatives like the Africa50 Infrastructure Acceleration Fund, which secured $222.5 million in its first close from 16 African institutional investors.

One proposed solution on project funding challenge was for governments to spread their funding across several projects to test their viability. Once a project is confirmed as viable, the private sector could take over the subsequent stages.

“The most obvious way is to spread scarce public sector funding across multiple projects to address their viability gaps, and then leverage private financing,” suggested Chris Flavin, Acting CEO of Gridworks. The summit will conclude tomorrow, January 28, 2025, with the signing of the national energy compacts by 12 African countries and a declaration on Mission 300 by the heads of states.

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