• Institutional funds can unlock development projects __AFC

Africa’s domestic capital base has grown to a level that now surpasses external financing flows over the past decade, but much of this wealth remains locked in institutional funds and is yet to be deployed into projects that directly improve livelihoods, according to a new report by the Africa Finance Corporation.

The State of Africa’s Infrastructure Report 2026, released at the Africa We Build Summit in Nairobi co-hosted with Kenyan President William Samoei Ruto, said the continent’s development challenge is no longer primarily about raising capital but about channeling existing funds into productive investments in infrastructure and industry.

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The report found that Africa’s non-bank domestic capital pools now exceed $2 trillion, overtaking the approximately $1.7 trillion in cumulative external flows recorded between 2014 and 2024. Pension and insurance assets alone have crossed the $1 trillion mark for the first time, while public development banks account for $276 billion and sovereign wealth funds $164 billion. Central bank reserves rose from $480 billion in 2024 to $530 billion in 2025, with gold holdings increasing significantly to about 17 percent of reserves, up from less than 10 percent in previous years.

Despite this growth, the report noted that most domestic capital remains concentrated in short-term, low-risk instruments such as government securities, reflecting weak project pipelines, regulatory constraints and limited risk-sharing mechanisms. This has created a persistent gap between available savings and long-term investment in infrastructure and industry.

President and Chief Executive of AFC, Samaila Zubairu, said the core issue facing the continent is now one of intermediation rather than capital availability. He noted that while savings exist at scale, the systems required to channel them into large, bankable projects remain underdeveloped. According to him, Africa’s next phase of growth will depend on moving away from isolated infrastructure projects toward integrated systems that connect energy, transport, industry and digital networks.

The report also highlighted a steady decline in external financing, reinforcing the need for a domestic capital-led development model. Official development assistance fell from $83.8 billion in 2020 to $73.5 billion in 2023 and is projected to decline further, while sovereign borrowing dropped sharply from over $29 billion in 2018 to between $4 billion and $6 billion annually in recent years. Foreign direct investment has remained relatively flat at $45 billion to $55 billion per year, far below the continent’s investment needs.

As a result, external funding is increasingly seen as complementary rather than central to Africa’s development strategy.

The report identified integrated, demand-driven infrastructure as the most effective avenue for deploying capital at scale. In transport, it noted that corridors deliver greater value when designed as production ecosystems linking ports, rail, roads and industrial hubs rather than serving as simple transit routes. In East Africa, for example, the Port of Mombasa handles more than 45 million tonnes of cargo annually, while expanding rail links are improving inland connectivity along key corridors.

In the energy sector, the report stressed the need for systems that combine generation, transmission, storage and industrial demand, rather than isolated capacity additions. Projects such as the Ethiopia–Kenya power interconnector were cited as examples of how regional integration can improve efficiency and reliability.

Recent global disruptions, including the Russia–Ukraine conflict and the 2026 Gulf crisis, have exposed the risks of fragmented supply chains. Africa continues to import more than 70 percent of its refined fuel and faces an estimated $230 billion annual import bill for essential goods such as fuel, food, fertiliser, steel and plastics.

The report pointed to industrialisation as a critical response to these vulnerabilities, citing the impact of large-scale projects such as the Dangote refinery developed by Aliko Dangote. It said such investments demonstrate how local processing can reduce exposure to global shocks, though it noted that scaling this model across the continent will require broader participation and coordinated policy support.

In digital infrastructure, the report said the next phase of growth lies in building foundational systems such as fibre networks, data centres and internet exchange points that can translate connectivity into productivity, services exports and job creation.

The AFC’s findings suggest that while Africa is no longer constrained by a lack of capital, significant structural and institutional barriers remain. Analysts say unlocking this capital will depend on stronger policy frameworks, deeper financial markets, improved project preparation and sustained political commitment to long-term development goals.

The report concluded that Africa’s opportunity lies in linking its financial resources with infrastructure, energy, industry and digital systems to create integrated ecosystems capable of supporting growth at scale, warning that without such coordination, much of the continent’s rising wealth will remain underutilized.