In a bold bid to counteract the evolving global funding landscape and reenergize local development, the Africa Finance Corporation (AFC) is set to tap into a largely underutilized resource: Africa’s own pension funds. Spearheaded by CEO Samaila Zubairu, the institution is accelerating initiatives to mobilize domestic capital—potentially unlocking between $15 to $20 billion over the coming years—to fund critical infrastructure and industrial projects across the continent. This ambitious strategy comes at a time when geopolitical shifts and changing aid policies from traditional donors in the United States and Europe are forcing African nations to rethink their financing models.

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Shifting Global Dynamics and the Imperative for Domestic Capital

Recent geopolitical developments have increasingly underscored the fragility of relying on external funding sources. With the United States pivoting toward an “America First” agenda that has seen significant reductions in foreign aid, and European countries increasingly reallocating their budgets toward defence spending, African nations are grappling with a funding gap that threatens the sustainability of vital development projects.

Samaila Zubairu, the chief executive of the AFC—a development finance institution owned by Nigeria’s central bank and other African financial institutions—emphasized the need for Africa to rely more on its own resources. “The only thing we want … to change, is to get domestic capital more available for investment within the continent,” he remarked in a recent interview. This renewed focus on mobilizing domestic capital is seen not only as a response to the tightening of traditional aid flows but also as a strategic move to empower local economies and stimulate sustainable growth.

Historically, Africa’s low savings rates and shallow capital markets have impeded efforts to harness local funds for large-scale investments. However, with a burgeoning middle class and a growing awareness of the potential benefits of local investments, there is an increasing drive to encourage pension funds and institutional investors to play a more active role in financing the continent’s future.

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Pioneering Pilot Projects: InfraCredit and Beyond

A flagship initiative in this drive to unlock domestic capital is the AFC’s pilot project, InfraCredit. Launched to support pension fund investments in critical infrastructure, InfraCredit has already made significant strides. The project, bolstered by guarantees on local currency debt from oil-rich Nigeria’s sovereign wealth fund, has mobilized approximately 230 billion naira (around $152 million). Notably, investments have come from 21 pension funds that historically limited their exposure to government debt.

Zubairu is optimistic about replicating the InfraCredit model in other African markets. Plans are already underway to launch similar initiatives in Botswana, Angola, and Kenya as early as this year. “This is the kind of program that we think needs to be replicated at scale,” he explained. By leveraging the successes of pilot projects, the AFC intends to create a ripple effect that can transform domestic capital markets across the continent.

Additional programs, such as the Infrastructure Climate Resilience Fund, have also demonstrated the potential of combining local investment with international partnerships. The European Investment Bank’s $52 million commitment to this fund is a clear signal that global investors are willing to collaborate on projects that promise both financial returns and social impact.

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Unlocking the Potential of Pension Funds

Pension funds represent one of Africa’s most promising untapped resources. With a combined pool of savings that has the potential to reach tens of billions of dollars, these funds could be a game-changer for the continent’s infrastructure development. Yet, despite this potential, pension funds have traditionally been constrained by a limited range of investment options—primarily government bonds with modest returns.

The AFC’s strategy seeks to diversify the investment portfolios of these funds, channeling a portion of their assets into high-impact projects that offer both attractive yields and the promise of long-term growth. By doing so, not only will the pension funds earn better returns for their beneficiaries, but they will also drive economic development in sectors that have historically been underfunded.

For example, the ARISE Integrated Industrial Platforms project is one of the initiatives designed to attract pension fund investments. This project aims to finance and design industrial ventures that can boost manufacturing and create jobs, thereby addressing both the supply side of industrial capacity and the broader socioeconomic challenges of unemployment and underemployment in Africa.

Furthermore, by promoting a diversified portfolio that includes infrastructure, industrial projects, and climate resilience initiatives, pension funds can help to reduce the overall risk associated with domestic investments. This risk mitigation is crucial in an environment where external shocks—such as global financial turbulence or abrupt policy changes in donor countries—can have outsized impacts.

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Geopolitical Context and the Rebalancing of Global Aid

The push to mobilize domestic capital is taking place against a backdrop of significant geopolitical shifts. U.S. foreign policy under the “America First” agenda has led to a marked reduction in aid to Africa, prompting concerns that billions of dollars in funding for development projects could be lost. Similarly, European nations, facing their own economic and security challenges, are redirecting aid budgets toward defence spending.

This retreat from traditional aid sources is forcing African institutions like the AFC to explore alternative funding mechanisms. By turning to domestic pension funds and other local sources of capital, Africa is taking a proactive stance, positioning itself to weather the uncertainties of an evolving global order. The move is not merely reactive—it is a strategic realignment that seeks to harness the continent’s own resources for sustainable development.

The implications of this shift are profound. In the long term, relying on domestic capital can help to build more resilient economies that are less vulnerable to external shocks. Moreover, by fostering a culture of local investment, African countries can stimulate the growth of their capital markets, improve financial literacy among citizens, and ultimately create a more robust economic foundation for future development.

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Regional Impact: Transforming Infrastructure and Industrial Development

The benefits of mobilizing domestic capital extend far beyond the financial sector. Strategic investments from pension funds can drive transformative change in critical areas such as infrastructure, industrial development, and climate resilience.

Infrastructure Investment

Across Africa, inadequate infrastructure remains a significant barrier to economic growth. Many countries face challenges related to transportation, energy, and communication networks—problems that hinder trade, limit market access, and constrain industrial expansion. By channeling pension fund investments into infrastructure projects, the AFC aims to bridge these gaps. The InfraCredit pilot project, for instance, is a clear demonstration of how domestic capital can be leveraged to fund large-scale projects that improve connectivity and stimulate economic activity.

Industrial Growth

Industrialization is a key driver of economic development, yet many African nations struggle to transition from resource-based economies to diversified, value-added industrial sectors. The ARISE Integrated Industrial Platforms project is a prime example of how targeted investments can spur industrial growth. By financing projects that build manufacturing capacity and create jobs, pension funds can contribute to a more balanced and sustainable economic landscape. This industrial diversification is essential not only for boosting GDP but also for reducing dependency on volatile commodity markets.

Climate Resilience and Sustainability

Africa is one of the regions most vulnerable to the impacts of climate change. Extreme weather events, rising temperatures, and environmental degradation pose significant risks to the continent’s development. Recognizing this, the AFC has incorporated climate resilience into its investment strategy. The Infrastructure Climate Resilience Fund, supported by both pension funds and international partners like the European Investment Bank, aims to build infrastructure that can withstand the adverse effects of climate change. This dual focus on sustainability and economic growth positions Africa to tackle environmental challenges while pursuing robust development.

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The Role of International Partnerships

While the AFC’s renewed focus on domestic capital is a key pillar of its strategy, international partnerships continue to play a crucial role. Collaborations with investors from the Gulf, Europe, and other regions provide complementary sources of capital and expertise. These partnerships not only supplement local funds but also facilitate the transfer of knowledge and best practices that can help African markets mature.

For instance, the involvement of the European Investment Bank in the Infrastructure Climate Resilience Fund demonstrates the potential for synergistic investments. Similarly, projects like the Lobito Corridor—a railway project linking the resource-rich Democratic Republic of Congo with Zambia and Angola’s Atlantic port of Lobito—have attracted interest from international investors. Although U.S. investment in the corridor remains uncertain, previous high-profile visits by figures such as former U.S. President Joe Biden underscore the project’s strategic importance.

These international collaborations are vital for several reasons. They help to de-risk domestic projects by sharing investment burdens, they open avenues for technological and managerial expertise, and they signal to global markets that African projects are viable and potentially lucrative. In a rapidly changing geopolitical environment, such partnerships can serve as stabilizing forces, ensuring that critical development projects continue to move forward despite external uncertainties.

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Expert Analysis and Future Outlook

Industry experts have lauded the AFC’s proactive approach to unlocking domestic capital. Many analysts believe that this strategy could herald a new era of self-sustaining development in Africa. By reducing reliance on external aid and tapping into domestic resources, the continent can build a more resilient economic framework that is better equipped to handle global shocks.

Economic strategists point out that if Africa can successfully mobilize even a fraction of the projected $15-$20 billion from pension funds, it could trigger a significant multiplier effect. Increased investment in infrastructure, industrial projects, and climate resilience would not only generate immediate employment and economic activity but also lay the groundwork for long-term sustainable growth. Furthermore, diversifying the investment portfolio of pension funds could lead to higher returns, which in turn would boost the overall stability of domestic financial markets.

However, several challenges remain. One major hurdle is the historically low savings rate in many African countries, which has limited the size and scope of pension funds. Efforts to improve financial literacy and encourage higher personal savings rates are essential to ensuring that pension funds can grow and eventually support large-scale investments. Additionally, regulatory reforms are needed to create an environment where pension funds can diversify their investments without facing excessive risk or bureaucratic obstacles.

Despite these challenges, the outlook remains optimistic. The AFC’s initiatives are not only well-timed but also strategically designed to overcome existing barriers. By leveraging a combination of domestic and international partnerships, targeted pilot projects, and a robust long-term vision, the institution is paving the way for a more self-reliant and prosperous Africa.

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Broader Implications for African Development

The significance of the AFC’s strategy extends beyond the immediate realm of financial investments. At its core, this initiative represents a paradigm shift in how African countries approach development. Rather than being passive recipients of foreign aid, these nations are increasingly taking control of their own economic destinies by harnessing local resources and expertise.

Fostering Economic Sovereignty

Economic sovereignty—the ability of a nation to determine its own economic policies and strategies without undue external influence—is a critical goal for many African countries. By mobilizing domestic pension funds, governments can reduce their dependence on volatile aid flows and assert greater control over their development agendas. This shift is particularly important in a global context where traditional funding sources are becoming less reliable and more unpredictable.

Strengthening Domestic Markets

The infusion of pension funds into key sectors such as infrastructure, industrial development, and climate resilience has the potential to strengthen domestic markets significantly. Improved infrastructure facilitates trade and commerce, industrial growth creates jobs and boosts productivity, and investments in sustainability help mitigate the economic risks posed by climate change. Together, these factors can create a more dynamic and robust economic environment that benefits all segments of society.

Enhancing Regional Integration

Africa’s diverse economies share common challenges, and regional integration is widely regarded as a key to overcoming these obstacles. Initiatives like the Lobito Corridor and the replication of successful pilot projects across multiple countries are steps toward creating a more integrated regional market. Enhanced connectivity and shared investment strategies can lead to more efficient trade, reduced transaction costs, and a stronger collective bargaining position on the global stage.

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Conclusion: A Transformative Vision for Africa’s Future

The Africa Finance Corporation’s renewed focus on unlocking billions from domestic pension funds is not just a financial strategy—it is a visionary approach to redefining Africa’s development trajectory. In an era marked by diminishing external aid and shifting geopolitical priorities, the continent’s reliance on its own resources is both a necessity and an opportunity.

By channeling pension funds into high-impact infrastructure, industrial projects, and climate resilience initiatives, Africa is taking bold steps toward economic sovereignty and sustainable growth. The successful mobilization of these domestic resources could serve as a blueprint for other emerging markets facing similar challenges, demonstrating that local capital can drive global competitiveness and long-term prosperity.

As pilot projects like InfraCredit pave the way and international partnerships continue to provide support, the vision of a self-reliant, resilient Africa is becoming increasingly tangible. While challenges remain—ranging from low savings rates to regulatory hurdles—the strategic initiatives spearheaded by the AFC offer a promising pathway forward.

In the coming years, as similar programs are launched in Botswana, Angola, Kenya, and beyond, the continent could witness a transformative shift in how development is financed and executed. For Africa, the journey toward economic self-determination is well underway, and the unlocking of domestic pension funds stands as a critical milestone in this ongoing evolution.

Ultimately, the AFC’s efforts underscore a fundamental truth: when nations harness their own potential, the possibilities for growth and innovation are boundless. In this dynamic and challenging global landscape, Africa’s leap toward greater domestic investment may well signal the dawn of a new era—one where the continent’s own capital becomes the engine of its development and the catalyst for a brighter, more prosperous future.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

10th March, 2025