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The Africa Finance Corporation (AFC) has called on African governments to tap into an estimated US$4 trillion in domestic capital held by pension funds, sovereign wealth funds, and banks to finance critical infrastructure projects on the continent.
The AFC noted that traditional external funding sources such as foreign direct investment and development assistance were increasingly constrained, placing greater pressure on national budgets and the need for alternative financing solutions.
“Global challenges, including higher interest rates, shrinking donor budgets, and protectionist policies, exacerbate funding shortages, while rising debt servicing costs strain national finances,” the AFC said in a statement on Friday.
The corporation urged governments to implement reforms that would make domestic capital more accessible for long-term infrastructure projects such as railways, roads, and power generation.
Key recommendations include formalizing untaxed and unregulated sectors of the economy, easing restrictions on pension fund investment allocations for infrastructure, and raising national savings rates — which currently trail those of leading Asian economies.
According to the African Development, Africa’s annual financing gap at over US$400 billion, nearly 14 percent of the continent’s projected GDP by 2030.
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