Africa’s Growth Outpaces Finance As Capital Markets Delay

The OECD’s Africa Capital Markets Report 2025 shows African companies raised about $220 billion in equity over 25 years, representing only 1% of global issuance and roughly 0.5% of the continent’s combined GDP.

The report concludes that the continent’s capital markets remain too shallow to support long term development, leaving economies dependent on banks and foreign borrowing.

OECD: “Capital markets in Africa are not yet playing their expected role as engines of growth and shock absorbers.”

DECISION HIGHLIGHT

Structural findings from the report:

• Equity issuance concentrated in a few countries
• Heavy reliance on bank financing
• High sovereign yields spilling into private borrowing costs
• Weak market depth constraining infrastructure and climate financing

DECISION MEMO

Africa’s development constraint is increasingly financial architecture rather than economic potential.

The data shows the continent produces growth but cannot fund it internally. Companies expand until they reach the limits of bank lending, then stall. Banks finance working capital, not transformation capital. Without deep equity and bond markets, scaling becomes episodic instead of continuous.

The consequence is structural. Governments borrow abroad because domestic markets lack capacity. Businesses borrow short term because long term funding is scarce. Both introduce fragility. External shocks translate directly into currency pressure, inflation and fiscal stress because domestic absorbers do not exist.

Market concentration worsens the issue. With most capital formation occurring in a few countries, the majority of African economies operate outside meaningful financial intermediation. The continent therefore behaves as separate financial islands rather than a unified capital pool.

The climate implication reveals the long term cost. Energy transition and infrastructure require patient capital measured in decades. Banking systems structured around short tenor deposits cannot supply it. Capital markets normally fill this role. In their absence, projects either shrink or depend on foreign funding.

The problem is not absence of investors but absence of investable pipelines and liquidity depth. Without tradable markets, capital cannot recycle efficiently. Each investment remains isolated rather than forming a self sustaining financing ecosystem.

DATA BOX

Equity raised: $220bn in 25 years
Share of global issuance: 1%
Share of Africa GDP: ~0.5%
Countries dominating issuance: South Africa, Egypt, Nigeria
Local currency bond real yield: ~5%
USD African bond yield: ~9%
High risk rated countries: about 80%

WHO WINS / WHO LOSES

Wins
Foreign lenders financing sovereign borrowing
Large corporates with access to international markets
Banks maintaining dominance in domestic financing

Loses
Small and medium enterprises seeking growth capital
Infrastructure developers needing long duration funding
Domestic investors lacking diversified instruments

POLICY SIGNALS

Financial sector reform shifting from regulation to market depth creation.
Regional capital market integration becoming economic priority.
Development strategy constrained by funding structure rather than policy ambition.

INVESTOR SIGNAL

Opportunity exists but liquidity risk remains high.
Returns elevated due to structural scarcity of capital.
Market entry depends on risk tolerance rather than opportunity availability.

RISK RADAR

1 Continued dependence on foreign currency borrowing
2 Interest rate spillover from sovereign to private sector
3 Capital flight during global tightening cycles
4 Infrastructure financing gap widening
5 Climate transition delays due to funding limitations

Africa’s challenge is no longer proving it can grow, but building financial systems capable of sustaining that growth.