Blended finance limits, 4 ways to unlock billions for Africa water

Blended finance is being wrongly treated as a cure-all for the water investment gap in Africa, despite lacking the capacity to deliver on the continent’s infrastructure needs.

This was the stark reality check provided by Hubert Danso, Chairman and CEO of Africa Investor Group, at the ongoing AU–Africa Water Investment Programme (AU-AIP) Water Summit 2025 in Cape Town.

“I love the enthusiasm around blended finance, but blended finance was designed decades ago… and if the truth be told, blended finance has not really got the depth and the capacity to accomplish any of our goals,” said Danso.

“If you bring all of the blended finance first loss capacity together for Africa as well as all emerging markets, less than 10% of what we actually need is available. So the question should be, ‘how do we fix the 90% gap that blended finance has not’?”

He was speaking during a panel discussion themed Investors Speak: What will it take to finance Africa’s water projects?

Finance focus needs to change

Danso warned that Africa’s development community was “spending 90% of our time trying to solve 10% of the problem.”

He argued that blended finance could even raise the cost of capital by creating a perception of loss before projects were considered.

“As I say to my colleagues, we spend 90% of our time trying to solve 10% of the problem, and less than 10% of our time working with people who can solve 90% of the problem.

“So blended finance, just so that we understand, I know that a lot of colleagues are leaning on blended finance because you don’t really have much else.”

“Blended finance… whilst it’s got some transactions done and we can throw some good names around… [but] if not sold properly, contributes to increasing the cost of capital, because it gives the perception that geographies that need blended finance are going to have a loss even before we’ve talked about the transaction… we’re explaining who’s going to take on board the loss.”

Instead, he urged a shift to “making development investable” and outlined four proposals to unlock more than $10 billion annually from the $300 trillion in global institutional capital.

Four ways to access finance for water sector in Africa

1. Legally classifying water ecosystems – from watershed protection to natural filtration – as national infrastructure assets eligible for regulated returns.
2. Replacing public-private partnerships with “institutional investor public-partnerships” to match long-term capital with long-term assets.
3. Securitising Africa’s $6 trillion in natural capital to unlock $900bn, including $18bn a year until 2050.
4. Creating scalable, tradable financial products such as water exchange-traded funds, nature-linked bonds and resilience funds linked to ESG capital taxonomies.

Making water development a bankable investment in Africa

“We don’t have to reinvent any wheel. We just have to perhaps let the development finance world understand that if they can’t finance the scope of the need, they should probably never invest in that… the alignment is there, and then we can decide the extent to which our development interests are balanced,” said Danso.

He said that one of the key philosophies “that we need to think about is, instead of trying to make investment developmental, we should be trying to make development investable to the point where it can unlock the social as well as economic dividends on an aligned basis.”

Danso said his organisation tends to invest in financial instruments, funds and more strategic platforms.

“So we believe that water is very aligned with that. It’s happening around the world… private capital are already going into well defined and regulated structures, and private capital is already doing it.”

Source: ESI Africa