Keypoints:
- Africa’s domestic capital exceeds $2tn, surpassing external flows
- Weak intermediation limits investment in infrastructure and industry
- External financing declines as debt pressures and global shocks rise
AFRICA’S domestic capital has surpassed external financing flows over the past decade, marking a structural shift in development funding. But a new report warns much of this capital is still not reaching infrastructure or industry.
According to AFC’s State of Africa’s Infrastructure Report 2026, non-bank domestic capital pools now exceed $2tn, compared to roughly $1.7tn in cumulative external flows between 2014 and 2024. This means Africa now has the financial base to fund its own growth—but lacks the systems to invest it at scale, reinforcing earlier projections outlined in Africa’s $2.5tn infrastructure financing opportunity.
A turning point—yet an incomplete transition
The report, launched in Nairobi on April 23, 2026, at The Africa We Build Summit, signals a turning point in Africa’s development model. The continent is increasingly capable of financing its own growth, even as external funding becomes less reliable.
However, the central constraint has shifted. The challenge is no longer raising capital—but deploying it effectively.
‘The constraint is no longer capital—it is intermediation,’ said Samaila Zubairu, President and CEO of Africa Finance Corporation (AFC). ‘We have the savings, but not yet the systems to channel them into infrastructure and industry at scale.’
This gap between available capital and productive investment now defines Africa’s development trajectory. It also reshapes the role of external finance—from primary funding source to strategic supplement.
Capital is rising—but stuck in low-risk assets
Domestic institutional capital has grown rapidly. Pension and insurance assets have surpassed $1tn for the first time, reinforcing trends previously highlighted in Africa’s public wealth nearing $1tn.
Public development banks hold $276bn while sovereign wealth funds account for $164bn, with central bank reserves rising to $530bn in 2025. Much of this growth has been supported by rising gold prices, which have boosted reserve values and driven a surge in capital holdings, according to Reuters reporting.
Yet much of this capital remains concentrated in short-term, low-risk instruments such as government bonds. AFC warns that regulatory constraints, weak project pipelines, and limited risk-sharing mechanisms are preventing funds from flowing into productive sectors.
The result is a persistent mismatch: large pools of savings exist but are not converted into long-term infrastructure and industrial investment.
External financing weakens further
At the same time, global conditions are making external financing more difficult to access.
Official development assistance to Africa has declined sharply, while sovereign borrowing has dropped from more than $29bn in 2018 to just $4bn–6bn annually in recent years. Foreign direct investment has remained flat at roughly $45bn–$55bn per year—well below the continent’s infrastructure needs.
Global shocks and geopolitical tensions have further constrained access to external funding, reinforcing the need for African economies to rely more on internal capital. Analysts say this shift could redefine how infrastructure is financed across the continent.
Why capital isn’t reaching projects
Despite growing capital pools, African governments remain under pressure from rising debt burdens, limiting their ability to directly finance large-scale projects.
At the same time, existing infrastructure has not always delivered expected returns. Many projects fail to reach full economic potential due to weak connectivity, fragmented systems, and poor integration into broader industrial networks.
The shift towards domestic financing is already taking shape in some markets. In Ghana’s planned $935m infrastructure bond, authorities are seeking to channel local savings into long-term infrastructure investment—exactly the intermediation gap identified by AFC.
William Ruto, speaking at the Nairobi summit, emphasised the need to ‘harness Africa’s capital’, noting that foreign investors have often prioritised raw material extraction over domestic value creation.
From projects to systems
The report argues that Africa’s next phase of development must move beyond standalone infrastructure projects towards integrated systems.
This includes transport corridors designed as production ecosystems, energy networks that connect generation to industrial demand, and digital infrastructure that converts connectivity into economic output.
The emphasis on system integration reflects a broader shift in thinking: infrastructure must be built not just to exist, but to function as part of coordinated economic ecosystems.
The institutional gap
Across sectors, the report’s conclusion is consistent: Africa’s challenge is increasingly institutional rather than financial.
‘Africa is not capital-poor—it is capital-rich but system-poor,’ said Samaila Zubairu.
Bridging this gap will require stronger financial instruments, deeper project pipelines, and regulatory reforms that encourage long-term investment.
As Africa’s domestic capital base continues to expand, the continent’s economic future will depend less on how much capital it can raise—and more on how effectively it can deploy it.
