President William Ruto has emphasized that Africa has sufficient capital to finance its development, but restrictive financial rules hinder the allocation of local funds to infrastructure and productive projects. Speaking at the Africa We Build High-Level Roundtable on the sidelines of the 81st United Nations General Assembly in New York, Ruto highlighted that Africa possesses over $2 trillion in domestic non-bank capital, including more than $1 trillion in pension and insurance assets. However, much of this capital does not reach projects requiring long-term financing.
Ruto questioned the preference of African pension funds for investments outside the continent, while major local infrastructure projects struggle to secure funding. He cited the example of African pension funds favoring US Treasuries over African power plants. The President also noted that the high cost of insuring productive assets and expensive insurance can make viable projects difficult to finance. Furthermore, he criticized the risk premiums applied to African countries, suggesting they may not accurately reflect their default and recovery records.
The President called for reforms to the continent's financial and regulatory systems to enable more local capital to finance domestic projects. He advocated for changes to prudential and liquidity requirements that discourage investors from committing funds for extended periods. Ruto emphasized that a 30-year investment in Africa should not be treated as an exotic asset solely due to its long-term nature. He also suggested that using African data to assess African risk could lead to more accurate pricing and reduce the cost of capital.
According to a UNDP estimate, more objective credit ratings could save African countries up to $74.5 billion. Ruto stressed that beyond regulatory changes, African countries need stronger financial systems to convert available money into projects that can attract investors. He identified bankable project pipelines, credit enhancement mechanisms, and local-currency financing instruments as essential tools to achieve this goal. The President used Kenya's pension sector to illustrate the disparity between available capital and funds reaching infrastructure projects.
In Kenya, the pension industry has assets worth approximately Sh3.2 trillion, with 46% invested in government securities and only 0.02% placed in infrastructure debt. Ruto noted that for every shilling invested in infrastructure debt, nearly Sh2,000 is invested in government paper. This situation can lead to pension contributions from individuals, such as a teacher in Eldoret, financing Treasury bills instead of a geothermal plant near their home. He emphasized the need for change to ensure that local capital is utilized for domestic projects.
Ruto announced that Kenya is prepared to provide a test case for efforts to change the way African risk is assessed. The country is willing to share its default and recovery data and make pension and insurance regulators available to rating agencies, insurers, and international standard-setting bodies. He also highlighted measures Kenya has taken to bring more private and institutional money into infrastructure development, such as the National Infrastructure Fund, which aims to mobilize up to $40 billion for various projects.
The President proposed the formation of a working group based in Nairobi to examine obstacles limiting infrastructure financing across Africa. The group will study the barriers and present its findings at the next Africa We Build Summit within 12 months. Ruto emphasized that resolving the financing challenge is urgent, as African countries prepare to meet the infrastructure needs of a population projected to approach 2.5 billion by 2050. His goal is to make financing productive African assets a normal occurrence, rather than an exceptional one.
Key points
- President William Ruto calls for reforms to financial and regulatory systems to allow African capital to finance local projects.
- Africa has over $2 trillion in domestic non-bank capital, but restrictive rules hinder its allocation to infrastructure projects.
- Ruto proposes a working group to examine obstacles to infrastructure financing and present findings within 12 months.
