Africa's capital markets are on the rise again. This way

By Kumeshen Naidu and Narissa Balgobind

Kenyan beverages giant East African Breweries has recently refinanced an existing KES11 billion corporate bond through medium term notes priced at 11.8 per cent, the first issuance under its newly approved. KES20billion program.

Time mattered. Kenya's 10-year government bond yield has fallen to about 13.3 percent, its lowest level since mid-2022, making the economics of refinancing viable again. The offer received strong demand due to active participation from banks, fund managers, pension schemes and retail investors. This resulted in an oversubscription of 152.4 percent, allowing EABL to issue up to KES 16.7 billion.

What that deal underlined is a point many businessmen make when looking at African markets: the liquidity is there for the right opportunities. The market has soared, rates have begun to drop from post-pandemic highs, and this shift is beginning to alter borrower behavior. As funding costs are becoming less punitive, investment decisions that were previously postponed are coming back, including acquisition and expansion activity where financing plays a key role.

This provides an opportunity to think more creatively about funding structures and where capital is best used. However, accessing the continent's bond markets is much more involved. Issuers need to prepare an issuance programme, appoint arrangers, external legal counsel, trustees, paying agents and settlement agents, engage with investors, comply with listing rules and meet ongoing disclosure requirements around financial reporting.

It is not surprising that Africa's corporate bond issuance has been particularly weak, with the outstanding amount falling from US$52 billion in 2010 to US$38 billion in 2024. oecd. It also found that despite Africa's contribution to global GDP being 2.5 per cent, it contributed only 0.1 per cent to global corporate bond outstanding.

Still, there is a lot of scope for development.

Regulation itself is not a barrier; Most African markets have direct issuance and listing requirements. What differentiates the results is scale, understanding and flexibility. Those factors ultimately decide whether the issuer accesses the bond market or remains in the debt market, which is generally easier to navigate and more adaptable.

In some cases, issuers can access the bond market at significantly lower costs, sometimes at levels that the debt market cannot compete with. In practice, this usually applies to specific parts of the transaction rather than the entire structure. As a result, blended financing becomes more common, allowing borrowers to combine low-cost market funds with loans or other instruments that offer flexibility, term, or risk coverage. And it is beginning to feature more prominently on the continent.

According to the research of convergenceAfrica's share of global blended finance transactions in 2024 was approximately 40 per cent, representing almost a third of total transaction volume, and reflecting the evolution of capital markets towards more structured solutions rather than reliance on a single instrument.

Looking ahead, innovation in Africa's capital markets is likely to focus on developing new products and demonstrating the ability to execute transactions. When East African Breweries first entered the Kenyan bond market in 2021, it marked the first corporate issuance in that market in almost five years. The transaction helped reopen the market and signaled to other issuers that investors were active, execution was possible, and pricing could be made to work.

Outside South Africa, capital markets are relatively shallow across much of the continent. This limits how effectively household savings can be channeled into long-term investments. Equity markets are small and thinly traded, and bond markets lack the depth and reference points that make pricing and secondary activity easier. To foster real development across the continent, this is where the focus should be.

>>>Kumeshen Naidu is Head of Debt Capital Markets and Narissa Balgobind is Head of Debt (AR) at ABSA.

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