By Benadeta Mwaura - Reporter
Kenya, April 23, 2026 - Africa is sitting on a growing pool of capital, yet the continent continues to struggle to finance the very infrastructure needed to unlock its economic potential.
A new report by the Africa Finance Corporation lays bare this contradiction, showing that despite a surge in domestic capital, large-scale infrastructure projects across the continent remain critically underfunded.
The findings point to a deeper structural problem: capital exists, but it is not flowing where it is most needed.
According to the report, Africa’s institutional capital, including pension funds, banks, and sovereign-backed entities, has now exceeded $2 trillion, representing a sharp increase in recent years driven in part by stronger commodity revenues and expanding financial systems. Yet this growth has not translated into meaningful investment in infrastructure.
“The continent is not short of capital,” the report states. “What is missing is the effective mobilisation and deployment of this capital into productive, long-term assets such as infrastructure.”
This disconnect is at the heart of Africa’s development challenge. Infrastructure remains one of the most significant constraints on growth, affecting everything from energy access and industrialisation to trade efficiency and job creation.
Despite this, much of the available capital continues to be channelled into low-risk, short-term instruments rather than long-term development projects.
The report notes that institutional investors across the continent have shown a strong preference for government securities and other liquid assets, largely due to their predictability and lower risk profile. While this strategy protects capital, it does little to address the continent’s infrastructure deficit.
“Institutional capital is largely allocated to low-risk assets, including government bonds, rather than to infrastructure, where it could have a transformative impact,” the report observes.
This trend has created a widening gap between financial capacity and economic need. On one hand, Africa’s financial systems are deepening, with more capital being accumulated domestically. On the other, the physical infrastructure required to support growth remains underdeveloped.
The consequences are visible across the continent. Energy shortages continue to affect hundreds of millions of people, transport networks remain inefficient, and the cost of moving goods across borders is significantly higher than in other regions. These challenges not only slow economic activity but also reduce Africa’s competitiveness in global markets.
The report warns that the situation is becoming more urgent as external financing conditions tighten. With global interest rates remaining elevated and geopolitical tensions affecting capital flows, African countries can no longer rely as heavily on foreign funding to bridge their infrastructure gaps.
“As global capital becomes more constrained, the need to mobilise domestic resources for infrastructure development has become more critical than ever,” the report states.
This shift places greater responsibility on African governments and financial institutions to rethink how local capital is deployed. However, the barriers to doing so are not insignificant.
One of the key challenges highlighted in the report is the lack of bankable projects. Many infrastructure initiatives fail to attract investment not because of insufficient capital, but because they are not structured in a way that meets investor requirements in terms of risk, returns, and governance.
At the same time, regulatory frameworks in several countries continue to limit the ability of institutional investors to allocate funds to long-term infrastructure projects.
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In many cases, rules are designed to prioritise liquidity and capital preservation, inadvertently discouraging investment in sectors that require patient capital.
“There is a need to align regulatory frameworks with development objectives, ensuring that institutional investors are able to participate in infrastructure financing without compromising financial stability,” the report notes.
Risk perception also plays a significant role. Infrastructure projects often involve long timelines, complex contractual arrangements, and exposure to political and economic uncertainties. Without adequate risk mitigation mechanisms, many investors remain reluctant to commit funds at scale.
The report emphasises that addressing these challenges will require coordinated action across multiple fronts, including policy reform, financial innovation, and improved project preparation.
“The solution lies not only in increasing capital, but in creating the conditions necessary for that capital to be deployed effectively,” it states.
These findings were presented at a high-level infrastructure forum that brought together policymakers, financiers, and development experts to explore ways of unlocking Africa’s domestic capital for growth. The discussions underscored a growing consensus that the continent’s future development will depend less on external funding and more on how effectively it uses its own resources.
The stakes are high. Without significant investment in infrastructure, Africa risks falling short of its economic potential, particularly at a time when its population is rapidly expanding and the demand for jobs, energy, and connectivity is rising.
At the same time, the opportunity is equally significant. If even a fraction of the continent’s $2 trillion capital pool were redirected into infrastructure, the impact could be transformative, accelerating industrialisation, boosting trade, and improving living standards across the region.
But for that to happen, the gap between capital and deployment must be closed.
The report makes it clear that Africa’s challenge is no longer about scarcity. It is about strategy.
“Mobilising domestic capital at scale will be critical to bridging Africa’s infrastructure gap and achieving sustainable economic growth,” it concludes.
Until that shift happens, the continent will continue to face a paradox that defines its current moment: vast financial resources on one side, and unmet development needs on the other.