Africa’s economic potential is vast, yet to fully realize it, the continent is in dire need of investment. With a substantial annual infrastructure financing shortfall estimated at $100 billion and a climate finance gap projected to reach $213.4 billion by 2030, the requirement for capital is clear.
Additionally, achieving the UN Sustainable Development Goals by 2030 is expected to require $1.3 trillion each year — a figure that represents 42% of Africa’s GDP. These statistics unmistakably demonstrate that substantial capital is essential for driving transformation, development, and ultimately, economic growth across the continent.
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Nevertheless, despite these challenges, Africa’s resilience is impressive. Economic forecasts indicate that real GDP growth is expected to rise to 3.7% in 2024 and 4.3% in 2025, continuing to surpass global averages. This resilience offers fresh opportunities for investors and underscores the region’s potential for high returns, particularly as global investors seek out assets in emerging markets.
Africa’s insurance markets, which are valued at $87.4 billion in 2023 and anticipated to grow to $153.9 billion by 2032 according to the IMARC Group, create significant capital pools. However, these resources must be strategically directed toward tangible investments. So, how can we align the increasing demand for capital with the available investment assets?
The answer lies in the development and availability of investable assets.
Though Africa’s stock markets are relatively small, as the continent advances, we expect a rise in issuances from both corporations and governments, particularly within the debt markets. Moreover, as African governments pursue the privatization of state-owned enterprises, the equity market is poised for considerable listings and growth. Nevertheless, this increase in listed markets will not adequately manage the influx of both domestic and foreign capital.
A significant amount of Africa’s assets is found in non-traditional or private markets, presenting substantial opportunities for investors and asset owners to unlock access to these niches.
Unlocking assets through tokenisation
A critical opportunity to bridge this gap lies in the adoption of Distributed Ledger Technology (DLT) and tokenisation. Tokenisation refers to the creation of digital tokens on a blockchain platform that represent various asset types—financial (bonds, equities), tangible (real estate, commodities), or intangible (digital art, intellectual property). Digitizing these assets can introduce them to the market, offering liquidity and expanding access to both local and international investors.
Imagine the transformative potential of tokenized infrastructure investments in Africa—tradable, liquid assets capable of driving development. Whether in real estate, infrastructure, or commodities, tokenisation facilitates more efficient trading and settlement of these assets. Analysts project that by 2030, between $4 trillion and $5 trillion in tokenized digital securities could be issued globally, highlighting the vast opportunity in this sector.
The necessity for market harmonisation
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However, it is important to note that asset creation is only one aspect of the overall equation. For Africa’s capital markets to thrive, they must function in a clear and efficient manner. Currently, many African markets, particularly outside South Africa, are fragmented and operate under diverse technologies, regulations, and frameworks, increasing investment difficulty and costs. To be competitive globally, we must harmonize our markets, aligning regulations and infrastructure to build a cohesive, unified system.
The question we should ask is: why must we invest in separate technologies and infrastructures when collaboration is on the table? By centralizing our infrastructure and adopting top-tier systems, we can distribute costs, improve consistency, and ensure that African markets remain globally competitive.
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The future of Africa’s capital markets depends on collaboration, harmonization, and the adoption of innovative technologies that will facilitate the realization of our continent’s full potential.
Now is the perfect time for Africa to rethink its market-building strategies. We must come together, leverage our collective strengths, and seize the opportunities ahead. Africa’s growth narrative is just beginning, and with the right strategies in place, we can ensure it achieves its fullest potential.
Rajesh Ramsundhar is the group head of Investor Services, Transaction Banking, Corporate and Investment Banking at Standard Bank.
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