The Thesis Has Been Proven

For most of the 2010s, the narrative on Africa as an investment destination oscillated between two poles: breathless optimism — “the African Century,” “the last great frontier,” “a billion consumers” — and deep structural scepticism rooted in governance failures, commodity dependency, and the persistent gap between promise and performance.

Neither pole was analytically useful. The optimists papered over real structural challenges. The pessimists failed to disaggregate — treating “Africa” as a monolith when it is, of course, 54 sovereign nations with wildly different fundamentals, growth trajectories, and investment climates.

In 2025, we can say with more confidence than at any previous point that the underlying investment thesis for a subset of African markets — those with improving governance, deepening capital markets, and structural growth drivers beyond commodity cycles — has been proven. Not promised. Not projected. Proven, transaction by transaction, across a growing body of evidence.

The shift we are observing is not a sentiment shift. It is a structural one, driven by a confluence of factors that we will examine in this report: improving macroeconomic management in key markets, maturing local capital markets, a generation of African entrepreneurs and executives who have rebuilt institutions from the ground up, and a global capital allocation environment that is, for the first time, seriously stress-testing the Western-centric assumptions that have historically kept institutional money away from frontier markets.

What Is Driving the Capital Migration

The headline numbers on capital flows into Africa are encouraging. But more important than the quantum of capital is its composition. The shift we are seeing is not primarily about more of the same — more DFI lending, more aid-adjacent financing, more portfolio flows chasing commodity cycles. It is about a qualitatively different type of capital entering African markets for the first time.

Global Diversification Pressure

The past three years have fundamentally changed the portfolio construction calculus for large institutional investors. Concentration in US equities, compressed yields across developed market fixed income, and the realisation that Chinese exposure carries political risk premiums that were previously underpriced have all forced institutional allocators to look harder at markets they had previously treated as too peripheral to justify the analytical overhead.

African infrastructure and private equity, priced at risk premiums that were built for a capital environment from a decade ago, are increasingly attractive on a relative basis. The 14-18% unlevered IRR available in well-structured African infrastructure deals does not look the same against a 5.25% US risk-free rate as it did against a 0.25% one.

The DFI Catalytic Effect Is Working

Development finance institutions have spent five years restructuring their approach to African markets. The shift from direct lending to catalytic capital — first-loss tranches, credit guarantees, and technical assistance facilities designed to attract commercial co-investors — is bearing fruit in a way that the previous model of DFI-as-lender-of-last-resort never did.

The data is encouraging. In energy infrastructure alone, every dollar of DFI concessional capital deployed in blended structures in 2024 mobilised an estimated $4.70 of commercial capital — up from $2.80 in 2021. The multiplier is improving as market participants become more familiar with the structures and as track records accumulate.

African Capital Markets Are Maturing

One of the least-discussed but most consequential developments in African finance over the past decade has been the deepening of local capital markets. Nigerian, Kenyan, South African, Ghanaian, and Rwandan pension funds have collectively grown their assets under management from under $100B in 2015 to an estimated $380B by 2024. These institutions are increasingly willing and able to invest in domestic infrastructure, providing local-currency capital that reduces the FX risk of international investors in blended structures.

Where Capital Is Flowing — and Why

Not all African markets are participating equally in the capital migration. The distribution of investment flows is highly concentrated in a small number of markets with credible governance, improving regulatory environments, and deep enough local institutions to absorb significant foreign capital. Understanding this concentration is essential for investors seeking to allocate effectively.

The concentration in six markets accounting for 77% of private investment is both an observation and an opportunity. For investors with the local presence and deal-origination capability to operate in the remaining 48 markets, the competition for assets is dramatically lower, the return premiums are higher, and the impact of new capital is more transformative.

Sector Themes for 2025

Macro tailwinds and improving market conditions matter, but investment returns are ultimately made at the sector and asset level. Here are the five sector themes we believe will define the African investment landscape in 2025.

1. Energy Infrastructure Remains the Defining Opportunity

We have written extensively on this theme (see our March 2025 report, The Green Transition in Sub-Saharan Africa: Beyond ESG Rhetoric). The core argument remains unchanged: Africa’s $170B annual energy financing gap is simultaneously the continent’s most acute development challenge and its most compelling investment opportunity. The blended finance structures required to bridge commercial and concessional capital are now sufficiently mature and well-understood to be deployed at scale.

2. Digital Infrastructure — The Backbone of the Digital Economy

Africa’s mobile internet penetration has grown from 26% to 40% in five years and is projected to reach 55% by 2030. The infrastructure required to support this growth — fibre backbone, data centres, tower networks, submarine cable landing stations — is in chronic undersupply relative to demand. Unlike consumer-facing tech, which carries market-penetration and unit economics risk, digital infrastructure is asset-backed, long-duration, and increasingly supported by anchor tenants with investment-grade credit profiles.

3. Agrifood Value Chains — Structural Demand, Structural Underinvestment

Africa produces 60% of the world’s uncultivated arable land and yet imports $50B+ of food annually. The gap between agricultural potential and agricultural productivity is a function of underinvestment in irrigation, cold chain, processing, and market access infrastructure — not a function of soil quality or climate. Investors with patient capital and local operating relationships are finding compelling opportunities in food processing, cold chain logistics, and precision agriculture technology across East and West Africa.

4. Healthcare Infrastructure — Serving the Continent’s Growing Middle Class

Africa’s middle class — currently estimated at 350-450M people depending on the income threshold used — is growing faster than any comparable demographic globally and is driving structurally higher demand for quality healthcare. Private hospital groups, diagnostic chains, pharmaceutical distribution networks, and health insurance platforms are all seeing demand growth that is supply-constrained rather than demand-constrained — the ideal conditions for infrastructure investment.

5. Financial Services — Deepening Access and Sophistication

Mobile money has already transformed financial inclusion in sub-Saharan Africa, with M-Pesa and its successors demonstrating that formal financial services can reach populations that traditional banking never accessed. The next wave — insurance, credit, savings, and capital markets products built on mobile money rails — represents a multi-decade investment opportunity that is still in its early innings. We are particularly interested in insurance technology, where penetration rates of 2-3% in most African markets represent a fraction of their potential.

The Risks That Remain Real

Intellectual honesty demands that we address the risks that remain material for investors in African markets. We are bullish on the opportunity — but we are not naive, and the conditions that make certain African markets compelling also make others genuinely risky.

1. Currency and convertibility risk. Local currency depreciation against the USD remains the single biggest return destroyer for foreign investors in African markets. Despite improvements in hedging instruments, the costs of currency protection remain high in most markets, and the depth of hedging liquidity is insufficient for large institutional positions. Investors must either accept currency risk, structure local-currency returns, or pay meaningful costs to hedge — and all three approaches require careful modelling.
2. Political and regulatory instability. The past two years have seen coups or unconstitutional transfers of power in seven African countries. While most of these were in markets that were not major investment destinations, they are a reminder that the governance progress driving the investment thesis is not irreversible. Investors must maintain active political risk monitoring and have clear exit frameworks for scenarios where the political environment deteriorates.
3. Liquidity and exit risk. African private markets remain illiquid by developed market standards. Exit routes — strategic sales to local or international acquirers, secondary market sales, and domestic IPOs — are all available in the leading markets but can take longer and require more active management than equivalent exits in more developed markets. Investors need to be honest about their liquidity requirements before entering positions.
4. Talent and operational capacity. The best investment theses can be undermined by inadequate operational capability in-market. Building, retaining, and developing the local talent required to originate, execute, and manage African investments is expensive, time-consuming, and non-negotiable for investors seeking returns beyond the commodity or infrastructure beta that passive exposure provides.

What Investors Should Do Now

The window for establishing African exposure at attractive valuations and with below-market competition for assets is real, but it is not indefinite. Based on our assessment of where the market is in its development cycle, we believe the next 18-36 months represent the most significant opportunity for new entrants to establish positions before the re-rating that is already underway in leading markets spreads more broadly.

• Build origination infrastructure before deploying capital. The investors who will benefit most from the African investment opportunity are those who are doing the groundwork today — hiring in-market, building local relationships, and developing the sector expertise required to originate proprietary deal flow. Investors who wait for fully-packaged transactions will pay a significant premium for the work that others have already done.
• Start with what you know. For investors new to African markets, the entry point with the highest probability of success is the intersection of a sector you understand deeply and a market with strong institutional foundations — typically Kenya, South Africa, or Nigeria for first-time entrants. Add market complexity only after your investment model is proven.
• Engage DFIs as partners, not competitors. Development finance institutions are not just capital sources — they are intelligence networks, de-risking partners, and market-makers. Investors who build genuine relationships with the IFC, AfDB, DFC, and European DFIs early will have a material advantage in deal flow, structure, and risk management over those who engage these institutions only when a specific transaction requires it.
• Plan for a 7-10 year horizon. Africa is not a trading opportunity. The returns available in African private markets are available to patient capital that can ride through the volatility inherent in frontier market investing. Investors with a 3-5 year horizon will consistently overpay for liquidity or exit before the thesis has fully played out.
• Measure and report impact rigorously. As the African investment opportunity becomes more mainstream, the pressure to demonstrate genuine impact — not performative ESG compliance — will increase. Investors who build credible impact measurement frameworks early will have a competitive advantage in accessing DFI co-capital, attracting institutional LPs with impact mandates, and maintaining reputational capital in markets where long-term relationships matter.

The Migration Has Begun — The Question Is Whether You Are Part of It

“Every major capital migration in history has looked obvious in retrospect and uncertain in prospect. The investors who built positions in Asian emerging markets in the 1980s, in Central Europe in the 1990s, in Chinese manufacturing in the 2000s — none of them were acting on consensus. They were acting on analysis.”

That is where we believe the Africa investment story is today. The data — GDP growth rates, FDI flows, capital markets deepening, energy transition acceleration, digital infrastructure build-out — is now sufficiently compelling that it is moving from a speculative thesis to a consensus view. But consensus has not yet been fully priced into valuations or capital allocations.

The window in which informed, first-mover capital can access Africa at the returns currently available will close. The investors who are building local presence, developing deal origination infrastructure, and deploying patient capital into well-structured transactions today will look back on this period as the moment when the strategic positions in African private markets were established.

At Crestmont International, we have been here for fifteen years. We have the teams, the relationships, the track record, and the conviction. We believe 2025 is the year that the broader investment community catches up — and we intend to be their preferred partner when they do.