A new investment vehicle dedicated to deploying long-term equity into distributed renewable energy businesses across sub-Saharan Africa has been launched with initial committed capital of $176-million.

Known as Zafiri, the blended-finance vehicle is a flagship programme under the broader Mission 300 initiative, which has been created with the objective of expanding electricity access to 300-million people in the region by 2030.

Its founding shareholders include the World Bank Group’s International Finance Corporation (IFC), the African Development Bank Group, including its Sustainable Energy Fund for Africa, The Rockefeller Foundation, Trade and Development Bank Group, Nordic Development Fund, the John D and Catherine T MacArthur Foundation, and FirstRand Limited.

African climate investment firm Inspired Evolution has been mandated by the investors to be Zafiri’s investment manager.

IFC Mission 300 lead investment officer Don Purka explains that Zafiri aims to address the acute finance gap faced by distributed renewable energy companies, which operate in markets where demand is clear but where access to equity capital is constrained.

At least half of Zafiri’s capital will, thus, be allocated to mini- or metro-grid developers, solar-home system providers, and to clean-cooking solutions.

“Our aim is to catalyse 10-million new electricity connections by 2030 and 30-million connections as the platform scales over time,” Purka explains.

“This launch allows us to move from design to execution – turning committed capital into investments that can scale operations on the ground, creating jobs and bringing real benefits to people and businesses.”

Zafiri, he adds, aims to show that long-term, risk-sharing structures can help mobilise private commercial capital into challenging markets.

“The platform is targeting a final close of $300-million within 12 months, with a longer-term ambition to scale Zafiri to $1-billion.

“As the permanent capital vehicle grows, we expect to induce new commercial investors into Zafiri with this proof of concept.”

The core model involves mobilising private capital into this market segment through a blended finance and derisked vehicle.

“Capitalised with 50% concessional junior equity from investors, Zafiri structurally derisks participation for commercial investors.

“By absorbing risk and investing in a portfolio of diversified companies, the platform creates a balanced entry point for commercial investors and helps build confidence in the asset class,” Purka explains.

Zafiri has also been structured as a permanent capital vehicle and will invest “patient equity” incrementally.

“We don’t just want to finance individual companies: we want to help establish a pathway for repeatable private investment into the sector, thus enabling the scale of capital that is needed to flow into these markets.”