Keypoints:
- Africa’s growth outpaces global averages
- Women and youth are central to success
- Domiciling funds locally is essential
2025 will be a pivotal year for investment. A quarter way into the 21st Century and global markets are being rocked by shifting economic policies, geopolitical realignments, growing protectionist trade, and new national industrial strategies. As investors ponder what’s next, Africa should be top-of-mind.
The African Development Bank projects the continent’s economy will expand by 4.3 per cent in 2025, up from 3.7 per cent in 2024. It will offer compelling opportunities across equities, venture capital, and infrastructure. The IMF predicts nine of the world’s fastest growing economies will be in Africa. They include: South Sudan, Libya, Senegal, Sudan, Uganda, Niger, Zambia, Benin Republic and Rwanda.
In Rwanda, Ethiopia, Cote d’Ivoire, and Tanzania growth is projected to exceed six per cent, due to agriculture, manufacturing, services, and technology sector expansion. Public markets are confirming it. The Bourse Regionale des Valeurs Mobilieres, Nairobi Securities Exchange, and Johannesburg Stock Exchange are seeing heightened activity, with increased foreign investor inflows and a resurgence of local participation.
Investing in women to transform society
With these trends, the Mennonite Economic Development Associates (MEDA), co-created the impact investment fund-of-funds, the Mastercard Foundation Africa Growth Fund, to invest in youth and to empower women entrepreneurs to lead innovation, growth and job creation. Women are Africa’s economic backbone. Sub-Saharan women have amongst the highest rates of entrepreneurship at 26 percent. Globally, one in six women intend to start a business, in Africa, it’s one in three. Women reinvest up to 90 percent of their incomes in education, health, and nutrition, compared to 40 percent by their male counterparts, transforming their societies.
As leading Global North economies descend into trade spats driven by the Trump Administration’s protectionist, and arguably imperialist, overtures. Canada launched its first-ever Africa Strategy for mutual prosperity and security. Africa can offer new markets, investment and trade opportunities for the North to pivot to, as the established norms fall.
Youth population drives future demand
Africa is the world’s youngest continent, more than 60 per cent of its people are under the age of 25. A promising future is evident. Today’s population is 1.4 billion and projected to reach 2.5 billion by 2050. Africa’s youth population, already the largest in the world, is projected to double to more than 830 million by then. That’s where business needs to be.
And women are essential to Africa’s economic renaissance. The Mastercard Index of Women Entrepreneurs 2023 ranked Uganda, Botswana, and Ghana among the top countries with high rates of female entrepreneurship. Many young women in West, East, and Central Africa are in informal employment, often in agriculture. This sector provides low wages and job insecurity, limiting economic advancement. Access to finance remains a barrier, with African women receiving only seven per cent of total private equity and venture capital funding. Microfinance institutions and fintech innovations, such as M-Pesa in Kenya, have improved financial inclusion for women, but the opportunities for real returns and growth are being missed.
Infrastructure, clean energy and fintech beckon
The demographics mean a burgeoning labour force and increased consumer base. Investors that fuel this growth can ensure the region skips youth unemployment and promotes training and education to prepare workers for the future. Sub-Saharan Africa’s working-age population will surpass that of developed countries. This shift compels substantial investments, estimated at $400 billion annually by the African Development Bank, to harness growth potential.
Priority sectors include Agriculture & Agri-tech, Renewable Energy, Digital and Fintech, and Infrastructure Development. Africa’s agriculture sector is critical, employing over 60 per cent of the workforce. Investment in agribusiness and climate-smart techniques will deliver food security. Africa also has massive untapped potential in solar, wind, and hydropower, making clean energy investment a necessity. Its mobile phone penetration and financial inclusion efforts are driving innovation, particularly in markets like Kenya and Nigeria. And rapid urbanisation calls for funding transport, housing, water, and sanitation systems.
Domiciling funds is a game-changer
Economist Rita Babihuga-Nsanze estimates there is $2-$4 trillion in excess African savings, in pension funds, insurance funds, sovereign wealth funds and central bank reserves. Much of this capital, however, is currently invested outside Africa, often in low-yielding assets.
This is why we are promoting greater Domiciliation of investment vehicles (IVs) in Africa. Eighty percent of African IVs domicile outside Africa. A change is vital to improving Africa’s competitiveness and ensuring inclusive growth, especially support for micro, small, and medium enterprises (MSMEs).
We conducted a study of factors and opportunities in Cabo Verde, Cote d’Ivoire, Ethiopia, Ghana, Kenya, Mauritius, Morocco, Nigeria, Rwanda, Senegal, South Africa, Togo and Uganda. A stronger investment ecosystem will deliver more global and domestic capital. IVs can pool capital across financial instruments, a diversity of business models, and different capital allocators, directing private capital, venture capital and pension funds to invest in MSMEs. But, the countries studied must engage policymakers, regulatory bodies, and advocacy groups to build and strengthen more robust markets. Clear and supportive policy will unlock pension fund investments. And facilitating seamless Domiciliation, while ensuring regulatory clarity, will ensure investor confidence.
Time for Africa to lead global capital flows
The investment conditions are ripe in Africa. By seizing on high growth, scaling enterprises with innovative finance by domestic IVs, encouraging capital inflows from domestic and global sources, promoting investment-friendly capital ecosystems with Domiciliation, and encouraging new financiers to develop African IVs will enable both domestic and global investment at the most critical time in history. It’s time for Africa to become the pivot point for investors everywhere.
This article was first published by CNBC Africa
