In a landmark move set to dramatically accelerate energy access across the African continent, the African Development Bank (AfDB) has announced a significant $40 million equity investment in Project Zafiri. This pioneering financing platform is meticulously designed to scale Decentralized Renewable Energy (DRE) systems, particularly in Africa’s most underserved and energy-deprived communities. The investment represents a flagship commitment under the Bank’s ambitious Mission 300 initiative, which aims to connect an additional 300 million Africans to electricity by 2030.

This strategic injection of capital into Zafiri is poised to address one of the most persistent bottlenecks in Africa’s energy transition: the critical scarcity of long-term, patient equity capital for off-grid solutions. By creating an innovative blended finance model, Zafiri seeks to de-risk private investment and unlock substantial commercial capital, paving the way for sustainable and inclusive energy development.

“Zafiri is a catalytic platform that will be an integral component of the Bank’s strategy to accelerate universal access to modern energy in Africa,” affirmed Kevin Kariuki, AfDB’s Vice President for Power, Energy, Climate, and Green Growth. His statement underscores the profound strategic importance of this initiative in the broader context of Africa’s development agenda.

The Promise of Decentralized Renewable Energy (DRE) in Africa

Decentralized Renewable Energy (DRE) solutions, encompassing mini-grids, solar home systems (SHS), and stand-alone renewable energy systems, are increasingly recognized as the most viable, cost-effective, and rapid means of delivering electricity to Africa’s vast rural, remote, and often fragile areas. Unlike conventional centralized grid expansion, which is frequently hampered by prohibitive costs, complex logistics, and slow deployment times, DRE systems offer modularity, flexibility, and the ability to be scaled precisely to match local needs.

Why DRE is Africa’s Energy Future

Africa’s energy landscape is unique. While urban centers often benefit from grid infrastructure, a significant portion of the continent’s population resides in rural or peri-urban areas where extending the national grid is economically unfeasible or technically challenging. This is where DRE solutions shine.

• Speed of Deployment: Solar home systems can be installed in a matter of hours, bringing immediate light and power to households. Mini-grids, while requiring more planning, can electrify entire villages or small towns in months, rather than the years often associated with grid extensions.
• Cost-Effectiveness: For remote communities, the cost of extending grid lines can be astronomical. DRE solutions often have lower upfront costs and can be designed to meet specific local demand, avoiding over- or under-sizing.
• Sustainability: Relying on abundant renewable resources like solar, DRE systems reduce dependence on fossil fuels, contributing to lower carbon emissions and fostering a greener energy future.
• Resilience: Decentralized systems are less vulnerable to large-scale grid failures, offering greater energy security at the local level.
• Economic Empowerment: Access to reliable electricity from DRE systems transforms lives. It enables longer operating hours for small businesses, powers irrigation for agriculture, facilitates access to education through lighting for studying, and improves health outcomes by powering clinics and refrigerating medicines. Studies, such as those highlighted by ResearchGate on Sustainable Electrification in East Africa, consistently demonstrate DRE’s positive impact on livelihoods, entrepreneurship, and environmental quality.

Current projections indicate that more than half of all new electricity connections in Africa by 2030 are expected to come from DRE solutions. This underscores their pivotal role in achieving universal energy access. However, despite this immense potential and proven impact, DRE companies across the continent have historically struggled with undercapitalization and a glaring lack of access to the kind of long-term equity financing necessary for sustainable growth and robust project execution. This is the critical gap that Project Zafiri aims to bridge.

Zafiri: A Groundbreaking Financing Architecture for Scale

Project Zafiri, jointly developed by the AfDB, the World Bank Group, and other strategic partners, is not just another fund; it’s a meticulously structured financing platform designed to revolutionize how DRE projects are funded in Africa. Its core innovation lies in its structure as a Permanent Capital Vehicle (PCV).

Understanding the Permanent Capital Vehicle (PCV) Model

A Permanent Capital Vehicle, often described as an “evergreen” structure, is an investment entity designed with an indefinite or very long time horizon. Unlike traditional private equity funds that have a fixed lifespan (typically 10-12 years) and a mandate to return capital to investors within that period, PCVs allow for continuous capital recycling and reinvestment. This “patient capital” approach is particularly well-suited for infrastructure development and long-term growth sectors like DRE, where projects may have longer gestation periods and require sustained support.

As explained by sources like Investopedia, PCVs prioritize long-term capital preservation and growth over short-term exits. For the DRE sector in Africa, this means:

• Reduced Exit Pressure: DRE projects, especially mini-grids, can take time to mature and generate consistent returns. A PCV structure removes the pressure for quick exits, allowing projects to develop organically and achieve their full potential.
• Continuous Reinvestment: Profits and returns generated from successful DRE projects can be continuously reinvested into new projects within the platform, creating a self-sustaining cycle of growth and impact.
• Stability and Predictability: Investors benefit from a more stable and predictable investment vehicle, which can attract a wider range of institutional investors seeking long-term, impact-oriented opportunities.

Zafiri is targeting a substantial $1 billion in total capitalization, signaling the ambitious scale of its impact. Phase 1 of the initiative aims to secure $300 million in commitments, strategically split evenly between junior and senior equity.

The Power of Blended Finance: Junior and Senior Equity

The AfDB’s $40 million contribution to Zafiri exemplifies the sophisticated blended finance model at the heart of the platform. This contribution consists of:

• $30 million in senior equity from the AfDB’s own balance sheet. Senior equity typically represents the least risky portion of the equity stack, as it is paid back first in the event of liquidation.
• $10 million in junior equity sourced from the Sustainable Energy Fund for Africa (SEFA), a multi-donor facility managed by the Bank.

The junior equity component is particularly crucial and innovative. It acts as a first-loss buffer, meaning it absorbs initial losses before any other tranches of capital are affected. This significantly reduces the perceived risk for private sector investors, making the DRE sector, traditionally viewed as high-risk and low-liquidity, far more attractive.

“Zafiri represents the largest patient capital commitment to the African DRE sector to date,” stated Wale Shonibare, AfDB’s Director for Energy Financial Solutions. This bold claim highlights the transformative potential of this structured, blended finance approach to unlock private capital at scale, delivering inclusive and climate-resilient energy solutions to millions. The approach aligns perfectly with insights from FurtherAfrica, which emphasizes blended finance as a powerful tool for de-risking pioneering transactions and mobilizing institutional capital in Africa’s energy sector.

Strategic Alignment with AfDB’s Broader Vision for Africa

Project Zafiri is not an isolated initiative; it is deeply interwoven with and strategically aligned with multiple pillars of the African Development Bank’s overarching long-term strategic agenda. This ensures that the investment contributes synergistically to the continent’s broader development goals.

Ten-Year Strategy (2024–2033): A Blueprint for Inclusive Green Growth

The AfDB’s Ten-Year Strategy (2024–2033) serves as the foundational blueprint for the Bank’s operations. Its vision is a “prosperous, inclusive, resilient, and integrated Africa,” underpinned by two key objectives: accelerating inclusive green growth and fostering prosperous and resilient economies. Zafiri directly promotes private investment in sustainable infrastructure, a core tenet of this strategy, by channeling capital into clean, decentralized energy solutions that power economic activity and improve livelihoods without exacerbating climate change.

The High 5s Priorities: Catalyzing Transformative Impact

At the operational core of the AfDB’s work are its “High 5s” priorities, which are designed to catalyze transformative development across critical sectors. Zafiri directly contributes to three of these five pillars:

1. Light Up and Power Africa: This is the most direct alignment. Zafiri’s focus on DRE systems is central to achieving universal energy access, bringing reliable electricity to communities previously unserved or underserved by traditional grids. As highlighted by the AfDB, this priority has already mobilized significant investment, connecting millions to electricity.
2. Industrialize Africa: Access to reliable and affordable energy is a prerequisite for industrialization. By powering small and medium-sized enterprises (SMEs), agricultural processing, and local manufacturing through DRE, Zafiri contributes to the growth of productive sectors and job creation, moving Africa up the value chain.
3. Improve Quality of Life for the People of Africa: Beyond economic benefits, energy access profoundly impacts social well-being. Electricity enables better healthcare services (e.g., refrigeration for vaccines), improved education (e.g., lighting for evening study), and enhanced safety and security. DRE solutions directly contribute to these improvements, particularly in remote areas.

New Deal on Energy for Africa: An Ambitious Partnership

Launched in 2016, the New Deal on Energy for Africa is a partnership-driven effort with the ambitious goal of achieving universal access to energy in Africa. It aims to mobilize domestic and international capital, strengthen energy policy and governance, and significantly increase the AfDB’s investments in the energy sector. Zafiri’s innovative financing model and its focus on unlocking private capital are perfectly aligned with the New Deal’s principles of transformative partnerships and innovative financing.

Climate Change and Green Growth Policy: A Commitment to Sustainability

Africa is disproportionately vulnerable to the impacts of climate change despite contributing minimally to global emissions. The AfDB’s Climate Change and Green Growth Policy commits the Bank to supporting sustainable, climate-resilient, and low-carbon development. Zafiri’s exclusive focus on renewable energy solutions directly supports both climate change mitigation (by reducing reliance on fossil fuels) and adaptation goals (by building resilient, decentralized energy systems less susceptible to climate-induced grid disruptions). The Bank has committed to allocating at least 40% of its project approvals as climate finance by 2025, and Zafiri is a prime example of this commitment in action.

Private Sector Development Strategy (PSDS): Mobilizing Private Capital

The AfDB recognizes that the private sector is the primary engine for job creation and inclusive green growth in Africa. Its Private Sector Development Strategy (PSDS) 2021-2025 outlines a roadmap for supporting private sector-led growth. By mobilizing equity capital for green investment and de-risking opportunities for commercial investors, Zafiri directly implements the PSDS’s objective of crowding in private finance, particularly for high-growth sectors like DRE.

“By anchoring the junior equity tranche, SEFA is helping to crowd in private investment at scale,” explained Daniel Schroth, AfDB’s Director for Renewable Energy and Energy Efficiency. “Zafiri directly addresses the lack of long-term equity that has stifled the growth of the DRE sector.” This multi-layered strategic alignment ensures that Zafiri’s impact extends far beyond mere energy provision, contributing to sustainable economic transformation and climate resilience across the continent.

Mobilizing Markets for Transformational Impact

Zafiri’s ambition extends beyond simply providing capital; it aims to serve as a powerful market-building mechanism. By consolidating funding, strategically de-risking early investments, and actively collaborating with policymakers and project developers, the platform is poised to catalyze a fundamental shift in the way energy is financed, distributed, and consumed across Africa.

Catalyzing a New Wave of Investment

The platform’s ability to attract interest from a diverse range of development partners and institutional investors seeking blended finance vehicles with scalable impact is a testament to its innovative design. By providing reliable, long-term funding, Zafiri is expected to:

• Stimulate Innovation: With more secure funding pathways, DRE companies can invest more in research and development, leading to more efficient, affordable, and tailored energy solutions for African contexts.
• Foster Entrepreneurship: The growth of the DRE sector creates opportunities for local entrepreneurs, technicians, and sales agents, building local capacity and creating jobs.
• Accelerate Clean Energy Deployment: A steady flow of patient capital will enable DRE developers to rapidly expand their operations, connecting more households and businesses to clean electricity.
• Promote Equity and Inclusion: Zafiri’s focus on underserved communities ensures that the benefits of energy access reach those who need it most, reducing energy poverty and fostering more equitable development.
• Enhance Resilience: By supporting decentralized, renewable solutions, the platform contributes to building more resilient energy systems that can withstand shocks and adapt to changing climate conditions.

The World Bank’s “Mission 300 is Powering Africa” initiative, which Zafiri is a part of, highlights the role of platforms like Distributed Access with Renewable Energy Scale Up (DARES) in leveraging collaboration to accelerate DRE access through private sector engagement, mirroring Zafiri’s approach.

A Critical Step Toward Energy Justice

With less than five years remaining to achieve the ambitious targets of Mission 300 – connecting 300 million Africans to electricity by 2030, with the AfDB contributing to 50 million of those connections – Zafiri comes at a truly pivotal moment. The scale of the energy access challenge in Africa remains immense. According to the latest Tracking SDG7: The Energy Progress Report 2025, published by the IEA, IRENA, UN, World Bank, and WHO, a significant 85% of the global population still lacking electricity (666 million people) is concentrated in Sub-Saharan Africa. The report emphasizes that despite progress, achieving universal access by 2030 is increasingly unlikely at the current rate.

The rural-urban divide is particularly striking, with approximately 451.1 million rural Africans still without electricity. This disparity underscores the inadequacy of current policies, the geographical isolation of rural communities, and chronic underinvestment in electrification infrastructure. The report calls for removing regulatory bottlenecks, improving data quality, and developing tailored financing tools, including blended finance – precisely what Zafiri aims to do.

Zafiri offers a practical, scalable, and impactful tool for delivering on Africa’s vision of universal energy access. It champions a future where energy provision is driven by local solutions, supported by global capital, and rooted in principles of equity, inclusion, and climate resilience. This investment is not just about megawatts; it’s about empowering communities, fostering economic growth, and advancing energy justice across a continent poised for transformative development.

Conclusion: Lighting Up Africa’s Future

The African Development Bank’s $40 million equity investment in Project Zafiri represents a powerful statement of intent and a tangible commitment to addressing Africa’s energy deficit. By pioneering a robust blended finance model within a Permanent Capital Vehicle structure, Zafiri is set to unlock the patient capital desperately needed to scale Decentralized Renewable Energy solutions.

This initiative is a testament to the growing recognition that a pragmatic, multi-faceted approach is essential for achieving universal energy access in Africa. It highlights the critical role of innovative financing, strategic partnerships, and a deep understanding of local contexts in driving sustainable development. As Zafiri begins its journey towards its $1 billion capitalization target, it carries the promise of lighting up millions of homes, empowering countless businesses, and building a more resilient and prosperous future for the people of Africa. The ripple effects of this investment are expected to extend far beyond mere electrification, fostering a new era of economic vibrancy and social equity across the continent.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

21st July, 2025