• African companies raised about $220 billion in equity on local stock markets over the past 25 years

• Equity market capitalization rose 27-fold to $560 billion between 2000 and 2024

• Limited access to finance remains the top obstacle for 31% of African firms

Capital markets remain underdeveloped across Africa. As a result, nearly one-third of companies identify access to finance as the main challenge to conducting business. High collateral requirements exclude a large share of very small, small and medium-sized enterprises (VSMEs) from formal credit systems.

African companies raised about $220 billion in equity on local stock exchanges over the past 25 years, according to a report published on Tuesday, November 18, by the Organisation for Economic Co-operation and Development (OECD).

This amount represents just 1% of global equity raised worldwide and 3% of equity raised by companies in emerging markets, the OECD said.

The “African Capital Markets 2025 Report” also shows that African equity markets expanded between 2000 and 2024, as total market capitalization increased 27-fold to $560 billion.

However, trading activity remains highly concentrated. South Africa, Egypt and Nigeria together account for more than 80% of total market capitalization. In addition, trading volumes remain generally low and focus on a limited number of large companies, partly due to high transaction costs.

Corporate debt outstanding, including bonds and syndicated loans, remains modest across African countries in both absolute terms and as a share of GDP compared with global averages.

This outstanding amount declined in recent years, falling from about $230 billion in 2020 to $180 billion in 2024. The figure represents around 1% of global corporate debt and about 5% of emerging market corporate debt.

Four economies—South Africa, Egypt, Nigeria and Mauritius—hold about 60% of total corporate debt outstanding on the continent.

This concentration illustrates both the uneven development of financial markets and the close link between corporate debt market depth and broader economic and financial development.

These trends confirm that limited access to finance represents a major obstacle to business growth across Africa.

In 23 African countries covered by the latest World Bank Enterprise Survey, 31% of firms cited access to finance as their main operational obstacle. This share stands nearly three times higher than taxation, the second-ranked constraint, and far above the global average of 17%.

Sovereign debt crowds out private credit

In this environment, companies rely primarily on internal financing. Among external sources, bank lending dominates in many countries, including Mauritius, Namibia, Côte d’Ivoire, Botswana and South Africa, while other countries show more balanced financing structures.

Although banks play a central role in corporate financing, structural lending features restrict access to credit.

Collateral requirements and financial history thresholds exclude a large share of VSMEs from formal credit systems, despite the fact that these firms account for about 80% of employment in Africa.

At the same time, rising sovereign debt issuance often crowds out private credit.

Banks favor sovereign debt instruments over private-sector loans because these assets carry lower risk and benefit from more liquid secondary markets. As a result, banks’ exposure to the public sector increased by nearly 70% between 2010 and 2023, while lending to the private sector declined over the same period.

The report also highlights Africa’s continued exposure to high foreign-exchange risk. A large share of corporate and sovereign debt remains denominated in foreign currencies, unlike in most advanced economies.

This situation reflects weak and fragmented regulatory frameworks, underdeveloped market infrastructure, heavy reliance on foreign capital, and the limited development of domestic institutional investors.

Insurance companies and pension funds play a limited role as institutional investors across most African countries.

Insurance penetration stands at 3.5% of GDP, about half the global average. Pension fund assets represent 23% of GDP, compared with 34% globally.

The small size of these assets, combined with portfolios heavily concentrated in government securities, limits their ability to provide stable long-term capital to the real economy. For pension funds, low income levels and widespread informal employment add further constraints.

Attracting more issuers and expanding the investor base

To strengthen the role of capital markets in corporate financing, the OECD urges policymakers to adopt additional measures to boost market activity.

The organization recommends more flexible listing frameworks and greater transparency to attract a broader pool of issuers. Authorities should also strengthen regulatory frameworks to enhance the role of institutional investors.

The OECD also recommends stronger policyholder protection, automatic enrollment in pension schemes, portfolio diversification, and measures to facilitate long-term investment.

Digital transformation of trading infrastructure and deeper regional financial market integration could also strengthen brokerage networks, promote cross-border activity, expand the investor base, and reduce operating costs.

Initiatives similar to the African Exchanges Linkage Project, which connects 10 major exchanges representing 90% of the continent’s market capitalization ($1.5 trillion), should expand further to deepen market integration.

Greater board independence and stronger protection for minority shareholders would also enhance investor confidence.

The report also recommends integrating reforms of state-owned enterprise governance into broader capital market development strategies. The recent adoption of the African Principles of Corporate Governance and updates to international governance standards offer an opportunity to strengthen practices.

On another front, African governments should pursue prudent debt management and increase issuance of local-currency-denominated bonds.

Over time, deeper local-currency sovereign bond markets could create a virtuous cycle for capital market development by supporting investor demand and improving liquidity.

This article was initially published in French by Walid Kéfi

Adapted in English by Ange Jason Quenum