African capital markets leaders seek to unlock Sh516tr for development

Capital markets provide an important link between savings and investment by enabling governments and companies to raise long-term financing for projects that can create jobs, expand businesses and support economic growth.

However, African capital markets remain underdeveloped, with fewer than half of countries issuing domestic corporate bonds since 2000, while equity markets have grown 27-fold to about $561 billion (Sh72.9 trillion) but declined as a share of global capital market activity.

Against this backdrop, more than 300 capital market leaders, policymakers, regulators, institutional investors and development finance experts from over 20 African countries recently gathered in Nairobi for the 3rd Sustainable Capital Markets Conference to explore how the continent can unlock an estimated $4 trillion (Sh516 trillion) in institutional capital to finance infrastructure, businesses, climate resilience and job creation.

The three-day event organised by FSD Africa and partners came at a time when African governments are facing mounting fiscal pressures, high debt-servicing costs and declining access to some traditional sources of external financing.

Organisers revealed that despite the huge financing needs, only about 2.7 per cent of institutional assets in Africa are invested in infrastructure and other productive sectors.

Delegates said the challenge is not simply a lack of capital, but creating investment opportunities and financial products that can channel available funds into the real economy.

SanlamAllianz Investments Chief Executive Jonathan Stichbury said the meeting seeks to shift the focus towards Africa's own capital markets and savings, particularly pension funds, insurance companies, banks and sovereign wealth funds, which control large pools of long-term money.

He said pension funds are among the institutions that could play a greater role in financing Africa’s long-term development. “As fund managers, we are keen to diversify our clients’ pension fund portfolios to reduce risk and improve returns,” he explained.

Stichbury noted that infrastructure offered a natural match for pension funds because both require a long-term investment horizon.

“Africa needs infrastructure, and infrastructure assets are long-term investments that generate income over an extended period. Pension funds are also long-term investment vehicles, so there is a natural match between the two,” he said.

However, Stichbury explained, the shortage of suitable investment products was limiting the ability of pension funds to diversify beyond government securities.

He added that investors needed appropriately structured, relatively low-risk and long-term opportunities, while intermediaries also needed to do more to package projects that meet institutional investors' requirements.

FSD Africa Chief Executive Mark Napier said the development of functioning financial markets was critical to creating the channels through which capital could reach productive sectors.

“Money markets are important because they provide the foundation for capital markets. They involve short-term financial instruments and, when functioning properly, allow liquidity to be recycled and help build long-term sources of funding,” he said.

Napier stated that Africa is facing a paradox in which institutional pools of capital are expanding while much of the money remains invested in government securities.

He added: “We have a disconnect. Pools of capital are growing, but they are not being allocated sufficiently to the real sector.”

He said more institutional capital is needed to finance small and medium enterprises, infrastructure and other productive investments because SMEs create jobs while infrastructure lowers the cost of moving people and goods.

The conference also examined how successful capital-market models can be replicated across countries.

Ethiopia Stock Exchange Chief Executive Yodit Kassa said Ethiopia's experience showed how developing market infrastructure could help create new opportunities for investment and economic activity.

“We could not have done it without the learning, exposure and in-depth knowledge within FSD Africa, which enabled us to draw on experiences from different markets,” Kassa said.

The Ethiopian Securities Exchange was launched in January 2025, while its money market began three months earlier. Kassa said the exchange now has six active securities, with significant activity also recorded in the interbank money market.

Kassa advised: “We need to document these experiences as case studies, not only to showcase Ethiopia but also to learn from other markets and improve our own systems.”

Petra Trust Company Managing Director Kofi Fynn explained that institutional investors were not necessarily opposed to investing in private assets but were constrained by the shortage of bankable projects with suitable risk-return profiles.

“I do not think this is because institutional investors are unwilling to diversify. Most would like to move away from government securities and contribute more directly to economic development,” Fynn said.

He said governments and other stakeholders need to make a deliberate effort to develop projects that could attract long-term institutional capital.

He added: “There needs to be a much more deliberate effort to move institutional capital into productive investments.”

The Nairobi meeting was expected to produce an Africa Capital Markets Roadmap outlining shared priorities for building deeper, more efficient and inclusive markets.

Delegates also developed a roadmap for capital mobilisation and identified new ways of directing the continent's $4 trillion institutional capital pool towards infrastructure, climate resilience, energy transition projects, SMEs and other productive sectors.

The discussions also focused on sustainable finance, blended finance, sovereign debt management, catalytic transactions, innovative financing and regulatory reforms.

For Africa, the stakes are high. The continent generates about 25 million new job seekers annually, while demand for investment in infrastructure, energy, businesses and climate resilience continues to rise.

The conference, therefore, sought to move the debate beyond the availability of capital to the creation of systems, products and projects capable of putting that capital to work where it can generate jobs, strengthen economies and support long-term development.