Pension Funds, Capital Markets, and Infrastructure Development in Africa

Pension funds in Africa are increasingly targeting investments in long-term infrastructure to hedge against inflation and secure stable, long-term returns. Simultaneously, these investments help to address the continent’s critical infrastructure deficit. This study examined the effect of pension funds and capital markets on infrastructure development in 52 African countries between 2005 and 2017. The study's results show a negative relationship between pension funds and infrastructure development in Africa. However, the interaction between pension funds and capital markets showed a positive, significant relationship with infrastructure development. This suggests that, even though pension funds do not have a direct positive influence on infrastructure development, capital markets are a channel that pension fund managers can effectively use to drive this development in Africa. The study concludes that pension funds have the potential to bridge the infrastructure gap in Africa, but that capital markets must first be developed. At present, most capital markets in Africa are not sufficiently mature and lack the necessary development assets, such as infrastructure bonds, that can deliver improvements to infrastructure. As a result, policymakers should consider integrating smaller markets to attract investors within and outside Africa. Afreximbank Policy Research Working Paper Series, 2026/04, 1-57