South African firm unveils $176 million fund to power rural Africa

 

Inspired Evolution has launched a $176 million investment vehicle aimed at bringing electricity to tens of millions of people across sub-Saharan Africa, drawing in the International Finance Corporation, the African Development Bank and a roster of other development lenders and philanthropies betting that patient equity can unlock a financing gap that has stalled rural electrification for years.

The vehicle, called Zafiri, was unveiled at the Africa Energy Forum and will direct capital toward distributed renewable energy companies, mini-grids, solar home systems, productive-use power ventures and clean-cooking businesses that serve households and businesses beyond the reach of national grids. Inspired Evolution, a climate-focused investment firm operating across the continent, was named investment manager.

At least half of Zafiri’s capital is earmarked for mini-grids, solar home systems and clean cooking, the segments expected to deliver the bulk of new electricity connections in Africa by the end of the decade. The firm said it expects to close the fund at $300 million within a year, with an eventual target of $1 billion.

Founding investors beyond IFC and the AfDB, which contributed through its Sustainable Energy Fund for Africa, include the Rockefeller Foundation, the Trade and Development Bank Group, the Nordic Development Fund, the John D. and Catherine T. MacArthur Foundation, and South Africa’s FirstRand Ltd., the only commercial bank in the group.

The fund is being positioned as a cornerstone of Mission 300, the World Bank and African Development Bank’s push to connect 300 million Africans to electricity by 2030, a target that energy economists have questioned given how often continent-wide electrification pledges have missed their marks, often because private capital has shied away from funding small, dispersed projects with uncertain returns.

Off-grid and mini-grid developers have long found it easier to raise debt than equity. Trade and Development Bank Group President Admassu Tadesse said the sector’s growth has been constrained less by a lack of borrowing capacity than by a shortage of risk-bearing capital, calling Zafiri a needed boost to the equity base that distributed energy and clean-cooking companies require to grow.

Ethiopis Tafara, IFC’s vice president for Africa, said the fund could extend clean-energy access to as many as 30 million people as the businesses it backs scale up. Kevin Kariuki, the African Development Bank’s vice president for power and green growth, said distributed systems are projected to account for at least half of new electricity connections across the continent through 2030, calling the fund’s launch well-timed against that backdrop.

The Rockefeller Foundation, which has directed catalytic grants toward African energy access for years, framed its involvement as an attempt to de-risk a market that conventional investors have largely avoided. Ghita Benabderrazik, the foundation’s managing director of innovative finance, said the goal is to mobilise longer-term investment into a sector still seen as underfinanced.

For FirstRand, the lone bank among the founding shareholders, the deal extends a strategy of pairing with development institutions on continental infrastructure. Mary Vilakazi, chief executive officer, said the bank was proud to be the only commercial lender among the consortium’s founding investors.