Home capital key to Africa’s infrastructure transformation, says AFC report

Africa has over $4 trillion in untapped assets that, if successfully mobilised, may catalyse an period of infrastructure-led progress. That is based on the Africa Finance Company’s State of Africa’s Infrastructure Report 2025, which was launched nearly on 5 June 2025. Drawing on the expertise of Asia, the report requires deeper monetary markets, stronger public establishments and focused coverage reforms to channel longer-term financial savings into power, transport and manufacturing and digital infrastructure for the continent. 

Presenting the highlights of the report, Dr Rita Babihuga-Nsanze, AFC’s chief economist and director of analysis and technique, famous that this 12 months’s report rises to the problem, set out in final 12 months’s version, to determine and map home capital swimming pools. “We didn’t simply estimate the numbers; we got down to find the place these financial savings are held throughout the continent and the way they’re at the moment being allotted. It’s the most exhaustive bottom-up effort up to now,” she mentioned. 

The report, she mentioned, maps institutional capital by geography and asset class throughout 28 international locations, masking 80% of Africa’s GDP. “African markets are enhancing in knowledge high quality, transparency, and regulatory disclosures,” she mentioned, including that “this report is a chance to again up the numbers which are quoted when speaking about Africa’s institutional financial savings.”

In accordance with the report, the continent has over $1.1 trillion in institutional capital, lodged in pension funds, insurance coverage, sovereign wealth funds and public improvement banks. As well as, there’s almost $500bn in central financial institution reserves, and by a conservative estimate, one other $200bn in family financial savings in Africa’s huge casual economic system. “Put collectively, these figures present a fuller, extra sensible view of the capital Africa can mobilise for its transformation,” Babihuga-Nsanze mentioned, including that the query that arises is how this capital may be directed into productive investments for the advantage of the continent. 

Babihuga-Nsanze mentioned that with allocations closely concentrated in low-risk, quick time period belongings corresponding to authorities securities, cash managers on the continent are crowding out the non-public sector whereas rising their publicity to sovereign, which has been heightened by the fiscal constraints that governments are at the moment dealing with. This conservative method contrasts sharply with in OECD international locations, “the place pension capital is channelled into the true economic system by way of equities, company debt and infrastructure. Briefly, Africa’s most strategic pool of long-term capital is within the OECD world in assist of [their] long-term transformation.” 

Actionable suggestions 

The report, Babihuga-Nsanze mentioned, recommends actionable steps, together with formally recognising infrastructure and long-term belongings as investable lessons, strengthening the capability of pension managers and enhancing monetary intermediation. Pointing to InfraCredit, the Nigerian finance home, for instance of success, she famous that “It has demonstrated how market-based de-risking can crowd pension capital into infrastructure with out necessary guidelines.” With its credit score ensures, InfraCredit has helped enhance pension allocation to infrastructure from 1.2bn naira ($775m) to over 242bn naira ($156m) in underneath a decade. 

Babihuga-Nsanze confused that it’s time for the narrative to shift and the AFC prefers to view Africa’s infrastructure deficit not as a constraint however moderately “as a chance to reshape economies, speed up industrialisation, and appeal to funding”. The report thus units out sector-specific methods to assist the continent’s ambitions for progress. In power for instance, the experiences adopts the benchmark of 1,000 kWh per capita per 12 months because the minimal for a functioning economic system, out of which 70% should be utilised for industrial functions. “Most African international locations are far under this threshold,” Babihuga-Nsanze famous, citing India’s progress in ramping up era capability. “If we wish to meet Africa’s industrial ambitions, we have to scale power with intent.”

Making tracks

The report additionally focuses on the rail sector, which Babihuga-Nsanze mentioned is central to the continent’s industrial future. Presently the continent’s railways are fragmented and, particularly in western and central Africa, stay on colonial-era tracks that have been designed solely to facilitate the extraction and motion of uncooked supplies. 

This, she mentioned, is about to vary. “We’re coming into a brand new cycle of rail funding,” she mentioned, with over 7,000 km of traces underneath development. The flagship Lobito Hall, for instance, which connects the jap and western coast of the continent with a Trans-African Railway, has the potential to invigorate commerce throughout the area. “The chance is not only to shut gaps,” she concluded, “however to reimagine Africa’s infrastructure as a related, catalytic platform for commerce and transformation”.

Reacting to the report, Patrick Njoroge, a former governor of the Central Financial institution of Kenya, confused that funding into infrastructure should be a part of a broader, built-in push for sustainable improvement. With out complementary investments into sectors corresponding to water, well being and schooling, “we danger constructing white elephants,” he warned. 

Njoroge nevertheless sounded a observe of warning with regard to pension funds and central financial institution reserves. Pension funds have a fiduciary responsibility to contributors and may stay focussed on retirement safety moderately than infrastructure returns. Whereas sovereign bonds have lengthy been seen as protected bets, latest crises in international locations like Ghana have proven in any other case, he identified. Equally, with a median of three.4 months of import cowl, barely above the crucial threshold of three months and with a number of international locations dealing with debt challenges, there’s really little room for manoeuvre, with central banks needing to maintain these reserves in extremely liquid and safe belongings. Because of these larger macroeconomic constraints, it isn’t so evident for these reserves to be deployed to extra productive sectors of the economic system. Reasonably, digital instruments should be harnessed to extend financial savings. 

Nonetheless, he did stress that empirical proof highlighted that African danger is usually mispriced. “Current analysis [from Moody’s and the AfDB] has proven that Africa has, at 1.9%, one of many lowest default charges on infrastructure and associated initiatives in comparison with different areas. Nonetheless, there’s work to be accomplished to align this final result with the price of borrowing.”

Donald Kaberuka, chairman of Southbridge Capital and former president of the African Growth Financial institution, famous that even when all Africa’s home financial savings have been deployed for the aim, this may not be sufficient to bridge the infrastructure hole. Reasonably, he argued, Africa wants a brand new type of monetary intermediation that directs surplus financial savings from ageing, capital-rich nations within the world north into infrastructure funding wants in Africa, the place there’s a younger and rising inhabitants. 

Vietnam, he mentioned, had efficiently accomplished this, attracting capital from ageing societies like South Korea, Taiwan, China, Japan and Singapore. “I believe it’s so essential for African monetary establishments to think about creating this platform which can allow them to do that,” he confused. 

On power, Kaberuka urged a regional method to attaining power self-sufficiency, noting that not all international locations can develop into self-sufficient. With monumental reserves of hydropower, Guinea, Ethiopia, the Congo Basin, Lesotho and components of Angola and Zambia can develop into sources for a continent-wide method to wash energy era. “Regional cooperation and regional energy swimming pools are essential for the transition,” he mentioned. 

He known as for implementation of the only aviation market, which might immediately allow Africans to journey freely across the continent. “That doesn’t require cash, doesn’t require infrastructure; it requires somebody to decide which permits the aviation market to work,” he noticed, stressing in conclusion that “we have to assume not simply out of the field however herald one other field”.

Dr Hanan Morsy, deputy govt secretary and chief economist on the United Nations’ Financial Fee for Africa, mentioned the report supplied a well timed counter-narrative to the notion that Africa lacks capital. The issue, she mentioned, is moderately fragmentation and aversion to danger. 

“What we have to do is to construct aggregation platforms that syndicate institutional buyers, industrial banks and sovereign funds to mobilise at scale, she proposed and known as on the AFC and different improvement finance establishments to “take the lead in creating an African infrastructure consortium that swimming pools, initiatives, diversifies danger and delivers investable pipelines”. 

Morsy additionally recognized the state of public funds as one other problem that should be successfully managed to unencumber extra financing for infrastructure. “So long as we’ve governments over-borrowing domestically, infrastructure funding will likely be successfully crowded out. Creating the fitting situations will likely be crucial for infrastructure to flourish as an asset class, she emphasised.

Reflecting on the report, Acha Leke, senior associate at McKinsey & Firm, mentioned it raises two essential questions: how one can higher leverage obtainable assets; and how one can develop them right into a extra sustainable and transformational monetary base for the continent. Noting that improvement help has been declining for a while, Leke mentioned it’s crucial for every African nation to utilise its personal assets to pursue its improvement. 

A prepared supply of funding

Pension funds, for instance, provide a prepared supply of funding, he mentioned, particularly as many are at the moment investing lower than they’ll even underneath present laws. “In lots of international locations, they’ll allocate as much as 10% however they solely make investments 2% in the present day. If we have been to match that, we may most likely [tap another] $80bn.” The query, he famous, is “how will we nudge, encourage and in some circumstances, pressure pension funds to allocate extra money to this asset class,” which he added, should additionally have the ability to generate returns to justify the funding. 

Additionally it is essential to develop the pot of obtainable assets, since even the $4 trillion recognized by the report will not be sufficient and is concentrated within the continent’s bigger economies. This implies most of Africa’s 54 international locations are nonetheless far behind, and whereas “there was some progress in Kenya and Nigeria, for instance, Leke mentioned others would possibly want encouragement. He prompt {that a} continental leaderboard that exhibits which international locations are making progress in rising their home financial savings, increasing pensions and insurance coverage protection and implementing the required reforms, may very well be the motivation they want. 

Reflecting on the expertise of his firm, Chinua Azubike, chief govt officer of InfraCredit, mentioned it had benefited from the assist of its backers, improvement finance establishments (DFIs) together with AFC, in addition to from Nigerian pension funds, which for the primary time determined to put money into an infrastructure fund. “We’ve seen the place in Nigeria, for the primary time, pension funds are in a position to on-lend to initiatives in tunnels of as much as 20 years.” 

This contains assist for the Lagos Free Zone, which lately raised a 20-year bond, and a toll street venture backed by a sub-national authorities by way of public-private partnership. “These kinds of tunnels have been thought of inconceivable,” Azubike mentioned, till now. InfraCredit’s mannequin tackles the crucial hole between “perceptional danger and actual danger,” providing ensures that it’ll step in within the occasion of a default. Azubike reported, nevertheless, that “there was zero defaults in our portfolio over 12 sectors,” demonstrating that “InfraCredit does have very low [risk] initiatives that we initially assured in secondary issuances with out the necessity for ensures.” He confused the necessity for forex stability. “We will’t construct markets the place trade charge volatility impacts on the buyer’s potential to pay, so matching that asset towards the legal responsibility construction in the identical forex may be very crucial.”

Mercy Thuo, govt director, CPF Capital and Advisory and group head of initiatives, CPF Group backed the central thesis of the report that “Africa doesn’t lack capital. It simply wants higher monetary engineering of the capital that we already maintain.” 

Dr. Hosea Kili is managing director of the CPF Group and likewise chairs Kenya’s committee of consultants on infrastructure funding, emphasised the urgency of tapping non-public sector funding within the mild of shrinking fiscal house. 

This may, nevertheless, Kili mentioned, require structural change. “Our regulatory framework discourages various investments from our portfolios,” he famous, calling for limitations on sovereign bond allocations and new incentives for infrastructure bonds. 

To deal with fragmentation and construct ticket dimension, Kili proposed aggregation by gamers, to carry collectively funds keen to put money into infrastructure initiatives. Extra broadly, Kili known as for continent-wide regulatory reforms and alignment in order that funding in different international locations will not be seen as “international funding”. 

Not a burden, however a springboard

Lerato Mataboge, the newly nominated African Union (AU) commissioner for infrastructure and power, known as on all stakeholders to reframe Africa’s infrastructure problem not as a burden, however as a springboard: “Africa’s infrastructure deficit has too usually been described as a crippling problem when it’s the truth is an actual and tangible alternative to form Africa’s future.” 

She praised the report’s alignment with the AU’s key methods, noting its recognition of initiatives corresponding to “the push in the direction of larger home income mobilisation, the event of Africa’s single electrical energy market and the development of an built-in high-speed practice community”. These, she confused, are crucial to delivering on the objectives of the African Continental Free Commerce Space, Agenda 2063 and the continent’s broader improvement ambitions. 

Concluding the discussions, Samaila Zubairu, AFC’s president and CEO, argued that the shifting world panorama presents each a warning and a chance. “The world has certainly modified,” he mentioned, pointing to the brand new focus of the continent’s conventional improvement companions on “defence and rearmament of their respective economies” and the truth of “fractionalisation of the world”.

Nonetheless, he mentioned, inside this geopolitical realignment lies Africa’s strategic leverage: “As you search to reindustrialise your economic system, you want safe and dependable provide chains and naturally the minerals for which are in Africa.” 

The continent is thus not simply related however important to this rising world resettlement. Zubairu posited that Africa should cease exporting uncooked supplies and begin creating worth at dwelling. “It’s this transformation that creates the standard jobs that results in elevated financial savings,” he mentioned, reinforcing the connection between industrialisation, employment and capital formation. 

Africa should take possession

“We should take possession of our improvement and we should fund it,” he added, urging Africans to guide the cost in demonstrating that “viable proposition” to world companions. Highlighting Nigeria’s success, he identified, “the federal government has deliberately accomplished regulation to create an asset class for infrastructure and that is what has led to the success of InfraCredit.” The duty now, he famous, is “to construct on the success of InfraCredit and see how we will try this throughout the continent”.

Zubairu issued a name for collective motion and structural reform. “We should work collectively to make sure that we put in place the fitting regulatory framework and the fitting devices that might do the intermediation.” He pledged that AFC, in its management position as chair of the Alliance for African Multilateral Monetary Establishments, “will lead this initiative to make sure that we’re setting up the fitting buildings for regulatory reform and structured intermediation”.