Africa’s $2.4 Trillion in Domestic Capital Could Transform Development
Africa’s institutional investors are managing over $2.4 trillion in capital, but just 10% is deployed in productive sectors like infrastructure, according to Nicholas Ithondeka, chairman of the Kenyan Fund Managers Association. While capital abounds, coordination and regulatory incentives have lagged, hindering its transformative potential across the continent.
Domestic capital surpassing foreign investment
Despite ongoing narratives about Africa’s dependence on foreign aid, domestic institutional investors such as pension funds and asset managers hold far greater financial clout, with $2.4 trillion under management. In Kenya, for instance, domestic capital finances over 90% of government bonds. Yet, only a small fraction of these funds is allocated to infrastructure or manufacturing, sectors critical for long-term economic growth. Instead, the majority is invested in safer assets such as short-term government securities.
Shifting dynamics and emerging frameworks
Kenya’s public-private partnership (PPP) framework, alongside efforts in West and Southern Africa, has begun unlocking investable projects, including the Nairobi Expressway. Development finance institutions and agencies like FSD Africa have played catalytic roles by structuring blended finance models, improving data transparency, and building cross-border industry platforms like the Pan-African Fund Managers Association (PAFMA).
Untapped savings growth fueling urgency
Demographic trends and policy reforms are accelerating pension and insurance asset growth in Africa. In Kenya, 2023 reforms doubled the National Social Security Fund’s size in just three years. With Africa’s working-age population rising rapidly, the challenge is connecting these expanding savings bases to opportunity through better regulation, shared standards, and innovative financial instruments.
Will coordinated efforts finally bridge Africa’s capital-rich reality with its development needs?
