Africa can fund infrastructure with $4 trillion of own assets: AFC

Africa must shift away from a dependency on foreign infrastructure financing and begin to unlock the potential of its own substantial financial resources, according to the Africa Finance Corporation.

The organisation’s State of Africa’s Infrastructure Report 2025 argues that Africa is not lacking in capital – it points to over $4 trillion in domestic resources, including commercial bank assets, pension funds, remittances, and sovereign wealth –  but is failing to fully leverage what it already possesses.

“Financing this infrastructure transformation must begin with African capital. The future of African infrastructure depends on African finance,” writes AFC CEO Samaila Zubairu.

“That means building deeper financial markets, strengthening development finance institutions, and unlocking long-term domestic capital. Pension funds, insurance pools, sovereign wealth funds, and diaspora remittances represent stable, patient sources of finance that remain largely untapped.”

The report says that of the estimated $4 trillion in domestic resources, $1.6 trillion can be found in the non-bank sector: $455bn in pensions, $320bn in insurance, $250bn in public development banks, $150bn in sovereign wealth funds, and $473bn in foreign reserves, including $38bn in gold holdings.

Unlocking pensions capital

AFC says that pension funds and insurance companies are heavily concentrated in short-term government initiatives, eschewing long-term infrastructure sectors such as transport, energy, and digital connectivity, the report finds. South Africa alone accounts for 70% of the continent’s pension assets, with resources heavily underutilised elsewhere.  

“Too much of Africa’s wealth is invested in low-risk, short-term instruments rather than channelled into productive sectors. Overcoming this requires stronger financial institutions, deeper capital markets, and a broader mix of investment vehicles that can mobilise long-term savings into infrastructure, industry, and innovation,” Zubairu writes.

Despite growing liquidity, many African financial institutions fail to deploy capital into strategic sectors, limiting the effectiveness of domestic savings. The report asserts that crucial reforms to pension capital include “the expansion of eligible asset classes, the revision of statutory investment limits to reduce overconcentration in government securities, and the raising of ceilings for private sector and alternative investments”.

Banking system disjointed

The report argues that the continent’s banking systems remain disjointed and poorly integrated, limiting cross-border investment flows.

Policymakers are urged to incentivise long-term lending and raise minimum capital thresholds, while Africa’s diverse financial system should work to “co-invest and co-lend alongside banks, absorbing early-stage risks and attracting additional private capital into infrastructure, energy, and manufacturing”, the report says.  

Informality across the 54 countries intensifies this inertia. In many African economies, over 90% of employment and 40% of GDP lie outside formal channels, placing large quantities of income beyond the reach of taxation, pensions, or insurance.

While 56% of Africans report saving, only 16% do so through formal financial institutions – an indication of deep-seated wariness and systemic exclusion. To address the disconnect between informal financial activity and formal investment channels as well as encourage small businesses to contribute to the formal economy, the continent must adopt labour market formalisation strategies and financial inclusion initiatives, the AFC says. 

Demographics present both a challenge and a fleeting opportunity. With the fastest-growing working-age population globally, Africa faces a narrow window to harness pensions and insurance while the workforce remains young. Investment in education, digital skills, and entrepreneurship will empower young Africans to drive economic transformation, the report says.

Call for energy infrastructure

The AFC says the energy sector is particularly in need of capital for infrastructure. Per capita electricity consumption is in decline, despite rising GDP and population growth. Since 2022, Sub-Saharan Africa has accounted for over 83% of the global population lacking access to electricity. The report positions energy as a fundamental element of economic modernity: without reliable and affordable power, structural transformation cannot materialise.

“Energy infrastructure must be designed not only to expand household access, but to drive industrial activity, power a future digital and data economy, and lift overall economic productivity. In short, Africa’s energy systems must evolve beyond meeting basic consumption needs—they must become engines of structural transformation, enabling the growth of manufacturing, minerals processing, data centers, and other energy-intensive sectors that anchor competitive economies,” Zubairu says. 

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}