Institutional investors are turning their gaze towards Africa with renewed interest, driven by improving market conditions, easing currency risks, and wide-reaching economic reforms.
According to a new survey by The Value Exchange in partnership with Standard Bank, half of global institutions plan to increase their Africa allocations by 2027. The report highlights a notable surge in capital inflows into African markets, including Kenya, South Africa, and Nigeria, with growing attention also being paid to smaller economies like Ghana and East African countries.
Diversified Portfolios and Eased FX Risks Attract Investors
Africa’s allure lies in its promise of yield and enhanced portfolio diversification, a combination that has become increasingly attractive in the face of global volatility. Notably, fears around foreign exchange (FX) repatriation, especially in Nigeria, have diminished. The country has significantly improved its FX liquidity issues, easing a major barrier that had previously discouraged foreign participation.
“Investors are actively repositioning portfolios to capture the potential Africa offers,” said Hari Chaitanya, Head of Investor Services, Africa at Standard Bank Corporate and Investment Banking. “We are seeing strong flows as macroeconomic conditions improve and FX repatriation risks ease.”
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North American and Middle Eastern Investors Lead the Charge
The biggest leap in interest is coming from North America, where 67% of institutions say they plan to invest in Africa — a threefold rise since 2022. Middle Eastern investors, particularly sovereign wealth funds and development organisations, are also increasing their African holdings. According to the survey, 72% of institutions from the Middle East already have portfolio exposure in the region.
At the same time, cross-border investment within Africa is also gaining traction, with pension funds in various countries looking beyond their home markets for diversification.
“Due to limited domestic opportunities, African pension funds are exploring other regional markets, which is fuelling broader growth,” added Chaitanya.
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Market Reforms Fuel Investment Confidence
Africa’s capital markets are undergoing significant reforms, improving ease of access and investor confidence. Countries are enhancing infrastructure through consolidation of stock exchanges, launching of derivatives trading, modernising central securities depositories (CSDs), and introducing new instruments such as green bonds and securities lending.
Chaitanya highlighted that account opening processes in African markets are now relatively smooth, especially when compared to other emerging markets like China and India.
Additionally, a number of African countries are shortening their trade settlement cycles to improve liquidity. Zimbabwe is set to move from T+3 to T+2 this month, while Nigeria will also adopt T+2 following consultations with investors.
In a significant move, Nigeria has introduced the Investment and Securities Act, aimed at enhancing investor protections and improving capital market transparency.
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Education and Regulatory Alignment Remain Key
Experts emphasise that Africa’s investment growth must be supported by ongoing investor education and strong dialogue between regulators and international stakeholders.
“Transparent communication between market authorities and index providers has been pivotal in markets like China and Kuwait. Africa needs a similar approach,” said Barnaby Nelson, CEO of The Value Exchange.
Nelson also stressed the importance of aligning with international regulatory standards, such as UCITS V, the 40 Act, and ERISA, especially since many funds investing in Africa are domiciled in Luxembourg, Dublin, or the United States.
Key Takeaways:
- 50% of global institutions plan to grow their Africa allocations by 2027.
- North American and Middle Eastern investors are driving a new wave of capital flows into Africa.
- Improved FX conditions and market reforms are revitalising investor confidence.
- Cross-border investments and portfolio diversification are expanding within Africa.
- Ongoing education and regulatory alignment are essential for sustaining momentum.
As Africa continues to strengthen its market infrastructure and regulatory environment, the continent is fast becoming a serious contender in global investment portfolios.
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