Trust deficit stalls Africa’s capital shift into infrastructure – AFC

Africa’s push to channel trillions of dollars in domestic capital into infrastructure and industrial development is being held back by a persistent trust deficit, despite growing urgency to fund the continent’s transformation from within, according to Africa Finance Corporation (AFC).

Speakers at a press conference during the just ended Africa We Build Summit in Nairobi, including Samaila Zubairu, president and CEO of AFC; Sameh Shenouda, executive director and chief investment officer; and Rita Babihuga-Nsanze, chief economist and director of Research and Strategy, said the challenge is no longer the absence of capital but the inability to mobilise it into productive sectors, as investors remain wary of risks tied to governance, transparency, and project execution.

“Capital doesn’t move because you ask it to,” Zubairu said. “It moves when risk is properly allocated and priced.”

That caution has left an estimated $4.4 trillion in African capital, spanning pension funds, insurance assets, and bank reserves, largely parked in short-term government securities rather than long-term infrastructure projects that could drive growth and job creation.

Of that total, about $600 billion sits in pension funds and $400 billion in insurance pools, both naturally suited for long-duration investments such as roads, power, and industrial assets. Yet, much of it remains tied to treasury bills and other low-risk instruments, effectively financing consumption rather than development.

The hesitation reflects deeper structural concerns. Investors are reluctant to commit funds to projects where regulatory uncertainty, weak data, and execution risks remain unresolved. Without credible frameworks that ensure transparency and predictable returns, capital continues to stay on the sidelines.

This trust gap is particularly significant given Africa’s vast economic potential. The continent holds nearly $30 trillion in mineral resources, with more than $8 trillion still undeveloped. However, poor data availability and limited geological mapping in some regions continue to deter large-scale investment.

Participants stressed that improving data quality, especially in sectors like mining, could play a critical role in de-risking projects. Better information reduces uncertainty, enabling investors to price risk more accurately.

Beyond data, regulatory reforms were highlighted as essential to rebuilding investor confidence. Many African markets still lack clear frameworks that encourage pension and insurance funds to allocate capital to infrastructure. Even where such policies exist, implementation has been slow, and investor appetite remains muted.

Another barrier is the fragmented nature of African markets. Infrastructure projects often require cross-border coordination, yet existing rules frequently restrict regional investment flows. This limits the ability to finance large-scale, integrated projects that connect resources, markets, and population centres.

“There has to be a more intentional policy push,” a participant noted, pointing to the need for governments and development institutions to actively guide capital into long-term assets.

Efforts are underway to address these challenges. The Africa Finance Corporation and its partners are working on a new financial architecture aimed at improving the flow of capital into productive sectors. This includes developing instruments that offer better risk-sharing mechanisms, such as guarantees and credit enhancements, to make infrastructure investments more attractive.

There is also a growing push to educate institutional investors. Many pension fund managers remain highly conservative, prioritising liquidity and capital preservation over returns, and often lack familiarity with infrastructure as an asset class. Changing this mindset is seen as critical to unlocking long-term funding.

Globally, pension funds play a central role in financing infrastructure, particularly in developed markets where they hold significant stakes in transport, energy, and utilities. Replicating this model in Africa will require both policy support and a shift in investment culture.

The urgency has been underscored by recent global shocks. Volatility in energy markets, driven by conflict in the Middle East, has exposed Africa’s vulnerability to external supply disruptions. Rising fuel costs, inflationary pressures, and trade bottlenecks have reinforced the need for domestic investment in refineries, fertiliser plants, and logistics infrastructure.

For policymakers and financiers, the lesson is clear: Africa cannot rely on external capital alone. But mobilising its own resources will depend on closing the trust gap that continues to hold investors back.

Until then, the continent’s vast pools of capital, and its equally vast development needs, will remain disconnected.