Insights and Analysis

Trends in energy and infrastructure transactions in Francophone Africa, 2025

16 June 2025

Given the exit of a number of international banks from the shores of Africa, a wave of local commercial banks and development finance institutions (DFIs) are increasingly obtaining a larger market share and bridging the gap created by such departure. The increase in participation, by local banks and local DFIs, on infrastructure and energy transactions is a sign of growing sovereignty, particularly across jurisdictions in Francophone Africa. This is a welcome trend – likely to boost and encourage investor confidence and foster additional opportunities for foreign direct investment across Francophone Africa and the rest of Africa.

Challenges currently faced by projects in Francophone Africa

Some projects experience extended delays in reaching first disbursement on project finance transactions. Attributing factors typically include delays in (i) obtaining government approvals, (ii) fulfilling regulatory compliance requirements and (iii) satisfying certain lender approvals, given the trend towards a strong emphasis on stringent ESG-related requirements – which international DFIs increasingly require and which may notably be onerous for certain sponsors to meet.

The last point is particularly relevant where compliance with such ESG-related requirements applies to suppliers or other related parties who are, in reality, far-removed from the project or supply chains and who sponsors, consequently, have limited or no control over. This makes compliance practically difficult and as a result, the turnaround time for reaching first disbursement on project finance transactions is typically stretched.

The advent of local banks and local DFIs presents an opportunity to mitigate certain of these challenges. Local banks and local DFIs have an understanding and knowledge of their local markets and regulatory environments and typically have less stringent requirements for sponsors to meet (especially with respect to ESG and other related requirements) ahead of first disbursement. As a result, project finance transactions involving local banks and local DFIs tend to achieve first disbursement within shorter timeframes. We have seen this on a number of infrastructure financings and refinancings in Francophone Africa, including on a recent transaction in Senegal, where the timeframe for reaching first disbursement was significantly shorter than it would be on a classic DFI financing.

As we expect an increased number of local banks and local DFIs to take up an increased market share in Francophone Africa, we expect the effects of enhanced efficiency and boosted investment to spill over into other sectors – particularly the energy and renewable energy sectors.

The disadvantage posed by the increased participation of local banks and local DFIs is that sponsors may face higher financing costs, as local banks and local DFIs are not always able to offer affordable interest rates. While we have seen a lot of proactivity, expertise and commitment from the local banks and local DFIs, some local banks may still lack the level of in-depth expertise or responsiveness that is required on large scale or complex project financings. Collaboration with international DFIs will be key as sponsors will still require a diversification of funding sources to insulate against currency risk and volatility and possible political or regulatory instability.

Despite this, the increased activity from local institutions provides a positive outlook and indicates a strengthening of the local banking and financial systems – which is a push towards sovereignty in the journey towards achieving economic stability in Francophone Africa.

Renewable energy expansion in Africa

In the context of the energy transition and the rise of solar projects across Africa in general, the investment in solar and other renewable energy assets is particularly ideal, as those assets typically pose minimal construction and operational risks. Additionally, solar projects would (i) increase the much-needed capacity required in African jurisdictions and (ii) fast-track achieving the 2050 energy transition goals.

As a result, African jurisdictions are currently experiencing major shifts in energy and infrastructure transactions as governments are increasingly prioritising investment in solar energy.

While Anglophone Africa has accelerated its solar capacity, owing to severe load-shedding experienced in countries such as South Africa and Zambia, we expect Francophone Africa to steadily follow this trend. The Government of Senegal has recently committed to ramp-up renewable energy production to 40% of its generation mix by 2030. Similarly, Côte d’Ivoire launched two international tenders for the construction of solar plants, in June 2025, as part of the country's push to increase renewable energy and improve grid stability.

We expect Francophone African countries to continue to place an emphasis on increasing renewable energy capacity and we anticipate that the increased involvement of local banks and local DFIs will assist in expediting and preparing the region for increased investment in solar and other renewable energy assets.

Authored by Takudzwa Matondo, Bruno Cantier, and Olivier Fille-Lambie.