AECF Launches REACT 2.0 to Fund Ethiopian Renewable Energy Productive-Use Technologies

The Africa Enterprise Challenge Fund (AECF) has launched the second phase of its renewable-energy challenge program, REACT 2.0, opening a new funding window for Ethiopian companies working on productive-use energy (PUE) technologies. These technologies use energy sources like solar, mini-grids, or biofuels to enable value-creating activities, such as milling grain, irrigating crops, or running workshops, rather than just meeting household needs.

The launch event, held at the Capital Hotel on Thursday morning, brought together past investees, microfinance institutions, energy-sector actors, and prospective applicants. With the application window now open until January 9, the program expects to support up to seven Ethiopian businesses over the next cycle. 

With a total budget of SEK 23.87 million (around $ 2.3 million), REACT 2.0 Ethiopia seeks to strengthen climate-resilient livelihoods by expanding PUE technologies. The two-year program running from 2025-27 aims to reach 100,000 beneficiaries, including roughly 20,000 new energy connections, within a tight implementation window. Success will depend on companies’ ability to deploy capital quickly, innovate around affordability, and implement technologies that deliver measurable productivity gains for smallholder farmers and rural businesses

REACT 2.0 builds on the program’s first phase, which ran from 2020-25 and supported ten Ethiopian companies operating in solar home systems, solar water pumps, and clean cooking. 

Caroline Toroitich (PhD), AECF’s Associate Director for Renewable Energy, says that in its first phase, the Fund invested a total of $3.8 million using milestone-based grants, disbursed only when companies met verified sales, operational, or impact targets. The ten Ethiopian firms also received technical support in governance, marketing, operations, and financial management.

“That round reached more than 59,000 rural households, created over 250 full-time equivalent jobs, and introduced roughly 0.5 MW of distributed solar generation,” Caroline told Shega. 

But the process was not without strain. During implementation, the National Bank of Ethiopia introduced a forex-retention policy requiring firms to surrender up to 80 percent of their foreign-currency earnings, making it nearly impossible for import-dependent businesses to replenish inventory.

Alem Gebru, founder of Modify Electromechanical Systems and Solutions, one of the solar distributors who benefited in the first cohort, recalled how the policy shift nearly stalled their operations. “AECF intervened and advocated for an exemption, allowing many companies to access 100 percent of their allocated foreign currency,” she said. Companies also had to contend with currency devaluation, high interest rates, supply-chain disruptions linked to COVID-19, and conflict-related blockages in regional markets.

Caroline says the new phase is designed to support companies navigating these realities while moving the sector toward larger, income-generating technologies, irrigation, cooling, drying, and milling. 

“We now hope to scale up and support bigger technologies that help households and small businesses generate income,” she told Shega. “If a farmer can irrigate year-round or cool milk properly, that changes livelihoods.”   

The Fund will operate two financial windows. The first is a working-capital and inventory facility for standalone systems below 1 kW, small pumps, compact cold-storage units, fridges, freezers, and similar technologies. Grants range from $250,000 to $400,000, with 30 percent disbursed upfront once documentation and customer pipelines are verified. The remainder is unlocked through sales milestones. 

Companies must match grant 1:1 through equity, credit, or in-kind assets such as existing inventory. 

The second window supports larger PUE systems, covering up to 40 percent of system CAPEX through milestone-based disbursements. The remaining 60 percent must be financed by the company, often through pay-as-you-grow models or payment cycles tied to agricultural seasons. AECF is also opening eligibility to microfinance institutions offering green loan products, as well as firms working on solar e-waste collection and refurbishment.

AECF was established in 2008 at the World Economic Forum and has raised over $ 524 million to date supporting 575 enterprises in 26 countries across Africa by investing in businesses that struggle to meet traditional risk-return standards for commercial investors.

Ethiopia-based businesses such as Green Scene Energy International, an eight-year-old company that works on clean energy projects, and Ethio Chicken, the Ethiopian unit of American investment group Flow Equity, have benefited from previous rounds.