Africa's Infrastructure Ambitions Stalled by Shallow Capital Markets and Institutional Bottlenecks

Strategic Insights -

A new report by the Africa Finance Corporation highlights the need for Africa to unlock its internal wealth to finance its infrastructure ambitions, with $4 trillion in domestic capital estimated to be lying dormant. The report cautions that shallow capital markets, weak financial intermediation, and institutional bottlenecks are constraining the effective deployment of these resources into the productive economy. As external financing dries up due to global economic turbulence, Africa faces a critical juncture where it must either mobilise its internal wealth or risk falling further behind in its development goals.

Key Takeaways:

  • Africa's domestic capital pools are estimated to be over $4 trillion, with more than $1.6 trillion in the non-bank sector, including $455 billion in pensions, $320 billion in insurance, $250 billion in public development banks, $150 billion in sovereign wealth funds, and $473 billion in foreign reserves.
  • Shallow capital markets and weak financial intermediation hinder capital flow and slow economic growth, limiting the supply of suitable long-duration assets and reinforcing conservative portfolio behaviors.
  • Africa's traditional sources of external financing are increasingly insufficient, procyclical, and often misaligned with the continent's long-term development priorities, with donor budgets shrinking and protectionist policies rising.
  • African policymakers are increasingly turning to domestic sources of finance, including national savings, sovereign wealth and stabilisation funds, public development banks, and capital markets, with evidence suggesting that external financing is most catalytic when it complements domestic resource mobilisation.
  • Africa's pension funds manage approximately $455 billion in assets, with the insurance sector holding significant untapped potential, with insurance assets across 28 countries standing at $320 billion.
  • Life insurance accounts for less than 30 percent of insurance policies in most African countries, with the industry predominantly skewed toward non-life segments, and pension participation remains low in most African countries.

Statistics:

  • $4 trillion: the estimated value of Africa's domestic capital pools.
  • $1.6 trillion: the estimated value of Africa's non-bank sector capital.
  • $455 billion: the amount of pension assets in Africa.
  • $320 billion: the amount of insurance assets in Africa.
  • 28 countries: the number of countries with insurance assets standing at $320 billion.
  • 80 percent: the percentage of Africa's GDP represented by insurance assets.
  • $258 billion: the amount of insurance assets in South Africa.
  • 79 percent: the percentage of Africa's total insurance assets held in South Africa.
  • Less than 30 percent: the percentage of life insurance policies in Africa.
  • 90 percent: the percentage of total employment in some sub-Saharan economies that is informal.

Sources:

  • Africa Finance Corporation (AFC), State of Africa's Infrastructure Report 2025
  • African Securities Exchanges Association
  • African Exchanges Linkage Project
  • World Bank
  • International Monetary Fund (IMF)