AFC: Africa’s $777 Billion Pension and Insurance Assets Hold Key to Economic Transformation
Africa sits on a $777 billion opportunity as the AFC urges policymakers to redirect pension and insurance assets toward long-term development.
Despite vast reserves, most funds are locked in short-term investments, stalling infrastructure growth across the continent’s fastest-growing economies.
The Africa Finance Corporation (AFC) has spotlighted a transformative opportunity for Africa’s economic development, urging policymakers to tap into the continent’s $777 billion in pension and insurance assets to bridge critical funding gaps for infrastructure and industrial growth.
In its latest State of Africa’s Infrastructure (SAI) Report, the AFC highlighted that despite having vast financial reserves under management, Africa’s pension funds and insurance companies continue to allocate most of their resources to low-risk, short-term investments, leaving the continent’s long-term development needs significantly underfunded.
“With over $777 billion in assets under management, pension funds and insurance companies hold substantial potential to finance long-term development,” the report stated. “Yet a large share remains allocated to short-term, low-risk instruments.”
Underutilized financial sectors
Together, insurance firms in 28 African nations oversee assets worth over $320 billion, with South Africa alone holding close to 80% of the total. Still, the report points out that the region’s overall insurance penetration remains low, limiting its capacity to support large-scale infrastructure or capital-intensive projects.
Several structural barriers continue to restrict growth in the pension and insurance industries, including a dominance of informal employment, limited public trust in financial institutions, and weak financial literacy. The report noted that many African countries also lack mandatory savings schemes, which dampens broader participation.
Furthermore, while life insurance could serve as a critical instrument for long-term investments, it accounts for less than 30% of insurance portfolios across most African nations. Instead, the market is heavily skewed toward non-life segments such as health, auto, and industrial insurance, largely influenced by regulatory mandates and corporate compliance needs.
Pension funds: A sleeping giant
The report also zeroed in on the immense but dormant potential of Africa’s pension sector. With formal pensions largely restricted to public servants and employees in the formal private sector, most Africans working in informal jobs, estimated at up to 90% of total employment in sub-Saharan Africa remain excluded from contributory pension schemes.
Despite this, Africa’s informal economy remains a sleeping giant. According to the International Monetary Fund (IMF), the sector accounts for between 25% and 65% of GDP across the continent. AFC estimates suggest that formalizing even a fraction of this economy could unlock more than $200 billion in new savings, creating a massive pool of local capital ready to fuel domestic investments.
Call for reforms and collaboration
To unlock this potential, the AFC has called for urgent policy and institutional reforms. It is recommended that governments create frameworks that encourage institutional investors to allocate a greater portion of their assets toward long-term, high-impact investments. It also emphasized the need for improved financial literacy, public trust-building, and the introduction of compulsory savings mechanisms.
Encouragingly, some African nations are already making strides. Nigeria and Namibia are among the countries aligning pension regulations with national development objectives. Similarly, South Africa and Kenya are implementing reforms to expand insurance and pension contributions.
With the right regulatory support and investor confidence, Africa’s financial institutions could play a leading role in funding the continent’s infrastructure ambitions and securing sustainable economic growth for future generations.
