Africa’s infrastructure challenge is often framed as a shortage of money. But the deeper challenge may be how existing capital is being used.
Across the continent, pension funds, insurers, banks, development institutions and sovereign wealth funds control substantial pools of capital. The question is how much of that money can be channelled into the roads, electricity systems, ports, water networks and digital infrastructure that African economies need to become more productive.
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The Africa Finance Corporation’s State of Africa’s Infrastructure Report 2026 estimates Africa’s annual infrastructure financing gap at approximately $400 billion, while African financial institutions hold more than $4 trillion in assets. The African Development Bank separately estimates annual infrastructure financing needs of $130–170 billion, leaving a gap of $68–108 billion.
The figures differ because the institutions use different methodologies, but the message is consistent: infrastructure investment remains significantly below what Africa needs.
The opportunity, therefore, is not simply to find more foreign capital. It is to build credible mechanisms that allow more African savings to finance long-term African development.
Infrastructure requires patient capital. A transmission line, railway, port or water network takes years to build and decades to generate value. Yet many African financial institutions operate within short-term liquidity and risk constraints, making government securities more attractive than complex, long-duration projects.
This creates a structural mismatch. Capital exists, but the financial system does not always connect it efficiently to productive assets.
The FSD Africa Landscape Report estimates that African pension funds and collective investment schemes hold more than $600 billion, including approximately $390 billion in South Africa and $17 billion in Nigeria. Yet portfolios remain highly conservative.
Government bonds account for roughly 60–70% of pension assets in many markets, reaching about 90% in Ghana, 60% in Nigeria and 50% in Kenya. In many countries, less than 10% is allocated to productive sectors such as infrastructure, housing and SMEs.
This conservatism is understandable. Pension funds must protect retirement savings and meet future liabilities. Insurers must remain capable of paying claims. Banks face liquidity and capital requirements. Central banks manage reserves for monetary and external stability.
The answer is not to force these institutions into unsuitable investments.
It is to create infrastructure investments that are sufficiently transparent, well structured and risk-adjusted to fit their mandates.
One obstacle is the dominance of government borrowing. When governments rely heavily on domestic banks, they can absorb credit that might otherwise support businesses and infrastructure. Government bonds are generally easier to assess and trade than long-term project finance.
Currency risk adds another layer. Infrastructure projects often earn revenue in local currency while equipment and debt may be priced in dollars. Depreciation can therefore increase both construction costs and debt-service obligations. A model examining 500 MW solar portfolios in Kenya, Nigeria and Ghana found that local-currency financing could reduce the weighted average cost of capital by 3–6 percentage points and lower the levelised cost of electricity by 1.4–3.3 cents per kWh compared with dollar-only financing.
The issue is not that investors are unwilling to take risk.
It is that risk must be identifiable, measurable and manageable.
Investors assess political, regulatory, currency, construction, demand and payment risks. Treating all African markets as one category of “Africa risk” obscures important differences between countries, sectors and projects.
As JP Morgan’s Africa Public Sector Head put it: “There is an appetite for risk for Africa. The liquidity is there. Technological innovation is there.”
The greater constraint is often the supply of bankable projects.
Governments currently provide an estimated 80–85% of infrastructure financing directly, while the private sector contributes only around 5–10%. Changing that balance requires projects that have been properly prepared before they reach investors.
This is where credit enhancement becomes important.
Partial-risk guarantees can cover specific government obligations. Political-risk insurance can protect against events such as expropriation or restrictions on currency transfers. First-loss capital can absorb initial losses and make projects more attractive to other investors. Liquidity facilities can manage temporary payment delays, while currency-risk instruments can reduce exposure to exchange-rate movements. Project-preparation facilities can finance feasibility studies and other work needed to turn ideas into investable projects.
But guarantees are not free money. If governments guarantee every project without clear limits, risk has not disappeared; it has simply moved onto the public balance sheet. Guarantees must therefore be targeted, transparently priced and properly disclosed.
The same principle applies to public-private partnerships.
PPPs can bring private capital and expertise into infrastructure where there is a clear public purpose, realistic revenue model and appropriate allocation of risk. But they do not eliminate public costs. Where users cannot pay the full cost of a service, governments may still need to provide subsidies or availability payments.
The OECD notes that 36 African governments have established PPP units, but only seven revise project budget risks, five conduct post-project evaluations and none consult affected communities. The lesson is clear: successful PPPs begin with project selection, preparation and accountability—not simply the search for private partners.
Ultimately, Africa’s domestic capital should not be viewed as one enormous pool waiting to be deployed. It belongs to workers, savers, policyholders and public institutions, each carrying responsibilities that cannot be ignored.
The real task is to build the channels that connect those savings to productive infrastructure without compromising the interests of the people whose money is being invested.
That requires well-prepared projects, transparent procurement, sound public finances, predictable regulation and institutions that investors and citizens can trust.
Africa does not only need more capital.
It needs to make the capital it already has work harder.
When African savings can finance African infrastructure, the continent gains more than roads, power plants, ports and digital networks. It creates a pathway through which African citizens can participate in the long-term returns generated by Africa’s own development.
That is the opportunity: to turn domestic savings into productive assets, productive assets into stronger economies, and stronger economies into lasting prosperity.
