Africa Capital Markets Report 2025

Executive summary

Developing a vibrant and well-functioning domestic capital market is a priority for many African economies. Stronger market-based financing could help mobilise resources for the real economy, spur innovation and competitiveness, and drive sustainable growth. Stronger capital markets could also help harness Africa’s dynamic demographics and improve financial inclusion. Several African countries, particularly middle-income economies with some level of capital market activity and supporting market infrastructure, have already implemented capital market development strategies, deepened regional financial integration, and aligned their frameworks with global standards. Nonetheless, progress remains uneven across the continent. Many markets continue to face significant challenges, including limited market infrastructure and liquidity, shallow investor bases and regulatory fragmentation. These constraints may limit their ability to close climate transition investment gaps and fully support sustainable economic growth.

While diverse in structure and maturity, African capital markets are overall less developed than those in other emerging market economies.

Over the past 25 years, a number of African countries have established stock exchanges, and companies have raised about USD 220 billion in equity capital. Yet, this represents only 1% of the total value of equity raised globally and 3% of that by emerging market companies, and is equivalent to only 0.5% of African GDP, a much lower share than in other regions. Moreover, capital market activity in Africa remains highly concentrated, with South Africa, Egypt and Nigeria together accounting for over 80% of total capital raised in the region. Trading activity is generally low and is concentrated in a few large companies, partly due to high trading costs. Policy efforts focusing on attracting more issuers, especially smaller and underrepresented companies, by reducing barriers, improving transparency, and creating flexible listing frameworks, could help deepen market activity and broaden domestic participation. Digitalising trading infrastructure and supporting regional capital market integration could expand the broker network, promote cross-border activity, and lower operational costs.

Many African countries have aligned their corporate governance frameworks with international standards, including by empowering regulators with broad oversight across all market segments and improving investor protection. However, implementation of frameworks is uneven, and concentrated ownership presents a particular challenge. Corporations own 24% of the listed equity in Africa, compared to 19% in emerging markets and 9% globally, a potential sign of weaker protection for minority shareholders. Improving investor confidence calls for stronger board independence and increased transparency, as well as better minority shareholder protection. The recent establishment of the African Principles on Corporate Governance and update of international corporate governance standards present an opportunity to upgrade corporate governance codes.

The limited use of bonds and syndicated loans in corporate financing underscores the region’s shallow domestic investor base.

Outstanding corporate debt in the form of bonds and syndicated loans remains low across African countries, both as a share of GDP and in absolute terms, compared to global averages. Moreover, it has declined gradually in recent years. Total outstanding corporate debt fell from approximately USD 230 billion in 2020 to around USD 180 billion in 2024, representing just 1% of global corporate debt and about 5% of that of emerging markets. Furthermore, four economies (South Africa, Egypt, Nigeria, and Mauritius) account for roughly 60% of the continent’s total. This underscores the strong concentration of corporate borrowing in a few more developed financial markets, as well as the broader link between corporate debt depth and economic and financial market development. Furthermore, African countries remain exposed to significant foreign currency risk, as a large part of both corporate and sovereign debt is denominated in foreign currencies, in contrast to most advanced economies. This reflects generally weak and fragmented regulatory frameworks and market infrastructure, a high reliance on foreign capital, and the underdevelopment of domestic institutional investors.

Broadening the investor base, including foreign investors, is essential, but excess foreign dependency could also lead to increased vulnerability arising from global uncertainty, monetary policy cycles, and financial instability. It is therefore equally important that African countries develop policy and regulatory frameworks that help to promote a strong domestic investor base, including pension funds and insurance companies. Expanding the pool of investors requires deepening regional integration, harmonising regulatory frameworks, and ensuring interoperability between market infrastructures. It also involves creating a more competitive environment that lowers transaction and operating costs while promoting digitalisation.

The climate transition in Africa faces a major financing gap, with the need to better leverage debt markets and private sector investment, particularly in the energy sector.

Achieving clean energy investment needs requires a substantial increase in capital expenditure. For example, meeting the announced 2026 pledges in Africa will require doubling current investment levels. This underscores the importance of the involvement of both private and public sectors to achieve climate goals aligned with announced pledges. Assuming recent trends in public and private climate investment persist, the continent is expected to face investment shortfalls until 2040.

Further integrating African capital markets would help mobilise funds for the climate transition by expanding investor bases, leveraging underutilised liquidity, and broadening investment options. Sustainable bonds, critical for financing this transition, could be a particularly useful instrument for energy companies. Initiatives like the African Exchange Linkage Project, connecting ten major exchanges covering 90% of the continent’s total market capitalisation, could be expanded to broaden market integration.

State-owned enterprises, amongst Africa’s largest companies, often lack robust corporate governance frameworks, limiting their participation in capital markets.

Forty-four of the largest 100 companies in Africa by turnover are state-owned, and many operate in strategic sectors such as mining, energy and telecommunications. However, the legal frameworks governing these enterprises often lack comprehensive ownership rationales and objectives, while governance arrangements can be inconsistent and subject to political discretion. This has frequently resulted in poor financial performance, limited transparency and weak accountability. Establishing clear state ownership and ensuring the separation of ownership, regulatory and policymaking responsibilities are essential to address these challenges.

In recent years, several countries have made progress by introducing institutional and legal reforms, and outlining performance expectations and governance responsibilities. African governments could further strengthen state-owned enterprise (SOE) performance and market impact by enhancing the availability and transparency of SOE data, including aggregated performance reports, modernising legal frameworks to reinforce accountability, and disclosing clear ownership policies. Integrating SOE governance reforms within broader capital market development strategies could help unlock critical financing, attract investors, and catalyse private sector growth.

Nurturing local currency sovereign debt markets would improve debt sustainability and support private sector participation.

Despite the significant growth in sovereign bonds in the region over the past two decades, Africa accounts for only 1% of global sovereign bonds, lower than its 3% share of global GDP. Since 2022, rising borrowing costs, weaker foreign demand, and reduced access to official financing have increased reliance on costly market-based debt. Combined with large refinancing needs, these pressures are straining fiscal capacity in many African countries. Around 80% of rated African countries are classified as high risk or lower, with average real yields of 5% for local currency bonds, and nominal yields of 9% for USD-denominated bonds. These high yields also influence corporate bond pricing, raising the cost of capital across the region.

To develop a deeper local bond market, mitigating financial vulnerabilities, developing long-term borrowing strategies, and improving coordination across fiscal, monetary and regulatory policies are essential. Prudent debt management and a gradual shift toward greater reliance on local currency-denominated bonds are also critical. Measures to enhance liquidity, reduce costs, and diversify the investor base could be considered. These include building liquid benchmark bond lines and exploring retail debt programmes for investors, as well as strengthening market foundations in coordination with central banks and other key market participants.

Nascent pension funds and insurance companies limit the investor base.

Unlike in many advanced economies, insurance companies and pension funds play a limited role as institutional investors in most African countries. The limited size of their assets and their considerable allocation to government securities prevent them from contributing as stable providers of long-term capital. For pension funds, low incomes and high levels of informal employment present additional constraints.

Strong, transparent and clear regulatory and supervisory frameworks are needed to strengthen the role of institutional investors. Depending on the context, potential measures could include enhancing the protection of policyholders' interests in the insurance market, increasing pension participation through mandates or the implementation of automatic pension enrolment, supporting portfolio diversification, and facilitating long-term investments. Some countries in the region have succeeded in expanding asset-backed pension participation and growing pension assets considerably, with scope for the exchange of good practices and experiences in the region.

Unlocking AI’s full potential for financial inclusion and market development requires reducing barriers.

While Africa lags behind other regions in formal banking access, it is among the highest users of digital and mobile finance globally. Digital financial services powered by advances in computing technologies have expanded access to financial services for underserved populations through innovations such as mobile money platforms, digital lending applications, and technology-based remittance solutions. Through tailored, data-driven and cost-effective solutions, AI could further promote financial inclusion and participation in capital markets by, for example, using alternative data to assess creditworthiness and support access to basic financial services for citizens with sparse financial records and other underserved groups. AI innovation could also support capital market development by enhancing operational efficiency and enabling proactive supervision through AI-based supervisory technology tools.

However, Africa faces barriers to fully leverage the transformative potential of AI. These include infrastructure constraints, high implementation costs, shortages of skilled professionals, inadequate data quality and availability, cyber risks, and gaps in financial literacy. Further investment in AI-enabling infrastructure, research and development, and human capital, supported by robust regulation that balances innovation with consumer protection and market stability, is needed. At the same time, AI models must be trained on locally sourced, representative data to reflect the continent’s linguistic, cultural, and socio-economic diversity.