For decades, Africa’s growth challenge has been framed as a shortage of capital. Policymakers look outward, investors cite funding gaps, and development debates revolve around how to attract more foreign money. But this framing no longer reflects the full reality.
Africa today does not lack capital. What it lacks is coordination.
Across the continent, pension funds and asset managers already steward more than $2.4 trillion in institutional assets, a figure that dwarfs annual aid flows and increasingly rivals foreign investment. In Kenya, over 90% of government bonds are financed by domestic capital. This is not a theoretical discussion about future potential; it is clear evidence of capital already in place and available for deeper deployment.
Yet in most African markets, less than 10% of institutional assets are invested in productive sectors such as infrastructure or manufacturing. The bulk remains parked in government securities, safe and liquid, but limited in their ability to drive long-term economic transformation.
While this is often presented as a failure of ambition it is actually a failure of coordination and regulatory incentives, but this is changing.
African institutional investors are frequently portrayed as overly cautious, yet their behaviour is largely a rational response to structural constraints. When governments issue short-term debt at double-digit yields, crowding out private investment, it becomes difficult to justify taking on additional risk. Conservative benchmarks limited investable pipelines and high transaction costs reinforce this pattern.
What is striking, however, is that foreign investors are often more willing to take risk in Africa than African capital itself. International funds, from London to New York, routinely pursue long-term infrastructure and private equity opportunities across multiple African regions. Meanwhile, domestic pension schemes remain concentrated in sovereign paper. This paradox does more than constrain growth, it reinforces the narrative that Africa is inherently too risky, even when many of these risks are overstated or can be better managed by local investors, particularly those with long-term liabilities in domestic currency.
Where coordination exists, progress follows
Kenya’s public-private partnership (PPP) framework, formalised over the past decade, has begun to generate investable projects such as the Nairobi Expressway (pictured), a flagship PPP backed by local and international capital. Strong market institutions, including capital markets authorities and stock exchanges, allow investors to price risk, structure exits and build confidence in long-term assets. Similar efforts are underway across parts of West and Southern Africa, supported by regulators and industry bodies seeking to deepen markets rather than simply attract capital.
Risk mitigation tools and market platforms are also evolving. Specialist development agency FSD Africa along with development finance institutions such as British International Investment, continue to play a catalytic role, not as primary financier, but as enablers of capital mobilisation. Their support in structuring blended finance vehicles, improving data quality, and building investable pipelines has been instrumental in helping domestic capital move with greater confidence.
In 2023, FSD Africa supported the establishment of the Pan-African Fund Managers Association (PAFMA), a new industry platform designed to enhance cross-border collaboration among fund managers across the continent. PAFMA membership has since grown to 11 members representing 23 countries with a market size exceeding $200bn in assets under management.
Industry associations have a critical role to play. As chair of the Kenyan Fund Managers Association, which brings together more than 20 investment firms, I have seen how shared standards and ethical codes can reduce friction and build trust. The momentum is growing across borders too. PAFMA will hold its inaugural conference in Nairobi on 27 and 28 January 2026, bringing together industry leaders, regulators and asset owners to deepen collaboration and tackle common investment challenges.
Other associations, such as Fund Managers Association in Uganda, Pension Operators Association of Nigeria, Namibia Savings and Investment Association and Association des Sociétés de Gestion et Fonds d’Investissements Marocains, are also helping professionalise markets and give institutional investors greater confidence that capital is being deployed responsibly and transparently.
Long-term capital needs a home
Perhaps most importantly, the savings base itself is changing rapidly. Pension and insurance assets across the continent are growing exponentially faster than in developed markets, driven by demographics and reforms. In Kenya, reforms to the National Social Security Fund implemented in 2023 doubled its size in less than three years, matching the growth achieved over the previous five decades. Across Africa, a rising working population and evolving policy frameworks are accelerating the accumulation of long-term savings. This capital needs a home, and the urgency is growing.
The question is no longer whether Africa can finance more of its own development, but whether its systems can connect capital with opportunity.
Leadership is essential. Regulators and policymakers have powerful tools at their disposal, from incentivising investment in productive sectors to setting allocation thresholds that nudge capital beyond government bonds. Industry bodies must continue building shared standards and investable pipelines. Institutional investors, for their part, must recognise that long-term resilience depends on backing the real economy that ultimately sustains their members.
Africa’s growth story should no longer be told through the lens of scarcity. The capital is here. The opportunities are here. With confidence, and coordinated collective action, the continent can finance far more of its own future, on its own terms.
Nicholas Ithondeka is the chairman of the Kenyan Fund Managers Association and chief executive Officer of Co-op Trust Investment Services.