How easing inflation and FX stability revive Africa’s capital flows

When East African Breweries refinanced an existing 11 billion Kenyan shilling corporate bond last month through a medium-term note priced at 11.8%, the transaction signaled more than just routine corporate housekeeping. It marked the first issuance under the beverage giant’s newly approved 20 billion shilling program and underscored a broader shift rippling across African capital markets.

The timing proved critical. Kenya’s 10-year government bond yield had eased to around 13.3%, its lowest level since mid-2022, making the economics of refinancing viable again. Strong demand from banks, fund managers, pension schemes and retail investors pushed subscription levels to 152.4%, allowing EABL to upsize the issuance to 16.7 billion shillings.

What the deal underlined is a point market practitioners increasingly emphasize when analyzing African markets: liquidity exists for credible opportunities. Markets have matured, rates have begun retreating from post-pandemic highs, and that shift is changing borrower behavior. As funding costs become less punitive, investment decisions previously shelved are returning to boardroom agendas, including acquisitions and expansion activity where financing plays a pivotal role.

From bank loans to syndicated structures

As businesses expand and funding requirements evolve, borrowers increasingly look beyond traditional bank financing toward broader capital sources. They challenge pricing, terms and conditions, funding purposes and security provisions with greater sophistication. Transactions often migrate into syndicated loan territory at this stage.

According to the Organization for Economic Cooperation and Development, syndicated lending in Africa has expanded significantly over the past two decades, with issuance and outstanding volumes nearly doubling. These transactions demand higher levels of financial sophistication and market knowledge.

Accessing the continent’s bond markets, however, remains considerably more complex.

Bond market barriers persist despite shallow penetration

Issuers must prepare comprehensive programs, appoint arrangers, external legal counsel, trustees, paying agents and calculation agents. They must engage investors, comply with listing rules and meet ongoing disclosure requirements around financial reporting. The process explains why Africa’s corporate bond issuance has remained particularly weak, with outstanding amounts falling from $52 billion in 2010 to $38 billion in 2024, according to OECD data.

The organization found that despite Africa contributing 2.5% of global GDP, it accounts for just 0.1% of global corporate bonds outstanding.

Significant room for development exists. Regulation itself rarely constitutes the primary constraint; most African markets maintain straightforward issuance and listing requirements. What differentiates outcomes is market scale, institutional understanding and structural flexibility. Those factors ultimately determine whether an issuer accesses bond markets or remains in the loan market, which typically offers easier navigation and greater adaptability.

In select cases, issuers can access bond markets at significantly lower costs, sometimes at levels loan markets cannot match. In practice, this usually applies to specific transaction components rather than entire structures. Blended financing consequently becomes more common, allowing borrowers to combine lower-cost market funding with loans or other instruments providing flexibility, tenor or risk coverage.

Blended finance gains traction across continent

This approach is featuring more prominently across Africa. Research by Convergence shows Africa accounted for roughly 40% of global blended finance transactions in 2024, representing approximately one-third of total volumes transacted. The figures reflect capital markets evolving toward more structured solutions rather than reliance on single instruments.

Looking ahead, innovation in Africa’s capital markets will likely focus on developing new products while demonstrating consistent execution capability. When East African Breweries first tapped the Kenyan bond market in 2021, it marked the first corporate issuance in nearly five years. The transaction helped reopen the market and signaled to other issuers that investors remained active, execution was achievable and pricing could work.

Outside South Africa, capital markets across much of the continent remain relatively shallow. This limits how effectively domestic savings can be channeled into long-term investment. Equity markets are small and thinly traded. Bond markets lack the depth and reference points that facilitate pricing and secondary market activity.

To foster genuine development across the continent, this is where focus must concentrate. As inflation pressures moderate and currency stability improves, the infrastructure for deeper, more liquid capital markets becomes not just desirable but achievable. The question facing policymakers and market participants is whether recent momentum can translate into sustained structural development that broadens access beyond the largest corporates and most established markets.

For now, transactions like EABL’s refinancing offer proof of concept: when macroeconomic conditions align with market readiness, African capital markets can deliver. The challenge lies in making such successes routine rather than exceptional.

By Kumeshen Naidoo, Head of Debt Capital Markets, and Narisa Balgobind, Head of Debt (AR), at Absa and edited by Ericson Mangoli

The views expressed in this article are the author’s own and do not necessarily reflect Kurunzi News’ editorial stance.