These funds represent a growing pool of assets that can be used to support domestic investments aligned with the type of long-term investment needed to help African countries achieve economic growth and shared prosperity.
Globally, both the number of investors and assets under management (AUM) have grown substantially.
AUM for SWFs and private pension funds increased from US$11 trillion in 2015 to US$15 trillion in 2020.
In Africa, the growth of AUM by SWFs increased by 76%, while the number of investors grew by 54%. According to PwC, African SWFs managed US$300 billion in 2020, representing a significant source of investible capital for the continent.
The Covid-19 has pandemic exacerbated the immense developmental challenges Africa is faced with.
According to the World Bank, Covid-19 has pushed 40 million people into extreme poverty in sub-Saharan Africa, eroding many recent developmental gains.
Moreover, an additional 43 million people could be pushed below the poverty line by 2030 due to climate change.
Reversing these trends will require unprecedented levels of investment to accelerate economic development and create jobs.
Investor appetite for impact investing surged prior to the Covid-19 pandemic.
Reaching US$2,3 trillion in assets under management in 2020, impact investing has the potential to mobilise private capital to address the region”;s most pressing social, economic, and environmental challenges.
We estimate that globally, the appetite for impact investing is much larger, up to US$26 trillion, or about 10% of global capital markets.
Most of this enthusiasm revolves around investments that offer both market-rate financial returns and positive social impacts.
Investments at this scale could significantly contribute to addressing challenges such as climate change and the achievement of the United Nations Sustainable Development Goals.
From financing infrastructure to strengthening healthcare systems and supporting affordable housing developments, opportunities abound for investors who want to make an impact in Africa.
The African Development Bank estimates the continent”;s infrastructure financing needs to be around US$170 billion a year, while solving Africa”;s housing backlog would require US$2 trillion over 10 years.
