Clean energy investment in Africa is growing fast. The infrastructure to absorb it is not.
By Philip Mwangangi
Africa’s clean energy moment has arrived, at least on paper. Private sector clean energy investment on the continent has tripled since 2019, rising from roughly $17 billion to nearly $40 billion in 2024. In Nairobi boardrooms and London development finance offices alike, the mood has shifted from caution to competition. And yet the arithmetic stays merciless. Africa hosts 20% of the world’s population but receives only about 2% of global clean energy investment. Debt-servicing costs across the continent now run at double the level of clean energy investment. The gap between stated ambition and verifiable delivery has rarely been wider.
Kenya sits at the centre of this contradiction. Cleantech accounted for 46% of the country’s total startup funding in 2024, compared with just 13% for fintech, making Kenya the only one of Africa’s four largest startup markets where financial services did not dominate venture inflows. In the third quarter of 2025, clean energy startups commanded 53% of all investment across those four markets, displacing fintech’s long-standing leadership and signalling a structural reordering of investor priorities.
Two Nairobi-based companies made the shift visible. Sun King closed a $156 million securitisation deal, the largest of its kind outside South Africa in Sub-Saharan Africa, while d.light expanded its receivables financing by $300 million to scale off-grid solar operations. Together, they captured 83% of Africa’s $550 million in clean energy investment in July 2025 alone, with 89% of that capital structured as debt.
The shift toward debt is not incidental. For asset-heavy businesses running pay-as-you-go solar models, receivables financing avoids equity dilution, scales with customer growth, and gives lenders a claim against predictable cash flows. For the first time, total debt funding across African startups exceeded $1 billion in the first nine months of 2025, reaching $1.6 billion. Africa’s most established energy companies had, in the space of a single reporting cycle, moved from venture-scale bets to infrastructure-grade credit.
Backing the next generation
While first-generation operators consolidated, a second wave of early-stage investors has been quietly building the pipeline behind them. In March 2025, Nairobi and London-based Equator VC closed its inaugural climate tech fund at $55 million. Its backers include the World Bank’s International Finance Corporation, British International Investment, and France’s development finance institution Proparco. The fund has already invested in six companies including electric motorcycles-maker Roam and solar-powered irrigation systems provider SunCulture, both based in Kenya.
Nijhad Jamal, Equator’s founder and managing partner, is candid about the investment thesis and its limits. “We are climate tech investors operating in a region where caring about climate change is, to be honest, a luxury,” he told Semafor. “Customers ultimately are focused on incomes, livelihoods and tangible benefits.” That framing shapes where Equator deploys capital. The fund targets commercially viable startups whose climate benefits are incidental to, rather than the primary driver of, their economic value to end users.
“The narrative has shifted,” Jamal said. “It’s no longer just about development and impact. It’s about mobilising private capital for scalable ventures that solve problems. The focus today is even more on things like unit economics and the path to profitability, because people know there isn’t just [enough] capital to throw at ventures to scale without thinking about monetisation, real economics, profitability or exits.”
The fund writes cheques of between $750,000 and $2 million for seed and Series A companies, with an explicit aim to crowd in larger capital at growth stage. Jamal has described his objective as seeking “to de-risk investment in these startups and pave the way for larger funds to invest tens of millions of dollars at growth stages.” It is a model that mirrors the logic of blended finance at the institutional level, applied instead to the venture tier: absorb early-stage risk so that more commercial capital can follow.
The structural problem
Enthusiasm at the margin does not resolve the fundamental constraint. “The steep cost of capital continues to be a major barrier to financing new energy projects in Africa, especially for financially constrained and heavily indebted governments,” said Lily Odarno, Director of Energy and Climate Innovation for Africa at the Clean Air Task Force. “If we want private capital to fill this financing gap, we must urgently lower these costs.”
For utility-scale clean energy generation, the cost of capital in Africa runs at least two to three times higher than in advanced economies or China. That premium does not primarily reflect technology risk. Solar photovoltaic is a mature, commercially proven technology. The premium reflects sovereign credit ratings, currency volatility, and regulatory uncertainty. As of late 2025, only three of 34 rated African countries held investment-grade status. Not a single low-income country was among them.
The withdrawal of concessional finance has compounded the problem at precisely the wrong moment. Public and development finance institution funding for energy projects in Africa fell by approximately one-third over the past decade, reaching $20 billion in 2024, largely owing to an 85% reduction in spending by Chinese development finance institutions. Private capital is scaling up, but it is selective. It follows bankability rather than geography. East Africa attracted only $797.7 million of Africa’s $13.84 billion in energy transition investment in 2025, compared with $3.91 billion in West Africa and $3.75 billion in North Africa. Countries with weaker regulatory institutions and thinner capital markets remain effectively locked out.
The gap between announced and installed capacity makes this concrete. Of the 74,461 megawatts announced across Africa’s energy transition pipeline in 2025, only 14,589 MW was actually installed. Capital is moving; hardware often is not. The bottlenecks are rarely financial in origin. Grid constraints, contested land rights, slow permitting, and the fiscal fragility of state utilities compound at every stage of project execution.
The missing middle
The mismatch between available capital and investable projects runs across the full financing chain. Institutional investors will refinance brownfield assets or subscribe to green bonds. DFIs will anchor blended structures for large infrastructure. A cohort of specialist early-stage funds such as Equator is beginning to cover seed and Series A. What remains thin is the growth stage, between a company’s first proof of concept and the scale at which it can attract a $50 million DFI facility. Many mid-stage climatetech firms now rely on development finance institutions, strategic corporates, and structured finance vehicles to bridge the gap between venture-scale pilots and continent-wide expansion.
Africa holds 60% of the world’s solar potential yet attracts less than 3% of global energy financing. Closing that gap will require more than innovative capital structures. It requires a reappraisal of how sovereign credit risk is assessed, how development institutions deploy concessional capital, and how African governments build the regulatory environments that give private investors confidence to commit at scale. Kenya’s National Energy Compact, which targets 100% clean energy by 2030, and its Energy Act amendment mandating renewable energy priority for grid integration, offer a replicable template. Whether the policy architecture can be replicated across the continent at the speed the climate requires is the question that no financing mechanism, however cleverly structured, can answer on its own. [end]
