Africa turns to domestic capital as external financing comes under pressure

The third Sustainable Capital Markets Conference, organised by FSD Africa and partners, is focusing on how African countries can deepen local capital markets and redirect more domestic savings into infrastructure, energy, businesses and other productive sectors.

The push comes as governments face mounting fiscal pressures, high debt-servicing costs and weaker foreign investment, limiting their ability to rely on external sources to fund development.

Despite an estimated US$4 trillion held by African institutional investors, including pension funds, insurers, banks and sovereign wealth funds, only 2.7 per cent of these assets are invested in infrastructure and other productive sectors, according to data cited at the conference.

Organisers say increasing the flow of domestic institutional capital into the real economy will be critical to supporting economic growth, job creation and climate resilience.

The conference has also highlighted the limited depth of Africa’s capital markets. Fewer than half of African countries have had a domestic company issue a corporate bond since 2000, while the continent’s share of global capital market activity has declined despite significant growth in the size of its equity markets.

African domestic equity markets have grown 27-fold since 2000 to about US$561 billion, but the growth has not kept pace with the expansion of global capital markets.

The financing challenge is particularly significant given the continent’s demographic pressures. Africa generates about 25 million new job seekers every year, increasing demand for investment in infrastructure, energy, businesses and other sectors capable of creating employment.

Participants at the Nairobi meeting are expected to examine ways of strengthening market infrastructure and regulatory frameworks, expanding sustainable finance instruments and developing investment products capable of attracting more long-term capital.

Discussions will also focus on green, gender and thematic bonds, blended finance, catalytic transactions, sovereign debt management and mechanisms for using public funds to crowd in private investment.

FSD Africa Chief Executive Officer Mark Napier is among the speakers at the conference, alongside Dhamana Guarantee CEO Chris Olobo, SanlamAllianz Investments CEO Jonathan Stichbury, ATIDI Principal Political and Credit Risk Underwriter Albert Rweyemamu and Public Debt Management Commissioner Japhet Justine.

Other speakers include Nairobi International Financial Centre Authority CEO Daniel Mainda, Ethiopia Stock Exchange CEO Yodit Kassa and Lusaka Stock Exchange CEO Nicholas Kebaso.

The conference is expected to culminate in an Africa Capital Markets Roadmap outlining priorities and commitments for developing deeper and more inclusive markets.

Participants will also seek to agree on a roadmap for mobilising domestic resources through public-private partnerships, regulatory reforms and innovative financing structures.

A further focus will be on developing new pathways to unlock the continent’s US$4 trillion institutional capital pool for infrastructure, climate resilience, energy transition, micro, small and medium enterprises and other productive sectors.