Africa’s pension and insurance funds hold hundreds of billions of dollars in assets, yet much of that capital remains invested in government securities rather than businesses and infrastructure projects.

The issue came into focus at the inaugural Africa Capital Week, held in Nairobi from 7 to 11 September under the themeDeepening Capital Markets to Advance Africa’s Economic Sovereignty.

The forum brought together more than 500 delegates from over 20 African countries, including policymakers, security exchange officials, institutional investors, development finance institutions, and other capital market players.

Currently, the Organisation for Economic Co-operation and Development (OECD) estimates that African pension funds and insurance companies held about $775 billion in assets, based on an Africa Finance Corporation estimate. Of this amount, pension funds accounted for about $455 billion and insurance companies $320 billion.

A newer estimate from the Africa Finance Corporation’s 2026 State of Africa’s Infrastructure Report puts pension and insurance assets at more than $1 trillion, indicating that the pool of domestic institutional capital has continued to expand.

However, the big question discussed by participants at Africa Capital Week was what is preventing more of that capital from finding its way into companies and infrastructure projects.

The OECD, in its 2025 Africa Capital Markets Report, noted that African pension funds allocated huge investments in government securities, limiting their role in capital market development.

“On average, pension funds allocated 44.4% of their investments to bills and bonds at the end of 2023, 26.9% to equities, 11.3% to cash and deposits and 15.9% to other assets,” the report notes.

It also found that pension funds in several African countries had allocations to bills and bonds above the regional average, with government securities making up a large part of those holdings.

“In Ghana, Nigeria, Uganda, Mozambique, Egypt, Angola and Kenya, the share of bills and bonds in pension funds’ portfolios was higher than the regional average. By contrast, in Botswana, Lesotho, Malawi, Mauritius, Morocco, Namibia and Zambia, the share of equities was higher than the average,” it continues.

In Uganda and Nigeria, government securities accounted for more than 79 per cent and 64.9 per cent of pension fund assets, respectively, in 2023, according to OECD data, compared with 47.5 per cent in Kenya.

However, this concentration is not necessarily a simple choice between government debt and private investment. Pension trustees have to consider the risk attached to an investment, the expected return, how easily the asset can be sold, the quality of its governance and whether it can be valued reliably.

Government securities generally offer established markets and more transparent pricing. In contrast, private infrastructure projects or corporate bonds can demand greater information, due diligence and structuring, while secondary markets for reselling these investments tend to be less liquid.

As a result, whether enough suitable investment opportunities actually exist becomes a key part of the conversation.

According to the OECD, African corporate debt markets remain small, with outstanding corporate debt below 15 per cent of GDP in almost all regional markets. The organisation also notes that pension funds tend to favour sovereign bonds over corporate bonds in their domestic allocations.

Against this background, Pierre Celestin Rwabukumba, Chief Executive of the Rwanda Stock Exchange and President of the African Securities Exchanges Association, said the development of capital markets would require more companies and projects that institutional investors can consider.

“We can’t deepen African capital markets without enough investable projects,” he said at the forum. “Our exchanges need more companies, more corporate bonds, more infrastructure instruments, more green and sustainability-linked products, and more opportunities for institutional investors.”

That leaves an important distinction in the debate. Pension funds may have the capital and, in some markets, the regulatory room to invest in alternative assets, but the investment opportunities still have to meet the requirements of the institutions responsible for workers’ savings.

Regulation is another part of the equation.

According to Nema Ramkhelawan-Bhana, a senior client executive for Global Markets International at RMB, Africa’s retirement industry suffers from what she calls a pension-sovereign nexus.

She notes that as governments borrow more money, retirement funds end up heavily tied to the state because other options are limited.

“As fiscal deficits widen across sub-Saharan Africa, the sheer scale of pension liquidity creates a perilous pension-sovereign nexus. Because corporate bond markets remain shallow and private-sector credit is constrained, pension trustees routinely default to buying government debt,” Nema wrote in an analytical piece published on South African news platform IOL.

Examining how strict financial rules can affect investment choices, she noted that when local stock and bond markets are small or inactive, international accounting standards can make asset values swing up and down in an unnatural way.

“IFRS-mandated fair-value accounting conceptually makes sense, but it introduces artificial balance-sheet volatility in markets where secondary trading is episodic and illiquid. International banking rules like Basel III indirectly choke pension efficiency.”

These factors do not prevent investment outside government securities, but they form part of the regulatory and practical considerations pension trustees face when assessing less-established investments.

But while businesses are looking for long-term capital, governments across Africa also need financing for their budgets and development programmes.

Kenya is a good example of the scale in question.

The country’s total public and publicly guaranteed debt stood at KSh12.844 trillion at the end of February 2026, equivalent to 69.5 per cent of GDP, according to the National Treasury.

The government also spent KSh1.72 trillion servicing its domestic and external debt in the 2024/25 financial year, according to the Public Debt Management Office. The figure included principal repayments and interest.

Treasury figures put the country’s ordinary revenue at about KSh2.42 trillion in the same period, meaning total debt service was equivalent to about 71 per cent of that revenue.

Kenya also issued a $2.25 billion dual-tranche Eurobond in February 2026, with the transaction forming part of the government’s management of its external financing and refinancing needs.

Ordinarily, when governments face expensive or constrained access to external borrowing, domestic markets provide another source of financing.

That includes the pension funds, insurance companies and banks that invest in Treasury securities.

For governments, borrowing in domestic currency can also reduce exposure to movements in foreign exchange rates that affect foreign-currency debt.

In a separate analysis, Nema switched focus to South Africa to show how a big local retirement industry can help when foreign investors pull their money out. Because South Africa has such a large amount of pension money, local investors are often able to step in and keep money moving when outside investors leave. This situation leads to an important question for retirement funds.

Ordinarily, when retirement funds buy a lot of government debt, their investments become tied closely to how well the government’s finances are doing.

That does not mean government bonds are a bad choice for retirement funds, as they remain a key part of many portfolios. The real issue, however, is figuring out how much exposure makes sense and what other types of investments can be built so pension funds have more ways to spread out their risk.

The contrast becomes more visible when the discussion moves from government borrowing to businesses.

Kenya’s micro, small and medium enterprises (MSMEs) account for a large share of the country’s businesses and remain an important source of employment, holding about a 98 per cent share of businesses.

The World Bank has separately estimated Kenya’s MSME financing gap at about KSh2.2 trillion. Its assessment found that supply-chain finance alone could potentially address up to 54 per cent of that gap.

More recently, the International Finance Corporation estimated that the financing gap facing Kenyan MSMEs was equivalent to nearly 21 per cent of GDP. It said MSMEs account for approximately 90 per cent of businesses and employ more than 15 million people.

From this perspective, access to finance remains a challenge for small businesses in the country and perhaps the continent at large.

On the other side of the continent, Nigeria is another illustration of the difference between the investment space available to pension funds and what they actually commit.

Under the country’s pension regulations, pension funds have been permitted to invest up to 15 per cent of their assets in infrastructure funds.

But figures from the National Pension Commission (PenCom) reported in October 2024 showed that only ₦172.5 billion, or about 0.82 per cent of total pension assets of ₦21.1 trillion at the time, was invested in infrastructure funds. The report attributed the low allocation in part to the limited availability of eligible instruments.

Nigeria’s pension assets have since grown. By 2026, the country’s pension industry had surpassed ₦30 trillion in assets, according to industry reporting. A closer look at its capital market paints a clearer picture.

The Nigerian Exchange’s total market capitalisation reached ₦160.42 trillion in August 2026 after the benchmark All-Share Index rose to a record level. The exchange said the rally was driven by gains in selected heavyweight stocks, while more stocks declined than gained during that session.

Dr Emomotimi Agama, Director General of Nigeria’s Securities and Exchange Commission, cautioned during Africa Capital Week that liquidity and public understanding remained important issues for the market.

“The biggest challenge is around liquidity. More importantly, there is a need for more education. Educating the public to learn the value of the capital markets is a principal thing to do,” he told Open African Tribune on the sidelines of the forum.

Across the continent, regulators and governments are experimenting with different ways of encouraging pension funds to invest in private assets and infrastructure, such as Ghana.

A 2025 report by the African Private Capital Association found that Ghana’s pension regulations allow up to 25 per cent of pension assets to be invested in alternative assets. Yet actual exposure to private capital remained much lower, with private capital accounting for only 0.5 per cent of assets under management in 2024.

The report said the permitted 25 per cent allocation, if fully used, could unlock more than $1 billion for private capital investment.

South Africa, on the other hand, has taken a different approach by allowing pension funds and other institutional investors to have foreign exposure of up to 45 per cent of retail assets under the country’s foreign-exchange rules.

That gives South African retirement funds greater scope to diversify beyond the domestic market. Continental development finance institutions are also looking at ways of connecting domestic savings with long-term investment.

Dr Heike Harmgart, Managing Director for Sub-Saharan Africa at the European Bank for Reconstruction and Development, told delegates at the Capital Week that domestic savings and local-currency capital could play a greater role in financing long-term investments.

“We really believe that channelling private capital and domestic savings into long-term investments is core, and local currencies are core,” she said.

“That’s why local domestic currencies and local capital markets are the best conduits to channel this into the market.”

One possible role for development finance institutions is to participate in projects alongside private and institutional investors, helping to structure investments and, where appropriate, reduce some of the risks associated with projects that are still developing.

Pooled investment vehicles can also allow pension funds to gain exposure to several projects rather than putting a large amount of capital into one project.

Currently, Kenya is developing a mechanism intended to mobilise long-term domestic and private capital through the National Infrastructure Fund.

The Cabinet approved the KSh5 trillion fund in December 2025, while the National Assembly passed the National Infrastructure Fund Bill in 2026. Government documents say the fund is intended to mobilise resources through domestic savings and monetisation of mature public assets and capital markets, to reduce reliance on borrowing and attract private investment.

Speaking at the forum, the fund’s founding Chief Executive, Dr James Mworia, supported the idea of listing an infrastructure development fund on the Nairobi Securities Exchange.

“For example, we can take them and multiply them for infrastructure. What that does is that investors can now come into a liquid instrument to address your asset-liability mismatch and I can buy and sell,” he said.

Looking further at Africa, it is difficult to speak of homegrown and locally funded projects without mentioning the Dangote Refinery in Nigeria.

The project brought together private capital and financing from commercial and development institutions, a sharp departure from conventional financing via sovereign borrowing.

The African Development Bank puts the cost of the refinery and petrochemical project at $19.5 billion, having approved a $300 million loan in 2014 to support its construction alongside a fertiliser plant.

Drawing on this, Kenya’s Principal Secretary for Economic Planning, Dr Bonface Makokha, noted the practical challenge of matching development goals with actual investment opportunities.

“A development priority is not automatically an investible asset,” he told delegates at the Capital Week. “We must convert our plans into credible projects, our projects into bankable assets, and our investments into measurable improvements in productivity, employment and household welfare. Government cannot finance everything. But government can make much more of Africa financeable,” he added.

The Nairobi Declaration emerging from the forum called for greater regulatory cooperation, deeper integration of African securities exchanges, an Africa Bankable Projects Pipeline and greater mobilisation of institutional capital for infrastructure.