How Africa's capital markets can finance development

Africa's economic growth is intricately linked to the development of infrastructure that facilitates market access. The potential of capital markets in driving financial support for local development is a key conversation that has gained prominence. The International Finance Corporation's (IFC) recent announcement of a $20 million investment in the African Local Currency Bond Fund has set the stage for discussions on how capital markets can play a pivotal role in financing development projects across the continent. CNBC Africa recently hosted a panel featuring experts Karl von Klitzing, Project Manager at KfW Development Bank, and James Doree, Director at Lion's Head Global Partners, to delve into the future of Africa's capital markets and the opportunities that lie ahead. The conversation centered around the ways in which capital markets can support economic development, drive infrastructure funding, and promote wealth creation in a more inclusive manner. The Capital Markets Authority in Kenya has been at the forefront of exploring these opportunities and paving the way for a more robust and interconnected capital market ecosystem in the region. One of the immediate opportunities identified by the authority is the potential for enhanced collaboration among different countries within the region. By fostering greater integration between exchanges and central securities depositories (CSDs), investors could access a broader range of investment opportunities and tap into various service providers across the continent. The pressing need for infrastructure development in Africa presents a significant demand for long-term capital markets financing. Traditional sources of project financing, such as banks, are facing regulatory constraints that limit their ability to provide extended funding for infrastructure projects. This gap underscores the importance of capital markets stepping in to complement the role of banks in financing projects and attracting institutional investors to support long-term growth. However, the challenge of engaging institutional investors remains a hurdle that needs to be addressed. One key factor that can accelerate the participation of institutional investors is the availability of clear and consolidated information about investment opportunities on the continent. Enhancing transparency, improving legal frameworks, and addressing infrastructure issues are crucial steps in attracting institutional money to African capital markets. Kenya has made significant strides in democratizing access to investment opportunities through initiatives like Emma Kiba. This innovative platform leverages technology to open up government debt investments to a broader population, allowing individuals to invest in government bonds with as little as $30. The success of Emma Kiba pilot programs indicates a growing appetite for accessible investment options among retail investors. As Kenya prepares to launch the real Emma Kiba bond, valued at 4.8 billion shillings, the conversation around inclusive participation in funding growth and transformation is set to evolve. By leveraging technology, improving access to information, and fostering collaboration among market players, African capital markets are poised to drive sustainable economic development and unlock the continent's vast potential.