According to the latest available estimates from the International Energy Agency (IEA), total energy investment in Africa is expected to reach around $110 billion in 2025. Although clean energy investment continues to grow, overall spending remains well below the level needed to meet rising electricity demand. Increasingly, the main obstacle is not a shortage of capital, but its cost.
For energy developers, the Weighted Average Cost of Capital (WACC) is one of the key determinants of project viability. Utility-scale solar, hydropower, gas-fired generation, and transmission networks all require substantial upfront investment. Higher borrowing costs can quickly render otherwise viable projects commercially unattractive. Africa's challenge is therefore less about resource availability than investment risk. The continent possesses abundant solar, hydropower, and natural gas resources, but lenders price projects according to sovereign risk, currency volatility, regulatory stability, contract enforceability, and the financial strength of electricity off-takers—not resource potential itself. These constraints are particularly evident across Central Africa. Many state-owned electricity utilities remain financially weak, making long-term Power Purchase Agreements (PPAs) difficult to finance. By contrast, projects supplying large industrial consumers—especially mining companies—often secure funding more easily because they offer stronger credit profiles and predictable, export-linked revenues. The Democratic Republic of the Congo illustrates this trend. Mining operators are increasingly investing in captive and hybrid power systems that reduce diesel dependence while improving supply reliability. For lenders, the primary credit risk lies not with the sovereign but with internationally active mining companies capable of honoring long-term corporate PPAs.
The model, however, has clear limitations. Captive generation strengthens energy security for industry but often creates isolated power systems with limited benefits for national grids or household electrification. Africa's financing landscape is also changing. According to the IEA, funding from Chinese development finance institutions has fallen by more than 85% over the past decade, while private investment has become increasingly important. Unlike state-backed lending, commercial investors apply far stricter risk assessments, making project bankability more important than ever. As a result, Development Finance Institutions (DFIs) are increasingly acting as risk-sharing partners rather than simply lenders. Blended finance, political risk insurance, first-loss capital, and partial credit guarantees reduce financing risk sufficiently to attract private investors that would otherwise remain on the sidelines.
For Central African governments, the implication is straightforward. Lower financing costs depend less on attracting new investors than on reducing the risks existing investors already price into projects. Stronger regulation, financially sustainable utilities, transparent procurement, and credible long-term contracts can all lower the cost of capital. Ultimately, Africa's energy transition will be determined not only by the amount of investment available, but by how affordable that investment becomes. In an increasingly selective financial market, reducing risk may prove as important as mobilizing new capital.
