The focus across markets on the continent is to clean up SOE portfolios, with a multi-faceted approach of closing non-performing entities, selling off poor performers to the private sector (not an option favoured in South Africa) or implementing deep turnaround strategies. A key contributor to such programmes are the Development Finance Institutions (DFI) that support the continent.
In 2025, Trialogue participated in various programmes funded by DFIs to strengthen and capacitate SOEs across markets on the continent. The focus ranged from bolstering governance and policies to establish transparent disclosure practices that meet the requirements of international investors.
DFIs recognise the importance of functioning and stable governments, that are capacitated to enable an environment that attracts private funding. They can impact policy and reform, improve governance and drive a positive investment climate through conditional loans, fiscal transparency, restructuring of SOEs, privatisation and improved procurement processes. AfDB’s R18.85 billion corporate loan to Transnet (2024) was linked to reforms, such as the strengthening of board oversight, improved governance structures, procurement and financial management as part of its business recovery plan.
Foreign direct investment (FDI) into Africa is recovering post-Covid and diversifying. In 2024, FDI into Africa skyrocketed. According to UNCTAD, Africa’s FDI inflows grew by ~ 75 % in 2024, reaching US$ 97 billion, within an environment where global FDI fell by 11%. In Africa, European investors held the largest FDI stock, followed by the US and China
Equally, the World Bank’s procurement framework is mandatory for all projects it funds, setting out detailed rules on competitive bidding, supplier vetting and audit trails.
However, DFIs that focus purely on commercially viable sectors or projects, rather than developmental or transformative investments, can be criticised for limited developmental additionality and undercutting domestic capital markets. For example, while DFIs have funded power plants in Africa, without corresponding fixes to transmission, gas supply, tariff setting and utility governance, assets are stranded or under-utilised. This was seen in Lake Turkana Wind Power (Kenya), the Azura-Edo IPP (Nigeria) and Bujagali Hydropower (Uganda), all impacted by poor transmission infrastructure and tariff issues.
DFIs have a vital impact to make in public development – such as education, health, poverty and climate resilience – to build human capital resilience that private capital cannot take on. The involvement of DFIs across Africa serve as a catalyst for systemic reform and long-term resilience. They can play a key role in transforming SOEs from underperforming state assets into credible investment partners capable of delivering essential infrastructure and services.
Although, what governments need to monitor is that their impact is on both structural development and social outcomes, filling a critical gap that private capital alone cannot deliver.
https://unctad.org/publication/economic-development-africa-report-2024
For more information contact Tina Playne.
