Africa’s economic potential is vast, but to harness it fully, the continent is in urgent need of investment. With an annual infrastructure funding gap of approximately $100 billion and a projected climate finance shortfall of $213.4 billion by 2030, the demand for capital is clear.

Additionally, to achieve the UN Sustainable Development Goals by 2030, an estimated $1.3 trillion annually will be necessary — accounting for 42% of Africa’s GDP. These figures highlight the critical capital requirements needed to drive transformation, development, and ultimately, economic growth on the continent.

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Nevertheless, despite these challenges, Africa’s resilience is commendable. Economic projections indicate that real GDP growth is expected to rise to 3.7% in 2024 and 4.3% in 2025, continuing to outpace global averages. This resilience offers new prospects for investors and underscores the region’s potential for high returns, particularly as global investors seek assets in emerging markets.

While Africa’s insurance markets, valued at $87.4 billion in 2023 and anticipated to reach $153.9 billion by 2032 according to the IMARC Group, create significant pools of capital, these resources must be channeled into tangible investments. The question is: how can we align the growing demand for capital with the investment-ready assets available?

The answer lies in the generation and accessibility of investable assets.

Africa’s stock markets may still be relatively small, but as the continent progresses, we expect greater issuances from both corporations and governments, especially in the debt markets. Furthermore, as African governments pursue the privatization of state-owned enterprises, the equity market is likely to see significant listings and corresponding growth. However, this expansion in listed markets alone will not suffice to absorb the influx of both domestic and foreign capital.

A large portion of Africa’s assets resides in non-traditional or private markets, which presents substantial opportunities for both investors and asset owners to gain access to these markets.

Unlocking assets through tokenization

A key opportunity to bridge this gap is through the adoption of Distributed Ledger Technology (DLT) and tokenization. Tokenization means creating 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, enhancing liquidity and broadening access for local and international investors.

Imagine the transformative potential of tokenized infrastructure investments in Africa—tradeable, liquid assets that can drive development. Whether in real estate, infrastructure, or commodities, tokenization facilitates the efficient trading and settlement of these assets. Analysts predict that by 2030, between $4 trillion and $5 trillion worth of tokenized digital securities could be issued globally, highlighting the significant opportunities within this market.

The need for market harmonization

However, it’s essential to recognize that asset creation is just one aspect of the overall strategy. For Africa’s capital markets to thrive, they must function in a transparent and efficient manner. Currently, many African markets, particularly those outside South Africa, are fragmented and operate under different technologies, regulations, and frameworks, which complicates and raises the cost of investing. To compete globally, we must harmonize our markets, aligning regulations and infrastructure to create a cohesive and unified system.

The pertinent question is: why should we all invest in separate technologies and infrastructures when collaboration is feasible? By consolidating our infrastructure and implementing top-notch systems, we can share costs, improve consistency, and ensure that African markets remain competitive on a global scale.

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The future of Africa’s capital markets relies on collaboration, harmonization, and the embrace of new technologies that will enable the realization of our continent’s full potential.

The timing is ideal for Africa to reevaluate its market-building strategies. We must come together, harness our collective strengths, and seize the opportunities that lie ahead. Africa’s growth narrative is merely beginning, and with the right strategies in place, we can ensure it realizes its full potential.

Rajesh Ramsundhar is group head of Investor Services, Transaction Banking, Corporate and Investment Banking at Standard Bank.

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