Can Africa Cut Its Borrowing Costs as Risk Premiums and Data Gaps Distort Pricing?
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Africa’s investment outlook remains broadly positive, driven by demographics, critical minerals and large pools of underused capital, but high financing costs and political instability continue to shape investor decisions.
African Business cited analysis from One Data estimating that African sovereign borrowing from capital markets costs about five times what comparable World Bank financing would cost, adding roughly $56 billion in extra costs on capital-market debt raised in the five years before 2021.
The article said markets increasingly price long-horizon political uncertainty, noting a pattern in which longer-dated African bonds tend to suffer sharper declines after instability scares, reflecting repricing of perceived coup or governance risks.
It argued that high borrowing costs also interact with Africa’s labour-force surge, with the region expected to provide a large share of new global workforce entrants by 2030, while weak job creation in major economies underscores the need for cheaper capital, reliable energy and a more predictable regulatory environment.
On commodities, the piece highlighted cobalt as a strategic lever, noting that the Democratic Republic of Congo produces more than 70% of global cobalt and has set a quota regime that would allow exports of 96,600 tonnes a year in 2026 and 2027, while conflict-linked illicit mining risks weakening state revenues and governance gains.
African Business also pointed to Africa Finance Corporation estimates that Africa holds around $4 trillion in domestic capital across pensions, sovereign wealth funds and banks, and it cited a University of Massachusetts Amherst PERI estimate of $2.7 trillion in capital flight from 30 African countries from 1970 to 2022, arguing that better, standardised data is now a competitiveness issue for lowering borrowing costs.
