The focus across markets on the continent is to clean up SOE portfolios, with a multi-faceted approach of With a focus across African markets on cleaning up state-owned entity (SOE) portfolios, development finance institutions (DFI) are key contributors to such efforts.
These include closing non-performing entities, selling off poor performers to the private sector or implementing deep turnaround strategies. .
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 establishing transparent disclosure practices that meet the requirements of international investors.
DFIs recognise the importance of functioning and stable governments that can create attractive environments for 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. For example, the African Development Bank’s (AfDB) R18.85 billion corporate loan to Transnet in2024 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 following the Covid-19 pandemic is recovering and diversifying. In 2024, FDI into Africa skyrocketed. According to United Nations Trade and Development (UNCTAD), Africa’s FDI inflows grew by around 75 % in 2024, reaching $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 support for associated infrastructure and policy such as transmission, gas supply, tariff setting and utility governance, assets are stranded or under-utilised. This was evident in the Lake Turkana Wind Power Project in Kenya, , the Azura-Edo power station in Nigeria and the Bujagali Hydropower plant in Uganda, all of which were negatively affected by poor transmission infrastructure and tariff issues.
DFIs can have a significant impact on public development, fromeducation, health, poverty and climate resilience to building human capital resilience that private capital cannot take on. The involvement of DFIs across Africa serves 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.
