Who is afraid of investing in Africa?
Africa is often tagged as high-risk. But the numbers cut through the clichés: investing in Africa is no more dangerous than betting on regions with far glossier reputations. Its diaspora knows it — and is now channeling capital back into a land it understands better than anyone.
“Africa’s risk is not different from any part of the world.” With these words, Akinwumi Adesina, President of the African Development Bank (AfDB), sought to debunk certain indicators at the World Governments Summit 2025. A year earlier, leading American risk management agency Verisk Analytics had named Sub-Saharan Africa “the riskiest region in the world” for investors.
Since the question of private equity – i.e. the financing of companies by other unlisted firms specialising in investment – in Sub-Saharan Africa has been attracting serious academic attention, the concept of the “institutional void” has appeared repeatedly in the literature. Popularised in 2010 by Professor Garry Bruton, this concept describes areas characterised by fragile legal systems, marked political instability, and narrow financial markets.
The Risk of the Stereotype
It underpins a number of studies, including those produced by leading consultancy firms such as SBM Intelligence.
According to the database compiled by Aswath Damodaran of NYU Stern, the risk premium required by investors for Sub-Saharan Africa hovers around 6%, while it is only about 2% in more unstable regions.
Commissioned by the AfDB in 2024, Moody’s Analytics measured the average loss rate of investments in Sub-Saharan Africa over the past fourteen years. It stood at only 1.7%, compared with 13% in Latin America and 10% in Eastern Europe.
On the Trail of the Missing Link
Three transformative dynamics are at work in the region, all within a shared context: the central importance of small and medium-sized enterprises (SMEs), the driving force of the Sub-Saharan economy. SMEs account for around 50% of GDP and 80% of employment. Yet their access to finance remains extremely limited. Their capital needs are estimated at over 400 billion dollars, while available financing covers barely 17% of that amount (70 billion dollars).
This financing gap is not uniform. It particularly affects the “missing middle”. It is here that private equity can play a pivotal role. The relevant stakeholders have clearly identified this opportunity. African governments, sovereign wealth funds, family offices, and institutional investors are gradually positioning themselves here and pooling their efforts. This paradigm shift is driven by three major transformations: the rise of pan-African funds, the increasing role of local capital, and the return of the diaspora.
Perhaps the most visible sign of this transformation is the explosion in the number of pan-African funds. In 1990, there were only a handful, managing less than one billion dollars. By 2024, this figure had risen to 500, with a total of nearly 65 billion dollars in assets under management.
This growth reflects an underlying structural trend and challenges the perception of a region seen as dormant and paralysed by risk. Sub-Saharan Africa is becoming more structured, continuing to develop, and now offers a complete local investment ecosystem.
Diaspora: Back to the Roots
In parallel with the expansion of investment funds in the region, another demographic and financial phenomenon is quietly yet fundamentally fuelling the private equity industry in Sub-Saharan Africa: the diaspora. In 2024, remittances from the West African diaspora reached 55 billion dollars, an increase of nearly 4% compared with 2023. This pool of money, currently used mainly for food and family expenses, represents an immense potential source of capital for SMEs and, indirectly, for the local investment ecosystem.
Read also: Are the Diasporas a springboard or a diving board for African football?
Beyond the financial dimension, professional expertise and business networks also play a crucial role. Many professionals trained in the West are now choosing to return to invest, and even to work from within Sub-Saharan Africa. They bring not only structure and governance standards, but above all credibility with international partners, grounded in their deep cultural understanding of the region.
This combination of finance and talent is giving rise to a very different investment dynamic, one that is better aligned with local opportunities and the region’s development realities.
Reinvesting Africa
Historically, African private equity has been shaped from the outside. The goal was to attract external capital and to “de-risk” markets deemed fragile. While still present, that logic is beginning to lose influence. Africans are taking back control, through their own capital and their own talent, to reshape investment in Sub-Saharan Africa.
A more sustainable investment structure is emerging, designed to align with local realities rather than replicate imported models. A model with a longer time horizon, where strategic patience matters as much as immediate profitability, and where cultural understanding becomes a competitive advantage.
Beyond the promise of returns and economic development, it carries the hope of rewriting the story, a form of reclaiming ownership that could, in time, reshape how global finance sees the continent.
