Africa Finance Corporation Secures Landmark EUR 250 Million Loan from Italian Development Bank, Bolstering African Infrastructure and Trade

In a significant move set to accelerate critical infrastructure development across Africa, the Africa Finance Corporation (AFC), a leading pan-African multilateral development financial institution, has successfully secured a EUR 250 million 10-year term loan from Cassa Depositi e Prestiti (CDP), Italy’s prominent National Promotional Institution and Financial Institution for Development Cooperation. Announced on June 23, 2025, this strategic partnership underscores growing European interest and investment in Africa’s burgeoning economic landscape.

The substantial facility is further strengthened by a guarantee from SACE, the Italian insurance and financial group fully owned by the Italian Ministry of Economy and Finance. This guarantee, covering up to 80% of the total facility amount, significantly de-risks the investment for CDP and highlights the Italian government’s commitment to fostering economic ties with African nations.

This financing is meticulously structured to do more than just provide capital; it explicitly aims to cultivate Italian supply chain opportunities in key sectors, particularly infrastructure and renewable energy generation across Africa. A prime example of this strategic alignment is the anticipated supply of components for the transformative Lobito Railway Corridor, a vital commercial railway line designed to connect landlocked mineral-rich regions in Central Africa to global markets via Angola’s Atlantic coast.

CDP’s Vision: Investing in Shared Growth and Well-being

Dario Scannapieco, Chief Executive Officer of CDP, articulated the institution’s philosophy behind this significant investment: “We are convinced that investing in strategic projects not only creates new opportunities for our companies but also helps to build lasting and shared ties capable of fostering growth and well-being for local communities.” This statement encapsulates the modern approach to development finance, moving beyond traditional aid models towards mutually beneficial partnerships that leverage private sector expertise and foster sustainable economic development.

CDP, as Italy’s National Promotional Institution, plays a pivotal role in supporting the Italian economy by facilitating investment in both domestic and international projects. Its mandate extends to promoting sustainable development and acting as a bridge between Italy’s industrial capabilities and global growth opportunities, particularly in emerging markets. This loan to AFC aligns perfectly with Italy’s broader foreign policy objectives, including the “Mattei Plan” for Africa, which seeks to establish a new paradigm of partnership with African countries based on equality, non-predatory cooperation, and shared prosperity, focusing on strategic sectors like energy, infrastructure, and agriculture. The plan emphasizes a departure from traditional donor-recipient dynamics, promoting instead a model of co-development and mutual benefit, where Italian businesses can contribute their technological know-how and secure new markets, while African nations benefit from critical infrastructure and economic diversification.

The Lobito Railway Corridor: Africa’s New Economic Lifeline and Geopolitical Chessboard

At the heart of this financing deal lies the Lobito Railway Corridor, a project of immense strategic, economic, and geopolitical importance. This ambitious infrastructure undertaking will serve as a crucial conduit for connecting the resource-rich regions of Zambia and the Democratic Republic of Congo (DRC) to the global trade routes via Angola’s Atlantic port of Lobito.

The project involves the construction of approximately 800km of new railway line, which will specifically link the Zambia Railways Line from Chingola to the existing Benguela Line in Luacano, Angola. This new segment effectively extends the reach of the rehabilitated Benguela Railway, creating a seamless rail link from the Angolan coast deep into the heart of Africa. The ultimate vision for the Lobito Corridor is to provide an open-access transcontinental rail link, potentially stretching from the Atlantic to the Indian Ocean, significantly reducing logistics costs and transit times for goods from the interior of the continent.

Last September, the Africa Finance Corporation solidified its leadership role in this transformative initiative by signing a concession agreement with the governments of Angola and Zambia. Under this agreement, AFC is spearheading the construction, financing, ownership, and operation of this critical railway link. This underscores AFC’s unique capacity not only as a financier but also as a project developer and facilitator, capable of bringing complex, multi-jurisdictional projects to fruition.

Economic Impact:

The Lobito Corridor is poised to unlock immense economic potential in the region. For Zambia and the DRC, both landlocked nations heavily reliant on mineral exports, the corridor offers a shorter, more efficient, and more cost-effective route to international markets compared to existing routes that typically pass through South Africa or Tanzania. This reduction in transportation costs is expected to boost the competitiveness of their mineral products (primarily copper and cobalt), stimulate new mining investments, and facilitate economic diversification beyond raw material extraction. It will also foster regional trade, integrate supply chains, and enable the industrialization of the landlocked economies by providing better access to inputs and markets.

Geopolitical Significance: The Scramble for Critical Minerals

The Lobito Railway Corridor is not just an economic project; it is widely perceived as a key battleground in the intensifying global competition for the Democratic Republic of Congo’s vast mineral wealth. The DRC holds an estimated $24 trillion in untapped mineral deposits, making it one of the world’s richest countries in natural resources. Crucially, it possesses the largest known reserves of cobalt (accounting for over 70% of global production) and significant deposits of copper (around 10% of global reserves). These minerals are indispensable for the global energy transition, forming the backbone of electric vehicle (EV) batteries, renewable energy technologies, and modern electronics.

Western nations, led by the United States and the European Union, are keen to secure reliable and ethical supply chains for these critical minerals, reducing their dependency on China, which currently dominates the processing and refining of many of these resources. The Lobito Corridor, backed by significant Western investment (including support from the US International Development Finance Corporation and the Partnership for Global Infrastructure Investment – PGII), is seen as a strategic alternative to Chinese-controlled logistics routes.

In response to this Western-backed initiative, Beijing has been actively making its own play to revamp the Tanzania-Zambia (Tazara) railway line. The Tazara railway, originally built with Chinese assistance in the 1970s, connects Zambia’s Copperbelt to the port of Dar es Salaam in Tanzania on the Indian Ocean. Reports indicate a substantial Chinese investment of over $1.4 billion for the rehabilitation and modernization of the Tazara railway, along with the procurement of new rolling stock. This Chinese-led effort aims to improve the efficiency and capacity of the eastern corridor, ensuring continued access for Chinese companies to the region’s mineral resources. This creates a parallel network of critical mineral export routes, effectively drawing lines in the sand for global influence over future energy technologies. The competition is fierce, reflecting the high stakes involved in securing the raw materials essential for the global green economy.

Africa Finance Corporation (AFC): A Catalyst for African Development

The Africa Finance Corporation (AFC) plays a pivotal role in addressing Africa’s significant infrastructure deficit. Established in 2007 by African sovereign states, AFC is a multilateral financial institution with a mission to provide pragmatic solutions to Africa’s infrastructure challenges. Its business model encompasses project development, financial advisory services, and principal investing across various sectors, including power, transport, heavy industry, natural resources, and telecommunications.

AFC’s unique approach involves:

• Project Development: Identifying, conceptualizing, and de-risking viable infrastructure projects to attract further investment.
• Financial Advisory: Providing expert guidance to governments and private entities on structuring complex financial deals.
• Principal Investing: Directly investing its own capital into projects, often taking a lead role in syndicating financing from other institutions.

This comprehensive approach allows AFC to participate across the entire project lifecycle and capital structure, ensuring that projects are not only well-structured but also reach financial close and achieve sustainable impact. Over the years, AFC has built a robust portfolio of impactful projects across more than 35 African countries, mobilising over US$100 billion for various initiatives. Its track record of delivering transformative projects has earned it a strong reputation as a trusted partner for governments, developers, and international financiers seeking to invest in Africa. The EUR 250 million loan from CDP further validates AFC’s standing as a reliable and effective conduit for international capital into African infrastructure.

SACE’s Guarantee: De-risking and Boosting Italian Exports

The involvement of SACE, the Italian Export Credit Agency, is a crucial element of this financing package. As a state-backed entity, SACE’s core mission is to support the growth of Italian companies globally by insuring their credit risks and guaranteeing their investments abroad. Its guarantee covering up to 80% of the loan amount significantly mitigates the risk for CDP, making the investment in a developing market infrastructure project more attractive.

SACE’s global presence, operating in 13 countries and supporting over 60,000 Italian companies, highlights its instrumental role in connecting Italian industrial capabilities with international opportunities. By providing guarantees for projects like the Lobito Corridor, SACE enables Italian firms to participate in large-scale infrastructure developments in Africa, providing components, technology, and expertise. This not only boosts Italian exports and creates jobs within Italy but also ensures that the development projects in Africa benefit from high-quality European standards and technological advancements. It’s a clear illustration of how development finance can be structured to create a win-win scenario, addressing both the developmental needs of recipient countries and the economic interests of donor nations.

The Power of Blended Finance for Africa’s Future

Banji Fehintola, Executive Board Member and Head of Financial Services at AFC, accurately summarized the significance of this deal: “Our partnership with CDP, further strengthened by SACE’s guarantee, exemplifies the power of blended finance in unlocking capital for infrastructure development in Africa.”

Blended finance is an innovative financing approach that strategically combines public or philanthropic funds (often concessional, meaning they offer more lenient terms) with private capital to fund sustainable development initiatives. In the context of African infrastructure, where projects often carry higher perceived risks and require large-scale investment, blended finance is a critical tool.

How it works:

1. Risk Mitigation: Public or development finance institutions (like CDP) or export credit agencies (like SACE) provide initial layers of capital, guarantees, or technical assistance. This “first loss” or de-risking capital makes the project more palatable for private investors who seek market-rate returns but are typically risk-averse in emerging markets.
2. Mobilizing Private Capital: By reducing risk and improving the risk-adjusted returns, blended finance attracts private commercial banks, institutional investors, and pension funds that might otherwise shy away from such ventures. This effectively leverages limited public funds to unlock much larger pools of private capital.
3. Achieving Development Goals: It ensures that commercially viable projects, which also have significant developmental impact (e.g., job creation, economic growth, improved access to services), receive the necessary funding.

For Africa, blended finance is particularly vital because:

• Massive Infrastructure Gap: The continent faces an enormous infrastructure deficit, estimated to require hundreds of billions of dollars annually to bridge. Public sector budgets alone cannot meet this demand.
• High-Risk Perception: Despite high growth potential, African projects are often perceived as high-risk due to political instability, regulatory uncertainties, and macroeconomic volatility. Blended finance helps to address these perceptions.
• Long Gestation Periods: Infrastructure projects typically have long payback periods, which can deter purely commercial investors. Concessional finance can help bridge this gap.

This partnership between AFC, CDP, and SACE serves as a textbook example of effective blended finance, pooling resources and expertise to drive impactful development while creating mutually beneficial economic opportunities.

Fostering Sustainable Development and Regional Integration

Beyond the immediate financial injection, this loan is expected to contribute significantly to sustainable development and regional integration across Southern and Central Africa. The Lobito Corridor, by facilitating trade and movement of goods, will foster economic linkages between Angola, Zambia, and the DRC, reducing their reliance on more distant or less efficient routes. This improved connectivity will not only benefit the mining sector but also agriculture, manufacturing, and other nascent industries by providing easier access to raw materials and markets.

Furthermore, the emphasis on renewable energy generation within the financing framework aligns with global efforts to transition to cleaner energy sources. Africa possesses vast untapped renewable energy potential, particularly in solar, hydro, and wind. Investments in this sector can provide reliable and affordable power, which is fundamental for industrialization, job creation, and improving living standards. This contributes to a greener, more sustainable future for the continent, reducing carbon emissions and mitigating the impacts of climate change.

The collaboration between an African institution (AFC) and European partners (CDP, SACE) also highlights the increasing trend of international cooperation in addressing global challenges. Such partnerships are essential for mobilizing the scale of investment required to meet the United Nations’ Sustainable Development Goals (SDGs) in Africa, particularly those related to infrastructure, economic growth, and partnerships for development. This loan is more than a financial transaction; it is a vote of confidence in Africa’s potential and a commitment to shared progress. The ripples of this investment are set to create significant opportunities, not just for the involved nations and companies, but for the wider African continent.

Ready to take your career to the next level? Join our dynamic courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

24th June, 2025