(3 Minutes Read)
About 60% of investment funds dedicated to Africa are registered outside the continent. This figure comes from a study commissioned by the MasterCard Foundation in partnership with Mennonite Economic Development Associates (MEDA) and conducted by a team of international experts, including Momentus Global (formerly International Financial Consulting), Samawati Capital Partners, and Stafford Law.
Locations such as Luxembourg, Delaware, and Dublin are more commonly linked to tax havens and global financial centers than to Africa. These areas serve as bases for funds to support African SMEs and essential infrastructure on the continent. This scenario highlights Africa’s structural issues rather than being an isolated incident.
The main reason behind this issue is that Africa has not yet become indispensable to global investors. International investors prefer stable jurisdictions, reliable laws, and predictable courts. Luxembourg, the world’s second-largest fund hub with USD 5 trillion in assets under management, is an example of how clear regulations, expert legal frameworks, and favourable tax policies attract fund managers. Singapore, with nearly $5 trillion in assets, offers similar benefits. In contrast, many African countries struggle with slow bureaucracies, vague laws, and economic instability. This deters investment, especially in promising sectors like SMEs, which account for 80% of formal employment on the continent.
A 2024 report on fund domiciliation in Africa highlights a USD 940 billion funding gap for SMEs. This gap perpetuates a vicious cycle: limited funding leads to slow growth and reduced attractiveness for investors. Not all of Africa is absent from the global investment map.
Mauritius has secured a strong position as a financial hub, attracting nearly USD 20 billion in investments. Its success stems from clear regulations, investor-friendly tax policies, and an open-door strategy for international capital. South Africa also stands out, with pension funds playing an active role. The Asset Owners Forum of South Africa (AOFSA) has mobilized over USD 500 million for local projects. Despite political and economic challenges, the country benefits from a strong financial sector and skilled professionals.
Rwanda is pursuing a niche approach with its Kigali International Financial Centre (KIFC), focusing on sectors like technology and social impact. This bold strategy is beginning to show results, even for a small nation.
Many African countries, including Nigeria, the continent’s largest economy, are still struggling to attract funds. Nigeria holds public assets worth USD 43.6 billion but has yet to create an attractive investment environment. Côte d’Ivoire and Togo in West Africa are making efforts to position themselves as regional hubs, but progress has been slow. Despite these challenges, Africa has immense untapped potential. Pension funds across the continent manage hundreds of billions of dollars, often underutilised. Redirecting these resources toward SMEs, infrastructure, and innovation could drive economic growth.
Read Also:
https://trendsnafrica.com/gulf-sovereign-funds-to-promote-investment-in-africa/
African pension funds currently manage over USD 600 billion, with USD 500 billion in South Africa and USD 33 billion in Nigeria. By 2050, these assets could grow to USD 7.3 trillion. This massive resource, if used strategically, could reduce perceived risks for private investors and attract additional capital. Public development banks, with over USD 100 billion in total assets, also hold long-term resources that could be better utilized.
Mauritius, South Africa, and Rwanda have shown that progress is possible. However, as long as most African jurisdictions remain overshadowed by major international financial centers, the continent will continue to finance its marginalisation.
